Q1 2025 Gilat Satellite Networks Ltd Earnings Call
Unknown Executive: Ladies and gentlemen, thank you for standing by. The call will begin shortly. Ladies and gentlemen, thank you for standing by.
Ladies and gentleman. Thank you for standing by the call will begin shortly.
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Ladies and gentlemen, thank you for standing by and welcome to <unk> first quarter 2025 results conference call.
Unknown Executive: Welcome to Gilat's first quarter 2025 results conference call. All participants are 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 May 19, 2025. By now, you should have all received the company's press release.
All participants are 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 May 19th 2025 by now you should have all received the Companys press release, if you have not received it.
Unknown Executive: If you have not received it, please view it in the news section of the company's website, www.gilat.com.
Speaker Change: Please view it in the news section of the company's website Www Dot <unk> Dot com I would now like to hand over the call to Mr. Alex Yeah. The altar of Alliance Advisors IR. Mr. V. Alta would you like to begin please.
Alex Vialta: 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? Thank you, operator, and good morning and afternoon to everyone.
Avi Sofia: Thank you operator, and good morning, and afternoon to everyone. Thank you for joining us for <unk> satellite networks earnings conference call for the first quarter of 2025 with US on the call are Mr. Avi Sofia, two lot CEO and Mr Gill and Yummy HELOC CFO.
Adi Sfadia: Thank you for joining us for Gilat Satellite Network's earnings conference call for the first quarter of 2025. With us on the call are Mr. Adi Safia, Gilat CEO, and Mr. Gil Benyamini, Gilat CFO. The earnings press release was issued earlier today and is available on Gilat's website underneath the investor relations section.
Avi Sofia: The earnings press release was issued earlier today and is available on <unk> website underneath the Investor Relations section.
Unknown Executive: 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 deductions in U.S. and foreign military spending, acceptance of new products on a global basis, and disruptions or delays in supply, raw materials, and components due to business conditions, global conflicts, weather, or other factors not under our control.
Speaker Change: 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.
Speaker Change: Risks and uncertainties that could cause actual results to differ materially include uncertain global economic conditions reductions in revenues from key customers delays or deductions in the U S and foreign military spending acceptance of new products on a global basis, and disruptions or delays and supply raw materials and components due to business conditions.
Speaker Change: Global complex weather or other factors not under our control.
Unknown Executive: 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.
Speaker Change: Company cautions investors not to place undue reliance on forward looking statements, which reflect the company's analysis as of todays date.
Speaker Change: <unk> undertakes no obligation to publicly update forward looking statements to reflect subsequent events or circumstances.
Unknown Executive: 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.
Speaker Change: Further information on these factors and other factors that could affect <unk> financial results is included in the company's filings with the SEC, including the latest quarterly report on Form 10-Q.
Speaker Change: 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 configure and corresponding GAAP figures.
Adi Sfadia: With that, I would now like to turn the call over to Mr. Adi. Please go ahead, Adi. 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 marks 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.
Speaker Change: With that I would now like to turn the call over to Mr. <unk>. Please go ahead I D.
Speaker Change: Thank you, Alex and good day to everyone.
Speaker Change: People join US today, as we discuss our first quarter of 2025.
Speaker Change: Results for the first quarter of 2025 marks the first quarter operating under our newly aligned organizational structure. Today, we will provide an update on our regular DFAST geological Michele and good afternoon, all divisions offering insight into how our strategies are driving growth and capturing.
Speaker Change: Opportunities in key markets, we will discuss key achievements for the quarter and opportunities and plans to continue accelerating revenues in 2025, as we capitalized on the acquisition of Stella Blue and the continued strong demand for Gila Defense solutions.
Adi Sfadia: We are already seeing the benefits of this change, particularly in our main gross engines, defense, VHTS and NGSO constellations, and in-flight connectivity. We begin 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 Blues 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 and $150 million.
Speaker Change: We are already seeing the benefits of this change, particularly.
Speaker Change: The main growth engine DFAST V H D S and NGL, so constellation and in flight connectivity.
Speaker Change: We began 2025 with a good first quarter.
Speaker Change: Q1 revenues reached $92 million, 21% increase you'll really.
Speaker Change: Adjusted EBITDA was $7 $6 million.
Speaker Change: Q1, 2025, it was the first quarter, we included stellar blues results in our financial results.
Speaker Change: Stella Blue contributed about $25 million to our top line and incurred an adjusted EBITDA loss of about $3 6 million.
Speaker Change: Excluding the loss on adjusted EBITDA for the quarter was about $11 2 million, representing a 20% even if it is.
Speaker Change: The increase.
Speaker Change: Blues yearly performance remains on track with revenue expectation of between 120 and $150 million. We also expect still a need to reach a 10% adjusted EBITDA margin run rate during the second half of the.
Adi Sfadia: We also expect Stellar Blue to reach a 10% adjusted EBITDA margin run rate during the second half of the year.
Adi Sfadia: 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 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.
Speaker Change: Before reviewing the performance of each division I want to address the impact of the garden and global macroeconomic turmoil and the shifting international trade policies and tariffs and get out of business.
Speaker Change: The global economic uncertainty and the shifting in international trade policies are creating new challenges.
Speaker Change: Still too early to assess to fully assess the impact as new facts emerge daily.
Adi Sfadia: Recognizing these trends early, we proactively initiated an adjustment 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.
Organizing distress early we proactively initiated an adjustment to our raw material sourcing several months ago.
Speaker Change: Involved strategically shifting from Ohio to North all these countries and to the U S. Importantly, a significant share of all U S defense business, you sourced and manufactured domestically in the U S supporting stability in this environment.
Adi Sfadia: We intend to monitor the worldwide development closely and will adapt our strategies as needed to ensure business continuity and minimize potential disruption.
Speaker Change: We intend to monitor the worldwide development closely and will adapt our strategies as needed to ensure business continuity and minimize potential disruption now.
Adi Sfadia: Now on 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 Asia-Pacific region.
Speaker Change: Now on the business review, where.
Speaker Change: We had a strong start to deal with the successful launch of Gila Defense Division doing the stuff that I 2025 contrasts.
Speaker Change: In Washington D C in early March.
Speaker Change: The market response has been very positive and we are already seeing results.
Speaker Change: When we made the right decision to unify our defense portfolio into a single dealer defense business.
Speaker Change: The dynamic macro geopolitical landscape is driving increased defense budgets and accordingly, there is a growing demand for secure high performance communication overstocked likes.
Speaker Change: We are well positioned to meet these mission critical needs, we are seeing demand from diverse.
Speaker Change: Geographically the markets, including North America, Europe, and Asia Pacific Region.
Adi Sfadia: In Europe specifically, recent events have accelerated efforts to develop sovereign communications networks with growing investments from both the European Union and in 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, continue 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.
Speaker Change: In Europe, specifically recent events as accelerated air force to develop sovereign communities Communications networks is growing investments from both the European Union and in individual countries. This trend is creating significant opportunities and we believe Europe will become increasingly important.
Speaker Change: The market for Gila defense going forward.
Speaker Change: In Q1 award spans a diverse global customer base, reflecting demand for a broad range of products and services.
Speaker Change: This broad portfolio, coupled with our global presence and continuing to position us as a trusted and reliable partner for defense organizations worldwide.
Speaker Change: During Q1, you'd have defense was awarded over $5 million to support ticket critical connectivity for the U S. D O D and international Defense forces with our Decatur arenas and field support services. We also secured a $4 million in orders for unique CCP portable something like dominoes fall from global.
Adi Sfadia: DoD and international defense forces with our DCAT 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 multi-year 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 operation readiness and continued reliability of these vital communication assets. Gilat Datapass was also awarded a contract of more than $11 million for DICAT 3420 terminals to a leading UAV company.
For global defense customers and another $6 million contract in Asia for our market, leading sky platform.
Speaker Change: Data bus was also awarded up to $23 million. So I'm looking at your contracts to survey satellite transportable Domino's for the U S. D. O D customers, you'll have data bus will deliver critical program management field services, and technical support and assuring operation readiness and continued reliability.
Speaker Change: This vital communication assets.
Speaker Change: Do you Love data bus was also awarded the contract.
Speaker Change: More than $11 million for <expletive> at 34, 20 terminals to a leading <unk> company in.
Adi Sfadia: In addition, we received a multi-million 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 system. These wins validate the strengths 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.
Speaker Change: In addition, we received a multi million dollar order from a global defense organization for the supply of advanced antenna technology to be integrated into the organizations state of the art Defense Communications systems.
Speaker Change: This win is validating the stress of our integrated technologies across Gila defense product lines and highlight the increasing trust customers have in our ability to deliver a mission critical communication in challenging environments.
Adi Sfadia: 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 DataPass 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.
As I mentioned during the fourth quarter call, we are increasing our investment in allocating more resources to R&D as it relates to sales and marketing at Gilead defense in 2025. This quarter, we launched several new products, including our new G. O P modem, the Aquarius Pro D S modem and the Gila data bus too.
Speaker Change: One 6 million.
Speaker Change: We are highly optimistic that this product will be adopted to sell on Geo MEO and Leo constellations for getting critical government applications. We plan to continue investing significantly in defense as we execute our strategy to lead in this important sector.
Adi Sfadia: Turning to our commercial business, we are seeing continued momentum in both system deliveries and customer expansions as airlines prioritize next-generation connectivity experience 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 SkyEdge4 platform to support IFC services and for high-performance HSPAs designed to support LEO constellations. The growing adoption of LEO and MEO constellations connectivity is creating favorable conditions for growth.
Speaker Change: Turning to our commercial business, we are seeing continued momentum in both system deliveries and customer expansions.
Speaker Change: Airlines prioritize next generation connectivity experience for passengers, including free Wi Fi planes and connectivity on regional Jets.
Speaker Change: We received a $15 million all in all of those various satellite operators, including for our skies for a platform to support IFC services.
Speaker Change: And for high performance has SBA is designed to support Leo constellations.
Speaker Change: Adoption of Leo and MEO constellations connectivity is creating favorable conditions for growth.
Adi Sfadia: This development underscores the increasing demand for our solutions in this rapidly evolving market. Also, in the IFC sector, with respect to StellarBlue, Intelsat has already installed Sidewinder ESA, the market's most advanced and only operational multi-orbit LEO and GEO electronically steered array terminal on more than 150 aircraft, delivering to date more than 70,000 flight hours of seamless connectivity across North America. The feedback we are receiving from customers and partners has been outstanding. A key milestone this quarter was successfully testing and certification of side vendor ISA by Panasonic, one of the major IFC service providers, further validating its leadership in the market.
Speaker Change: These developments underscore the increasing demand for our solutions in the in this rapidly evolving market.
Speaker Change: Also in the IFC sector with respect to Stella Blue Intelsat is already installed sides. When there is a the market most advanced and only operate operational multiyear with Leo and Geo electronically steered already terminal.
Speaker Change: More than 150 aircraft delivering to date more than 70000 flight hours of seamless connectivity across North America.
Speaker Change: The feedback we're receiving from customers and partners has been outstanding.
Speaker Change: A key milestone this quarter was successfully testing.
Speaker Change: And certification of size, whether you saw by Panasonic one of the major IFC service providers further validating its leadership in the market.
Adi Sfadia: We are optimistic that this will lead to additional business for us. At the same time, our next generation LEO Business Aviation ESA, the ESR 2030 terminal, was tested successfully during flights, and we expect these efforts to allow us to have a production-ready antenna by the end of 2025. Gilat is expanding its strategic collaboration with partners to drive the advancement of next-generation aviation ESA terminals. This development project focuses on further developing our Sidewinder ESA and also extends its reach to adjacent aviation markets, including ISR, military, defense, and VVIP. A key aspect of this development is making the Sidewinder platform compliant for OEM profitability with Boeing as part of Boeing's Technical Service Agreement.
Speaker Change: We are optimistic that this will lead to additional business for us at.
Speaker Change: At the same time.
Speaker Change: Next generation little business Aviation Isa the ESR 'twenty theoretically I mean was tested successfully during flight and we expect these efforts to allow us to have a production ready antenna by the end of 2025.
Speaker Change: The love is expanding its strategic collaborations with partners to drive the advancement of next generation of aviation eastern terminus.
Speaker Change: This development project focused on further developing our side when there is and also extended its reach to adjacent aviation markets, including ISR military defense and V VIP.
Speaker Change: A key aspect of this development is making decide when the platform compliance for Oems liability with Boeing.
Speaker Change: Part of Boeing's Technical service agreement.
Speaker Change: The platform is progressing through OEM qualification with availability expected in early 2026.
Adi Sfadia: The platform is progressing through OEM qualification, with availability expected in early 2026.
Adi Sfadia: This represents a significant step forward in strengthening our position in the evolving aviation connectivity landscape. Importantly, as IFC deployments ramp up, we are also seeing increased demand for our SkyH4 and SkyH2C basement platforms, further strengthening our position in this market. Building on this momentum, we are also responding to rising demand from satellite operators who are looking for cloud-based, software-driven ground segment architectures. As a result, we have stepped up development of virtualization capabilities for SkyH4, positioning Gilat at the forefront of next-generation cloud-native solutions for satellite communications designed to run on standard cloud hardware and expected to serve the needs of very large software-defined satellites.
Speaker Change: This represents a significant step forward in strengthening our position in the in the evolving aviation connectivity landscape.
Speaker Change: Importantly, as IFC deployments ramp up we are also seeing increased demand for our skies for sky to see baseband platforms further strengthening our position in this market.
Speaker Change: Building on this momentum we have.
Also our response responding to rising demand from satellite operators, who are looking for cloud based software driven drawn segment architectures. As a result, we have stepped up development of utilization capabilities for Skype for positioning at the forefront of next generation <unk>.
Speaker Change: <unk> Native solutions for satellite communications designed to run on standard cloud hardware and expect it to serve the needs of very large software defined satellites.
Adi Sfadia: In other commercial verticals, the demand for digital inclusion is also accelerating as more governments and organizations prioritize access to essential services like education, employment and healthcare. Satellite communications are playing an increasingly critical role in bridging the digital divide and expanding connectivity to remote and underserved areas. We are leveraging the proven capabilities of Gilat Peru to compete on projects worldwide with multiple digital inclusion projects currently in the pipeline, reflecting the strong momentum we are seeing in these important areas. In Peru, we are progressing on several important fronts. We received network acceptance and began operation of the Amazonas transport network, and we are moving forward with the acceptance process across the Amazonas access network.
Speaker Change: In other commercial royalty caused the demand for digital inclusion is also accelerating as more governments and organizations prioritized access to essential services like education employment and health care.
Speaker Change: Satellite communications are playing an increasingly critical role in bridging the digital divide and expanding connectivity to remote and underserved areas.
Speaker Change: We are levering leveraging the proven capabilities of Peru to complete on projects worldwide with multiple digital inclusion projects currently in the pipeline, reflecting the strong momentum we are seeing in this important area.
Speaker Change: We are focusing on several important fronts, we received network, except us and began operation of the Amazonas transport networks, and we are moving forward with acceptance.
Speaker Change: Of course, the Amazonas access network.
Adi Sfadia: Additionally, we successfully transferred the ICA transport network to Tronatel, the first such transfer, and are working towards transferring the additional regions' transport network as well.
Speaker Change: Additionally, we successfully transferred the <unk> transport network to point until the fifth such timescale and are working towards scaling the additional regions Hospital network as well.
Adi Sfadia: While the strong pipeline remains intact, several large projects, bids, renewals, expansions and extensions continue to face delays. That said, we remain optimistic about future opportunities in Peru. I am pleased to say that we continue to have a strong backlog and a healthy pipeline. Therefore, we feel comfortable reiterating our 2025 annual guidance. Gilat is strategically positioned for sustained growth driven by strong demand for mission-critical defense connectivity, the increasing satellite capacity, and the accelerating adoption of multi-orbit architectures. Our diverse product portfolio is ideally suited to support this evolution, offering the essential flexibility, scalability, and the performance our customers require.
Speaker Change: While the strong pipeline agreement remains intact several of our large projects business renewals expansions and extensions continued to face delays that said, we remain optimistic about future opportunities.
Speaker Change: I am pleased to say that we continue to have a strong backlog and a healthy pipeline.
Speaker Change: Therefore, we feel comfortable reiterating our 2025 annual guidance.
Speaker Change: <unk> strategically positioned for sustained growth driven by strong demand for mission critical defense connectivity, the increasing satellite capacity and the accelerating adoption of multi orbit architectures.
Speaker Change: Although our diverse product portfolio. He is ideally suited to support this evolution offering the essential flexibility scalability and the performance our customer requirement.
Adi Sfadia: Our defense business is off to a strong start this year, benefiting from strong tailwinds driven by the macroeconomic development. Gilat Defense is building momentum and extending its critical role in delivering resilient, high-performance satellite communication in support of national security and global stability. In our commercial business, we are seeing solid execution and continued growth. Stellar Blue's innovative Sidewinder ESA is gaining significant market traction, and we are working closely with our partners to broaden its application into new verticals and advance its certification for line-fit installation. At the same time, the increasing demand for both IFC and multi-orbit solutions is driving further adoption of our Baseband and RF avionics technologies, reinforcing our leadership position in the global ground segment market.
Speaker Change: Our defense business is off to a strong start this year.
Speaker Change: Benefiting from strong tailwind driven by the macro economic developments Gila defense is building momentum and extending its critical role in delivering resilient high performance satellite communication in support of National Security and global.
The ability.
Speaker Change: In our commercial business, we are seeing solid execution and continued growth stellar blues innovative side when the visa is gaining significant market traction and we are working closely with our partners to broaden its application into new verticals and address its certification.
Speaker Change: <unk> for line fit installation at.
Speaker Change: At the same time, the increasing demand for both IFC and multi always solutions is driving further adoption of our baseband and RF ASEAN ex technologies reinforcing our leadership position in the global ground segment market.
Adi Sfadia: We are encouraged by the momentum across our business segment and remain confident in our strategic direction as we continue to deliver innovation, execution, and long-term value to our customers and stakeholders.
Speaker Change: We are encouraged by the momentum across our business segments.
Gil: And remain confident in our strategic direction as we continue to deliver innovation execution and long term value to our customers and stakeholders and with that I will hand, the call to Gil <unk> our CFO.
Gil Benyamini: And with that, I will hand over the call to Gil Benyamini, our CFO. Gil, please go ahead. Thank you, Adi. Good morning and good afternoon to everyone. I would like to remind everyone that our financial results are presented both on a gap and non-gap.
Gil: Please go ahead. Thank you good morning, and good afternoon to everyone I would like to remind everyone gets our financial results are presented both on a GAAP and non-GAAP basis.
Gil Benyamini: I will now talk through our financial highlights for the first quarter of 2020. As Adi mentioned, we are very pleased with our first quarter performance. We completed the acquisition of Stellar Blue in January 6 and they are reflected in our financials for the first In terms of our financial results, revenue for the first quarter was $92 million, 21% increase compared to $76.1 million in Q1. The increase was led by the commercial segment due to the acquisition of Stellar Blue combined with the growth in the defense segment and offset by lower revenue. In terms of the revenue breakdown by segments, Q1 2025 revenues for the commercial segment were $64.2 million compared to $41.2 million in the same quarter.
Gil: I'll now talk through our financial highlights for the first quarter of 2025.
Gil: As Andy mentioned, we're very pleased with our first quarter performance, we completed the acquisition of Blue in January six.
Gil: And they are reflected in our financials for the first time in terms of our financial results revenue for the first quarter were $92 million, 21% increase compared to $76 1 million in Q1 24.
Gil: The increase was led by the commercial segment due to the acquisition of Stella Blue combined with the growth in the different segment and offset by lower revenue in this segment.
Gil: In terms of the revenue breakdown by segments Q1, 'twenty five revenues for the commercial segment were $64 2 million compared to $41 2 million in the same quarter last year. The 56% increase was primarily due to the acquisition of Stella Blue, which contributed 25 million.
Gil Benyamini: The 56% increase was primarily due to the acquisition of Stellar Blue, which contributed $25 million to our revenue, partially offset by the termination of our activity in Russia. Q125 revenues for the defense segment were $23 million compared to $17.2 million in the same quarter last year. 34% increase was primarily driven by high delivery to our defense customers in the U.S. Q125 revenues for the Peru segment were $4.8 million compared to $17.7 million in Q125. The decline is primarily attributed to delays in renewing several projects, postponement in major project bids. Additionally, in Q1 2024, we recorded revenues from the construction phase of the Amazonas project expansion.
Gil: Two our revenue partially offset by the termination of our activity in Russia in 2020 for Q.
Gil: Q1, 'twenty five revenues for the defense segment were $23 million compared to $17 2 million in the same quarter last year.
Gil: The 34% increase was primarily driven by higher deliveries to our defense customers in the U S and Asia.
Gil: Q1, 'twenty five revenues for the Peru segment were $4 8 million compared to $17 7 million in Q1 'twenty for the decline is primarily attributed to delays in maneuvering. Several projects was born in major project bids and slower progress on expanding existing projects.
Gil: Additionally, in Q1 'twenty four we recorded revenues from the construction phase of the Amazonas project expansion, which was completed during the year.
Gil Benyamini: was completed during the year. We are currently awaiting parental inspection and approval to transition to the operational phase. Furthermore, some equipment deliveries are expected later in the year. Our Gap Gross Margin in Q1 2025 decreased to 30.9% compared to 36.9% in Q2. The crisis is primarily due to lower margins in stereo blue as it ramps up production as well as amortization of purchased intangibles and lower gross margins. GAP operating expenses in Q1'25 were $31.1 million compared to $22.7 million in Q1'26. The increase is primarily due to the consolidation of Stellar Blue, amortization of purchased intangibles, transaction costs and other income recognizers.
Gil: We are currently awaiting for unfairly inspection and approval to transition to the operational phase. Furthermore, some equipment deliveries are expected later this year.
Gil: Our GAAP gross margin in Q1, 25 decrease to 39% compared to 36, 9% in Q1 24.
Gil: The decrease was primarily due to lower margins and still blue as it ramps up production as well as amortization of purchased intangibles and lower gross margins improve.
Gil: GAAP operating expenses in Q1, 25 were $31 1 million compared to $22 7 million in Q1 24.
Gil: The increase was primarily due to the consolidation of Stella blue amortization of purchased intangibles transaction costs and other income recognized in Q1 for us.
Gil: Scott operating loss in Q1 25.
Gil Benyamini: Gap operating loss in Q125 was 2.7 million compared to gap operating income of 5.4 million in Q125. The decrease was driven by acquisition-related expenses and purchase intangibles amortization and the absence of proceeds from arbitration in Peru that was recognized in Q1 2010. Gap net loss in Q1'25 was $6 million or a loss per share of $0.10 compared to gap net income of $5 million or diluted income per share of $0.09. Moving to non-GAAP results, our non-GAAP gross margin in Q1'25 decreased to 31.7% compared to 37.8% in Q1'24. Non-GAF operating expenses in Q1'25 were $24.1 million compared to $22.2 million in Q1'24.
Gil: $2 7 million compared to GAAP operating income of $5 4 million in Q1 'twenty for the day.
Gil: Increase was driven by acquisition related expenses and purchase intangible amortization and the absence of proceeds from arbitration in Peru that was <unk>.
Gil: <unk> recognized in Q1 24.
Gil: GAAP net loss in Q1, 25 was $6 million or a loss per share of 10 cents compared to GAAP net income of $5 million or diluted income per share of <unk> in Q1 'twenty.
Gil: Moving to non-GAAP results, our non-GAAP gross margin in Q1 25 decreased to 31, 7% compared to 37, 8% in Q1 24.
Gil: non-GAAP operating expenses in Q1, 25 were $24 1 million compared to $22 2 million in Q1 24.
Gil: And non-GAAP operating income in Q1, 25 was $5 2 million compared to $6 6 million in Q1 24.
Gil Benyamini: and Non-Gap Operating Income in Q1 2025 was $5.2 million compared to $6.6 million in Q1 The non-gap net income in Q1'25 was 1.8 million or a diluted income per share of 3 cents. compared to a net income of $6,000,000 or income per share of $0.11 in Q1. Adjusted EBITDA in Q1'25 was 7.6 million compared to an adjusted EBITDA of 9.3 million in Q1'26. The decrease in the adjusted EB die is primarily due to steroid blue losses in the first quarter. Our Q125 organic adjusted EB die excluding steroid blue losses was 11.2 million. 20% increase compared with Q1.
Gil: non-GAAP net income in Q1, 25 was $1.8 million or diluted income per share of <unk> <unk>.
Gil: Compared to a net income of $6 million or income per share of <unk> 11 in Q1 24.
Gil: Adjusted EBITDA in Q1, 25 was $7 6 million compared to an adjusted EBITDA of $9 3 million in Q1 'twenty for the decrease in the adjusted EBITDA is primarily due to Stella blue losses in the first quarter.
Gil: Our Q1, 'twenty five organic adjusted EBITDA, excluding Stella Blue losses was $11 2, million% to 20% increase compared with Q1 'twenty.
Gil: Moving to our balance sheet on January six the company secured the $100 million credit line from our bank consortium from which utilized $60 million to finance the acquisition of Stella Blue.
Gil Benyamini: Moving to our balance sheet. On January 6th, the company secured the $100 million credit line from a bank consortium, from which it utilized $60 million to finance the acquisition of Tel Aviv. As a result, as of March 31st, 2025, total cash and cash equivalents...
Gil: As a result as of March 31, 25, total cash and cash equivalents and restricted cash were $64 3 million.
Gil Benyamini: The total cash was $64.3 million, or approximately $3.8 million net of loans, compared to $118.2 million on December 31st. In terms of cash flow, we used $6.6 million for operating activities in Q1 2025 to support the working capital needs of Stellar Blue during the ramp-up and its acquisition-related expenses. DSOs, which exclude receivables and revenues of our terrestrial network construction projects in Peru, were 75 days up from 71 days in previous years. Our shareholders' equity as of March 31st, 2025, totaled to $300 million compared with $304 million at the end.
Gil: Or approximately $3 8 million net of loans compared to $118 2 million.
Gil: On December 31 2024.
Gil: In terms of cash flow, we used $6 6 million for operating activities in Q1, 'twenty five to support the working capital needs of Stella Blue during the ramp up and its acquisition related expenses.
Gil: Dsos, which exclude receivables and revenues of our terrestrial network construction projects in Peru, where 75 days up from 71 the previous quarter.
Gil: Our shareholders' equity as of March 31, 25, total to 300 million compared with $304 million at the end of 'twenty four.
Gil Benyamini: Looking ahead, as Adi mentioned, we are reiterating our guidance for 2025 with projected revenue between $415 million and $455 million, representing year-over-year growth of 42% at the midpoint. Adjusted EBITDA is expected to be between $47 and $53 million, represented year-over-year growth of 18%.
Gil: Looking ahead as the dimension, we are reiterating our guidance for 2025 with projected projected revenue between $415 million and $455 million representing year over growth of 42% at the midpoint adjusted EBITDA is expected to be between 47%.
Gil: $53 million represented year over year growth of 18% at the midpoint.
Gil Benyamini: That concludes my financial review.
Gil: That concludes my financial review I would now like to open the call for questions. Operator. Please go ahead.
Unknown Executive: I would now like to open the call for questions. Operator, please go ahead. Thank you.
Speaker Change: Thank you ladies and gentlemen at this time, we will begin the question and answer session. You will have a question. Please press star one if you wish to cancel your request. Please press star two if you are using speaker equipment kind of lift the handset before pressing the numbers. Please.
Unknown Executive: Ladies and gentlemen, at this time, we will begin the question and answer session. If you have a question, please press star one. If you wish to cancel your request, please press star two. If you're using speaker equipment, kindly lift the handset before pressing the number. Please stand by while we poll for your questions.
Gil: Please stand by while we poll for your questions.
Gil: The first question is from Louie Dipalma of William Blair. Please go ahead.
Louis Dipalma: The first question is from Louis DiPalma of William Blair, please go ahead. Adi and Gil, good afternoon. Hi Louie, how are you? I'm doing great.
Louie Dipalma: Good afternoon, Hi, Louie how are you.
Gil: I'm doing great.
Adi Sfadia: My first question is your defense business expected to be a beneficiary of the increases, the expected increases in European defense spending? Generally speaking, yes, we are seeing a lot of traction from Europe defense increased budget. You know, nothing yet materialized, but we are seeing a lot of demand, request for RFPs and things like that. So we believe that mid-term we'll see decent business from Europe that will support our growth in defense.
Gil: My first question is your defense business expected to be a beneficiary of that.
The increases the expected increases in European defense spending.
Gil: Generally speaking, yes, we are seeing a lot of traction.
Gil: From a Europe defense.
Gil: <unk> budget.
Gil: Nothing yet materialized, but we.
Gil: We are seeing a lot of demand requests for rfps and things like that so we believe that the.
Gil: Mid mid then we'll see.
Gil: Decent business from a and from Europe that will support our growth in defense.
Gil: Great and it seems that you've made progress well.
Adi Sfadia: Great. And it seems that you've made progress with the Boeing line fit. What other milestones need to be achieved for that program before it's implemented? Generally speaking, there are some... Adaptation to the Terminal, and now we are in the certification process. So, it seems like 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.
Gil: The Boeing line fit what other milestones need to be achieved for that program before it's implemented.
Speaker Change: Generally speaking there are some.
Speaker Change: Adaptation to the terminal and now we are in the certification.
Speaker Change: Process so it.
It seems like just do it.
Speaker Change: Within the next two or three quarters, we will get this qualification will be ready.
Speaker Change: And then it's up to the customers to order it.
Speaker Change: Great Thanks and.
Unknown Executive: Great, thanks.
Unknown Executive: And for Peru, how should we think of? revenue linearity over the next few quarters? I think you reiterated the full year guidance, but should most of the revenue be in the fourth quarter? Or how should we think about it?
Speaker Change: Or Peru households, we think of.
Speaker Change: Revenue linearity over the next few quarters and I think you reiterated the full year guidance, but should.
Speaker Change: Most of the revenue be in the fourth quarter or how should we think about it so truly linearity is a bit the challenging so we do expect the route.
Adi Sfadia: So Peru linearity is a bit challenging. So we do expect the route, you know, revenue run rate to be 45 to $50 million. This quarter is 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 or $8 million of hardware revenue every year.
Speaker Change: Revenue run rate to be $45 million to $50 million. This quarter. It was relatively low because several.
Speaker Change: Large projects that are about to be renewed.
Speaker Change: The renewal was delayed and we expect to have it.
Speaker Change: Hopefully in Q2 and if not in early Q3. In addition, part of the recurring revenue in Peru, we need to deliver some how do equipment. Once every year and we do expect it.
Speaker Change: During the third quarter. This is a chunk of seven or $8 million of the.
Speaker Change: How do the revenue every year.
Speaker Change: In addition, there are several.
Adi Sfadia: In addition, there are several large projects, especially large expansions of existing projects where we are not competing against others. It's just a negotiation with the government and we expect to conclude the negotiation in the next few months and revenue will return to the same level that we saw in recent years.
Speaker Change: Large project.
Speaker Change: Especially large expansions of our existing project, where we are not compete against others is just.
Speaker Change: Negotiation with the government and we expect to conclude the negotiation in the next few months and the revenue will return to the same level that we saw.
Speaker Change: In recent years.
Speaker Change: Great. That's it for me. Thanks, Thank you Lee Susan.
Unknown Executive: Great.
Unknown Executive: That's it for me.
Unknown Executive: Thanks.
Unknown Executive: Thank you, Luis.
Unknown Executive: See you soon.
Speaker Change: The next question is from Ryan Koontz of Needham and company. Please go ahead.
Ryan Koontz: The next question is from Ryan Koontz of Needham & Company, please go ahead. Hi, can you hear me okay, gentlemen? Yes, we do. Great. Sounds like your organic growth in defense is going quite well and you're stepping up OPEX a little bit there to make some investments. both R&D and sales.
Ryan Koontz: Hi can you hear me, Okay, gentlemen, yes, we do.
Speaker Change: Great.
Speaker Change: Sounds like your organic growth in defense is going quite well and you're stepping up opex, a little bit there to make some investments.
Speaker Change: With R&D and sales. My question, then really is more about the commercial side, how that's evolving stellar blue unit and its integration with the balance of your commercial business.
Adi Sfadia: My question then really is more about the commercial side, how that's evolving, you know, the Stellar Blue unit and its integration with the balance of your commercial business. From a sales perspective, do you feel like you have sufficient go-to-market resources in place today to achieve your goals you've set for Stellar Blue, or is that something you're still adding on? And the second question related to that is, you know, is the nature of these relationships, these sales relationships, is it generally more technical, more engineering to engineering related, or is there actually a lot of... has this bidding going on kind of on a.
Speaker Change: From a from a sales perspective do you feel like you have sufficient our go to market resources in place today to achieve your goals you've stepped except for stellar blue or is that something youre still adding on and second question related to that as you know is the nature of these.
Speaker Change: Shifting the sales relationships is it generally more technical and more engineering to engineering related or is there actually a lot of.
Speaker Change: Hedges are bidding going on kind of what I'm sorry.
Speaker Change: A lot of business. Thanks.
Adi Sfadia: Okay, so in terms of progress at Stellar Blue, I think we made a very good progress during the quarter. One of the main risks in the acquisitions was that it's a new product introduction from a startup company, and the market acceptance and the feedback we are getting is really amazing. More than 150 aircraft already installed, perform more than 70,000 flight hours with seamless connectivity with relatively no issues whatsoever. We do have some supply chain issues with one of the LRUs, one of the component manufacturers. We identified ahead of time, and we are working internally on replacing this unit.
Speaker Change: Okay. So.
Speaker Change: In terms of.
Speaker Change: Progress, it's still a little blue.
Speaker Change: Although we made very good progress during the quarter one of the main risks in the acquisitions.
Speaker Change: It's a new product introduction.
Speaker Change: From a startup company and the market acceptance.
Speaker Change: The feedback we're getting is really amazing more than 150 aircraft already installed.
Speaker Change: Before more than 77 zero.
Speaker Change: Flight hours.
Speaker Change: Seamless connectivity with the.
Speaker Change: They're relatively new.
Speaker Change: No.
Speaker Change: Issues whatsoever.
Speaker Change: We do have some supply chain issues with one of the.
Speaker Change: And I'll use one of the components.
Speaker Change: The manufacturer.
Speaker Change: We identified ahead of time and we are working internally on replacing this.
Speaker Change: Unit.
Speaker Change: The new unit is under.
Adi Sfadia: The new unit is under production. Underqualification and certification processes and we expect that during, towards the end of this quarter, early next quarter, we'll have both solutions available and we'll be able to accelerate deliveries and revenues to customers. So I think we are on track with that. We are doing cost reduction on the terminal and we expect to see much better margins along the year. So we remain with our guidance for Stellar Blue of revenues of between 120 to 150 million dollars with reaching a run rate of just a dividend of more than 10 percent, sometimes during the second half of the year.
Speaker Change: Under the qualification and certification processes, and we expect to doing.
Speaker Change: Towards the end of this quarter early next quarter, we'll have both solution available and we will be able to accelerate.
Speaker Change: Deliveries and revenues to two customers.
Speaker Change: So I think we are on track with that.
Speaker Change: We are doing cost reduction on the on the terminal and we expect to see a much.
Speaker Change: Much better margins along the way so we remain with our guidance still stellar blue.
Speaker Change: Revenues of between $120 million to $150 million.
Speaker Change: With the <unk>.
Speaker Change: Reaching a run rate of adjusted EBITDA.
Speaker Change: More than 10%, sometimes during the second half of the well.
Speaker Change: I think we have internally enough resources to achieve our goals I think we have a strong backlog that covers.
Adi Sfadia: I think we have internally enough resources to achieve our goals. I think we have a strong backlog that covers most, if not all, of our market guidance. We do expect to get some large orders in the next few weeks or a few months, the latest. We need to remember that those orders are coming in batches, not one or two, rather hundreds or several hundreds every time. And we believe that we'll meet all our objectives with Taylor Blue along the year.
Speaker Change: Most if not all of our market guidance, we do expect to get some larger orders in the next.
Speaker Change: A few weeks. So we're a few months the latest we do remember that those orders are coming in versus not.
Speaker Change: One or two rather hundreds.
Speaker Change: Several hundreds every time and we believe that will meet all our objective we still have Lou.
Speaker Change: Hum.
Speaker Change: As for selling airports.
Adi Sfadia: As for selling efforts, you know, most of the technology sales is with Intersat and Panasonic and the IFC service providers. Over there, we need to be chosen and to prove that our technology is superior upon competitors. Later on, it's Intersat and Panasonic, they need to go and fight in the we are supporting them. I think that our superior technology helps them in the competitive market environment.
Speaker Change: The most of the technology sales.
Speaker Change: With into southern Panasonic, and the IFC service providers over there we need to be chosen and to prove that our technology is superior upon competitors later alone it's a in the southern Panasonic.
Speaker Change: They need to go and.
Speaker Change: Right.
Speaker Change: In the market with the airlines to get.
Speaker Change: The awards over there and when needed we are supporting them I think that our superior technology helps them.
Speaker Change: In the competitive market environment.
Speaker Change: Okay.
Adi Sfadia: That's great very thorough response there appreciate that and you mentioned on the call earlier a next-generation product coming I assume that's coming from the stellar blue side Can you walk through kind of the differentiation there compared to your current current generation product? What's what's coming at the end of the year, and when do you think it might start to achieve revenue? yeah, so in general is to take the existing a side window ISA and Adjust it a little bit to support the military defense ISR and VVIP aircraft We expect we already started the work, and we expect it to be finished you know some during 2025 and some early 2026 we do expect to get some orders if not by the end of the year than early next year Alright, great.
Speaker Change: That's great very thorough response I appreciate that and you mentioned on the call earlier, a next generation product coming I assume that's coming from the stellar blue side.
Speaker Change: You walked through kind of the differentiation there compared to your current current generation product with what's coming at the end of the year.
Speaker Change: And do you think it might start to achieve our revenue yeah. So in general is to take the existing.
Speaker Change: Side, when the Isa and.
Speaker Change: Adjusted a little bit to support the military defense ISR and V VIP aircraft.
Speaker Change: We expect.
Speaker Change: We started the work and we expect it to be finished.
Speaker Change: Yeah.
Speaker Change: I'm doing it.
Speaker Change: 2025, and some early 2026, we do expect to get some orders if not by the end of the year and early next year.
Ryan Koontz: All right great. That's all thank you. Thank you Ryan.
Unknown Executive: That's all I have to do. Thank you. Thank you, Ryan.
Speaker Change: Okay.
Sergey Glinyanov: The next question is from Sergei Glinyanov of Freedom Broker. Please go ahead. Hello, Adi, Gil, how's it going? Hi, Sergey. Thank you for taking my question.
Speaker Change: The next question is from Sergey Glenn Yano of Freedom broker. Please go ahead.
Speaker Change: And nobody would yield so it's growing.
Speaker Change: Okay.
Speaker Change: Yeah. Thank you for taking my question, so I need to lose about sidewinder.
Sergey Glinyanov: So, a little bit about Sidewinder. What monthly production rates do you have for now and what do you anticipate by the end of the year? We know that you have a long-term target rate at roughly 100 per month, so what's going now and what do you anticipate by the end of the year? So, indeed, we are expecting by the end of the year to, you know, before the end of the year, to reach to about 100 units per month. Right now, in most of the units, we are, give or take, very close to this production capabilities, except for the fact that, as I said earlier, we are missing one specific unit that we are working both internally and with the existing vendor to accelerate his production and to introduce additional product alternative.
Speaker Change: Hum monthly production rates do you get for now and would you anticipate by the end of the year, we know that.
Speaker Change: Do you have a long term a long term target trades at roughly 100 per month, so what whats going now and would anticipate by the end of the year.
Speaker Change: So.
Speaker Change: Indeed, we are expecting by the end of the year before the end of the year to reach to about 100 units.
Speaker Change: For months now.
Speaker Change: In most of the units, we are give or take very close to this.
Speaker Change: Production capabilities.
Speaker Change: Except from the fact that as I said earlier, we are missing one specific.
Speaker Change: Unit that.
Speaker Change: But we are working both internally and with the existing vendor to accelerate he is production and to introduce additional.
Speaker Change: Yeah.
Speaker Change: Product alternative so I believe that.
Adi Sfadia: So I believe that towards the end of Q2, early Q3, we will reach to our close to 100 units per month. Yeah, sounds great.
Speaker Change: Towards the end of Q2 early Q3, we will reach to.
Speaker Change: Close to 100 units per months.
Speaker Change: Yeah, It sounds great and.
Sergey Glinyanov: And So, as you mentioned, you have not worked at this point closely for now, because of certification you should pass, and in terms of primary and secondary aviation markets, what revenue structure do you anticipate for this year and for long term? I'm not sure I understand the question. Can you again repeat it and clarify? Yeah, sure. So now you're working primarily with the aviation airlines, I think, and you have not worked closely with Boeing because you should pass your certification for a StellarBlue SI. But what delivery structure in terms of primary and secondary aviation market do you expect for this year and for long term?
Speaker Change: So that.
Speaker Change: You mentioned that you have not work at this point closing for now because they.
Speaker Change: <unk> issued by Us and.
Speaker Change: <unk>.
Speaker Change: Sure.
Speaker Change: In terms of primary and secondary aviation markets are what revenues to actually do you anticipate or was this year.
Speaker Change: Long term.
Speaker Change: I'm not sure I understand the question.
Speaker Change: Can you again repeat it.
Speaker Change: Clarify.
Speaker Change: Yeah sure. So now we're working primarily with the B the aviation I Airlines I think and you. He has not worked closely with the blurring because you shoot that he is simplification.
Speaker Change: Sure.
Speaker Change: Yes.
Speaker Change:
Speaker Change: Livery swaps in terms, so Brian Murray and secondary aviation market moves it for this year in <unk>.
Speaker Change: So okay. So you are talking about the breakdown between line fit and retrofit. So currently in 2020.
Adi Sfadia: Okay, so you're talking about the breakdown between line fit and retrofit. So currently in 2025, 100% of our revenues will come from retrofit, meaning putting the antenna on existing fleets. 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.
Speaker Change: Five 100%.
Speaker Change: Overall, our revenues will come from retrofit.
Speaker Change: Meaning.
Speaker Change: Putting the antenna.
Speaker Change: Existing.
Speaker Change: The fleets, we do expect it towards the mid <unk> over the second half of 2026, the split will be will be closer to 50 50 and on the long term I think that Oh, it will be slightly more line fit and retrofit, although the retrofit will continue to be a significant amount.
Speaker Change: But for us.
Speaker Change: Yeah got it and I didn't miss it.
Adi Sfadia: Adi, you mentioned that you would like to expand the Sidewinder application in ISR and VVIP. Does it not harm your original product like ESR2030, or maybe you can put some colors about that? Sure. First of all, for the same market segment, in some cases we have more than one product. The ESR2030 is a LEO only antenna that can work on KU, meaning on one web constellation. The Sidewinder is a multi-orbit LEO-GEO antenna, and it fits to a larger aircraft, and it's another product for the same market segment. So I think that both products will go together, it's not really replacing each other.
Speaker Change: Like do you expand.
Speaker Change: And wider application.
Speaker Change: ISR and the E V I E.
Speaker Change: Hum.
Speaker Change: Tom Your original Brian deck like U S. R. Lindsay <unk>, maybe you can put some colors about that sure sure.
Speaker Change: First of all for.
Speaker Change: The same for the same market segment, we in some cases, we have more than one product. The ESR 2030 is the lead only antenna.
Speaker Change: That can work on ku, meaning on one web.
Speaker Change: Constellation.
Speaker Change: Aside when there is a multi orbit.
Speaker Change: <unk> and <unk>.
<unk> to a larger aircraft and it's another.
Speaker Change: And other products.
Speaker Change: So the same the.
Speaker Change: Same.
Speaker Change: Market segments. So I think that both products will go together, it's not really a <unk>.
Speaker Change: Replacing each other.
Speaker Change: Okay. Thank you got it that's all for me. Thank you very much. Thank you so okay.
Sergey Glinyanov: Okay, thank you. I got it. That's all for me. Thank you very much. Thank you, Sergey.
Speaker Change: The next question is from Chris Quilty of Quilty space. Please go ahead.
Chris Quilty: The next question is from Chris Quilty of Quilty Space. Please go ahead. Thanks Adi, I just wanted to follow up on the sidewinder. I think you mentioned you're working towards defense. Yes Chris, we lost you. Chris? I'm checking this out.
Chris Quilty: Thanks, Andy I just wanted to follow up on the Sidewinder I think you mentioned youre working towards defense.
Speaker Change: Yes.
Chris Quilty: Chris We lost you.
Speaker Change: Chris.
Speaker Change: Okay.
Speaker Change: <unk> checking this out.
Speaker Change: The next question is from on <unk> of Oppenheimer. Please go ahead.
Omriya Froni: The next question is from Omriya Froni of Oppenheimer. Please go ahead. Hi guys, thanks for taking my questions. I was wondering a little bit more about the certification process in the Boeing lineup. Is it part of the earn-out? You're going to deal with Stellar Blue? Is it a piece of the $25 million of the strategic contract that if Stellar Blue signs, you need to pay them? Thanks.
Speaker Change: Is it part of the earn out you showed that you have you ever done to deal with a stellar blue is <unk>.
Speaker Change: The $25 million of the strategic contracts that if Stella blue signs you need to pay and pay them. Thanks, and then and then I have another question sure. So this specific deal with Boeing was signed before.
Adi Sfadia: And then I have another question. Sure. So this specific deal with Boeing was signed before we signed the acquisition, so it's not part of the earn-out. There are several types of line fit that might, also with Boeing, that might, will trigger earn-out payment, but this specific technical service agreement OEM offerability is not part of the earn-out. So just to clarify it, in the next two or three quarters, you're forecasting to have a certificate that the new Stellar Blue antenna will be line-fitted into the Boeing production. Is it right? Eh, correct. It's, uh, Intelsat will be able, Intelsat or Panasonic or any other customer will be able to install the Sidewinder antenna in Boeing premises.
Speaker Change: We signed the acquisition. So it is not part of the year now.
Speaker Change: Several time types of line fit.
Speaker Change: But.
Speaker Change: As it might.
Speaker Change: Also as boring as it might.
Speaker Change: It will trigger.
Speaker Change: The payment, but this specific technical service agreement.
Speaker Change: The OEM of durability is not part of the.
Speaker Change: Part of the year.
Speaker Change: So.
Speaker Change: So just to be just to clarify it in the next two or three quarters.
Speaker Change: Your forecast seem to have a certificate that a new set of long tenor will be lie and feed it into the <unk>.
Speaker Change: Production is that right.
Speaker Change:
Speaker Change: Intelsat will be able to intersect with Panasonic or any other customer will be able to install decide when their antenna in volume premises. Okay. So that's where so that will trigger a $25 million of earn out or no not part of this is as I said earlier. This is not part of.
Adi Sfadia: Okay, so that's, uh, so, uh, that will trigger the $25 million of earn-out, or it's not part of it? No, this is, as I said, uh, earlier, this is not part of the earn-out. This is a specific agreement we'll sign before, uh, we sign the agreement. Okay, and... It will be part of Boeing...
Speaker Change: This is a specific agreement was signed before.
Speaker Change: We signed the agreement.
Speaker Change: And.
Speaker Change: But it will be part of Boeing.
Speaker Change: Uh huh.
Speaker Change:
Speaker Change: Yeah.
Speaker Change: Portfolio and you will be able to order this with.
Speaker Change: The aircraft then.
Speaker Change: It can be it can trigger.
Speaker Change: No.
Omriya Froni: Thanks for that clarification.
Speaker Change: Payment.
Speaker Change: Okay got it thanks for that clarification and about a 10% EBITDA run rate in the second half 'twenty five one of the one of the steps in the early a M.
Adi Sfadia: About 10% EBIT run rate in the second half of 25, one of the steps in the earlier announce was to get into the profitability of the Stella Blue products. Does the lower EBIT now from the products have any effect on the earn out you need to give to Stella Blue or the stage one and stage two earn out is still in place? So it's a good question with a very long answer. So in general, when we build the airnaut, we build it in a way, especially the first airnaut, is to reduce significantly the production risk.
Speaker Change: So as to get into the the probability of Stella Blue products is it it does the.
Speaker Change: Lower every time now from the products have any effect on the earn out do you need to give to Stella blue or.
Speaker Change: The stage, one and stage two.
Speaker Change: It's still in place.
Speaker Change: So it's a good question.
Speaker Change:
Speaker Change: It was a very long answer so in general when we build year note when we build it in a way.
Speaker Change: Especially the first earn out is to reduce reduce significantly the.
Speaker Change: Production risk.
Speaker Change: With that.
Adi Sfadia: With that, we are more than satisfied with the current status of the production rate. Having said that, the actual deliveries are lower than what the urinals require because of this missing component that I explained earlier. And because it's the first units, they are slightly more expensive in terms of cost than what we expect the usual run rate will be. We are already starting to see the cost reduction, and we do expect that during the third quarter we will reach to the expected costs and margins with Teller Blue. So if you summarize what I said, then right now the first air mount is not on track from payment perspective.
Speaker Change: More than satisfied with the current status of the production rate.
Speaker Change: Having said that the actual deliveries.
Speaker Change: The lower than what we earn as require because of this.
Speaker Change: Missing components that I explained.
Speaker Change: Earlier and because its the first <unk>.
Speaker Change: <unk>.
Speaker Change: Slightly more expensive in terms of cost and.
Speaker Change: And then what we expect the usual run rate, we'll be we're already starting to see the cost reduction and we do expect that during the third quarter, we will reach to the expected costs and margins with Stella Blue.
Speaker Change: So no if you summarize what I said then right now the first earn out is not on track from payments perspective, still we have seven weeks until the end of the quarter and.
Omriya Froni: Still, you know, we have seven weeks until the end of the quarter, and everyone at Teller Blue is working very hard in order to meet the air mount, to expand deliveries, and to reduce the cost. As for the second air mount, it depends on the number of units, new units, orders, and at least based on the forecast that we are seeing right now, we are on track to get those orders. Okay, got it.
Speaker Change: Everyone is still on Blue is working very hard in order to meet.
Speaker Change: And the earn out.
Speaker Change: To expand deliveries and to reduce debt.
Because as for the second earn out it depends on the number of units.
Speaker Change: New units all of them.
Speaker Change: And at least based on the forecast that we're seeing right now.
Speaker Change: We're on track to get those orders.
Speaker Change: Got it thanks, so much taking my questions.
Unknown Executive: Thanks so much for taking my questions. Pleasure.
Speaker Change: Pleasure.
Speaker Change: Yeah.
Speaker Change: The next question is from Chris Quilty of Quilty space. Please go ahead.
Chris Quilty: The next question is from Chris Quilty of Quilty Space. Please go ahead. Thanks guys. Can you hear me? Yeah, we hear you great. Following up on orders, you had mentioned that you expect some additional Sidewinder orders. Presumably that is based upon orders already won by the customer, or do your airline customers place orders for antennas? I assume not, in advance of them actually winning a large batch. So, right now, we are not working directly with the airlines, although we support our customers with those sales, so typically we are getting the orders from the Intelsat and the Panasonic of the world, and we do expect them to place some orders in the next few weeks or months.
Chris Quilty: Thanks, guys can you hear me, yes, we hear you great.
Speaker Change: Oh, that's better Okay, probably went up on orders.
Speaker Change: Had mentioned that you expect some additional sidewinder orders, presumably that is based upon our.
Speaker Change: Orders already won by the customer.
Speaker Change: Or do your airline customers place orders ran.
Speaker Change: Assume not in advance of them actually winning a large bathroom planes.
Speaker Change: Planes.
Speaker Change: So right now we are not working directly with the airlines, although we support our customers.
Speaker Change: With those sales. So typically we are getting the orders from the Intelsat and the Panasonic over the world and we do expect them to place some orders.
Speaker Change: In the next few weeks or months.
Speaker Change: Correct.
Adi Sfadia: Correct, but presumably that's based upon orders that Intelsat has already won with Arrow. Correct, they are ordering for inventory but against a business that they already want. Perfect.
Speaker Change: Resiliency, that's based upon orders that Intelsat has already won with airlines.
Speaker Change: Correct.
Speaker Change: No they're ordering for inventory, but.
Speaker Change: Against.
Speaker Change: Business that they already won.
Speaker Change: Perfect.
Adi Sfadia: Also, you mentioned a UAV terminal during, I think, the script. That's the first one I can recall, aside from the... I mentioned that we sold a DICAT, a transportable terminal, to a leading UAV company. It's part of their portfolio to manage the UAVs. Got it.
Speaker Change: Also you mentioned a UAV terminal during I.
Speaker Change: I think the script.
Speaker Change: The one I mentioned.
Speaker Change: And that.
Speaker Change: We sell D kit transportable, telling me now.
Do a leading <unk> company.
Speaker Change: It's part of their portfolio to manage the Uavs.
Speaker Change: Got it.
Unknown Executive: If I can switch real quick just to the to the balance sheet.
Speaker Change: If I can switch real quick just to the to the balance sheet and this is the first we kind of see.
Gil Benyamini: And this is the first we've we've kind of seen stellar blue folded in there. So Gil, some questions for you. There was a large step up in advance from customers and other other long term liabilities. and obviously a big step up in amortization. Can you give us some visibility on those items? Yeah, sure. So, of course, we applied the acquisition account. It means that we consolidate all of the assets and liabilities of Stellar Blue into the balance. So there are some advances that you can see and other items. On top of that, we applied in the Purchase Accounting PPA, 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 airnaut according to, you know, modeling the airnaut and in present value.
Speaker Change: <unk> stellar blue folded in there so guild some questions for you.
Speaker Change: There was a large step up in advance from customers in other other long term liabilities.
Speaker Change: And obviously, a big step up in amortization can you give us some visibility on those items, yes sure. So.
Speaker Change: Of course, we applied the acquisition accounting it means that we consolidate all of the assets and liabilities.
Speaker Change: L a blue into into the balance sheet.
Speaker Change: So there are some advances that you can see in <unk>.
Other items.
Speaker Change: On top of that we applied in the purchase accounting PPA purchase price allocation under which we've allocated the axis amount that we paid on top of the tangible assets.
Speaker Change: To goodwill and two other other.
Speaker Change: Other intangible assets as well as creating a provision for the earn out according to.
Speaker Change: Our modeling.
Speaker Change: The earn out and.
Speaker Change: In present value.
Gil Benyamini: So this is mainly what you can see in the balance sheet. On top of that, I mentioned the $60 million loan that we took in order to execute the acquisition, and you can see that as well on the balance sheet. All of these items, except for the goodwill, are reflected in the P&L. 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. So the backlog would usually be four to six quarters, and the other assets would be much longer, like 10 years.
Speaker Change: So this is mainly what you can see in the balance sheet on top of that I mentioned, the $60 million loan that we took to.
Speaker Change: To execute the acquisition and you can see that as well on the balance sheet. All of these items, except for the goodwill are reflected are reflected in the P&L.
Speaker Change: The intangible assets are depreciated.
Speaker Change: Most of the assets the underlying assets are the backlog the technology and the customer.
Speaker Change: Customer agreements, so we depreciate it over there are effective life.
Speaker Change: So the backlog would usually be four to six.
Speaker Change: And the other assets would be much longer than 10 years.
Gil Benyamini: and of course we have financing expenses for the loan in...
Speaker Change: And of course, we have our financing expenses for the loan in the P&L.
Speaker Change: Understand it too.
Gil Benyamini: Understand. And so, I mean, what should we model, you know, ballpark for amortization this year, or maybe just DNA? I mean, is Q1 a good run rate? Or does it not fully capture the amortization? It is not fully, fully capturing the whole picture, because Mayrav Sher, Serge Guillermo, Gil Benyamini, Ehud Helft, Serge Guillermo, Gil Benyamini, including the backlog. Okay, great.
Speaker Change: What should we model ballpark for amortization this year or maybe just DNA is Q1, a good run rate or does it not fully capture.
Speaker Change: I think the amortization it is not fully fully capturing.
Speaker Change: They're all.
Speaker Change: Picture because.
Speaker Change: Mainly because of the.
Speaker Change: The backlog asset which is not a.
Speaker Change: Not so linear.
Speaker Change: I would say that about.
Speaker Change: $3 5 million of amortization, our expected quarterly results of excellence during the first year, including the backlog, including the backlog of course.
Speaker Change: Okay.
Adi Sfadia: And the large gateway orders, that's still something that we expect to happen sometime here in 25? Yes.
Speaker Change: Great and.
Speaker Change: The large gateway orders, that's still something that we expect to happen sometime here in 'twenty five.
Speaker Change: Yes.
Speaker Change: So you're talking about the skies for gateway or Youre talking about the Leo constellations.
Adi Sfadia: Are you talking about the Sky Edge 4 Gateway or you're talking about the LEO Constellations? LEO Constellations. Leo Constellation, the sky is full for MEO and GEO, we do expect to have large orders. On the Leo Constellation, as I said in the last call, OneWeb right now, OneWeb Gen2 is right now on halt until Utah State will better understand the synergies between OneWeb and Iris Square. With Iris Square, we expect to get RFIs and RFPs during the...
Speaker Change: Leo constellation.
Speaker Change: Leo constellation.
Speaker Change: The Sky fall for immuno NGL, we do expect to have larger orders.
Speaker Change: On the Leo constellation So as I said in the last call one word right now one with Gen. Two is right now.
Speaker Change: Until you do start will better understand the synergies between one weapon.
Speaker Change: And I use square with IV square, we expect to get a refi than RSP is doing that.
Speaker Change: They said before the end of the second quarter I suspect there will be a bit of a delay so let's say Q3.
Adi Sfadia: they said before the end of the second quarter I suspect there will be a bit of a delay so let's say Q3 and again they said awards before the end of the year but I would give it another quarter so there is a risk that the decision taking will be delayed to early next year but at least from discussing with the different part of the consortium they are on track with their plans we received some kind of Some kind of questionnaire about in what areas do we want to compete and things like that. In general, we see that the plans are on track.
Speaker Change:
And.
Speaker Change: Again, they said awards before the end of them, but I would give it another quarter.
Speaker Change: So there is a risk that the.
Speaker Change: The decision taking will be delayed to early next next year.
Speaker Change: But.
Speaker Change: At least from the.
Speaker Change: Discussing with.
Speaker Change: Different part of the consortium they are on track with their.
Speaker Change: Plus we received.
Speaker Change: Some kind of.
Speaker Change: Some kind of.
Speaker Change: Questionnaire about.
Speaker Change: In what areas do we want to compete and things like that.
Speaker Change: In general we see that.
Speaker Change: The players.
Speaker Change: On track. In addition, we do expect to get the large.
Adi Sfadia: In addition, we do expect to get a large order to SSPA for existing LEO constellations, which we can't name the name of the customer. Great.
Speaker Change: All of them to SBA.
Speaker Change: S SBA.
Speaker Change: For the existing Leo constellation, which we cannot name the name of the customer.
Speaker Change: Great.
Gil Benyamini: Final question, Gil, just to clarify, for the full year guidance, Q1, using the $7.6 million reported or the $11.2 million that would reflect the extra charges to Stellar Blue? The 3.6 of Stellar Blue is just to clarify that organically we made significant progress in terms of profitability this quarter, but the guidance we gave to the market includes Stellar Blue as well. And I think this is the place to remind that It's really hard to measure Gilat quarter over quarter because of the way we do business with large and small deals, with different margin profile between regions, between segments.
Speaker Change: Final question Gil just to clarify for the full year guidance Q1, using the $7 6 million reported or the 11 point to that would reflect.
Speaker Change: The extra charges to stellar blue.
Speaker Change: No the 747 six yes.
Speaker Change: Three six of sell it really is just.
Speaker Change: To clarify that organically, we made a significant progress in terms of.
Speaker Change: Really this quarter, but the guidance we gave to the market includes.
Speaker Change: Stella Blue as well and I think this is the place to be mined.
Speaker Change: And that.
Speaker Change: It's really hard to measure in the last quarter over quarter because of the way, we do business with large and small deals.
Speaker Change: With different margin profile between regions between.
Speaker Change: Segments.
Gil Benyamini: So I think that the best way to look at the Gilat results is the current quarter or the current four trailing quarter with guidance for the year, and we are on track to achieve our guidance for the year, both on the top line and on the bottom line, based on a very large backlog that we have. I think that we have close to 80% of our backlog covering the revenues for the year, and additionally a pipeline of opportunities that we have in front of us. Great.
Speaker Change: So I think that the best way to look at the Gila to result, as the current quarter or the current four trailing quarters.
Speaker Change: Guidance for the year and we are on track.
Speaker Change: To achieve our guidance for the year, both on the top line and on the bottom line.
Speaker Change: Based on.
Speaker Change: A very large backlog that we have.
Speaker Change: I think that.
Speaker Change: We have close to 80% of our backlog.
Speaker Change: Covering the revenues for the year.
Speaker Change: Additionally.
Speaker Change: The pipeline of opportunities that we have in front of us.
Speaker Change: Great.
Unknown Executive: And if the best way we did get the segment reporting broken out by defense and commercial, I didn't notice, did you file the historical pro formas for that?
Speaker Change: The best way, we did get the segment reporting broken out by defense and commercial I Didnt notice did you file.
Speaker Change:
Speaker Change: Historical pro forma.
Unknown Executive: And second question, would you consider reporting EBITDA margins by segment in the future? So in the future we'll consider. You will see it in the six-month report. with the prospectus that we are maintaining, and filing pro forma is required only to maintain those kind of... those kind of reports.
Speaker Change: That.
Speaker Change: And second question would you consider reporting EBITDA margins by segment in the future.
Speaker Change: So in the future we will consider them.
Speaker Change: You will see it.
Speaker Change: And.
Speaker Change: Six months report.
Yeah.
Yeah.
Speaker Change: With.
Speaker Change: The prospectus that we are maintaining.
Speaker Change: And.
Speaker Change: Finding pro forma is required only to maintain.
Speaker Change: Those kind of.
Speaker Change: Jim.
Speaker Change: Those kinds of reports so it will take a decision if we are extending it or not.
Unknown Executive: So we need to take a decision if we are extending it or not. And based on that, if we will decide to extend it, then we are required to provide pro forma as well. We are working right now on the pro forma results to be ready to be filed once we take a decision.
Speaker Change: And based on that if we will decide to extend it then we have a cloud to provide pro forma.
Speaker Change: As well.
Speaker Change: We are working right now on the pro forma results to be ready to be filed once once we take a decision.
Speaker Change: Great. Thank you and good luck for the balance of the year here. Thanks.
Unknown Executive: Great, thank you and good luck for the balance of the year here. Thank you, Chris. Thank you.
Chris Quilty: Thank you Chris Thank you.
Speaker Change: The next question is from Gunther Karger of Discovery Group. Please go ahead.
Gunther Karger: The next question is from Gunther Karger of Discovery Group. Please go ahead. Yes, thank you. Can you hear me all right? Yes, Gunther. Thank you.
Gunther Karger: Yes. Thank you can you hear me Alright, yes has gone to.
Speaker Change: Oh, great. Thank you.
Gunther Karger: Yes.
Adi Sfadia: Unmissed quality Yes, so in general, it's too early to assess the effect because it's emerging daily. We did an analysis and we understood that based on the existing rates, the effect is not significant. In addition, before all the turmoil started, we identified it's going to start and we started to shift some of the raw material sourcing from high to low tariff countries and shift a lot of production into the U.S., especially for the product that we manufacture to the U.S. DOD. So in general, I think that overall, at least as it seems like, now the effect is not high.
Gunther Karger: I missed part of your comments.
Gunther Karger: The effect of our parents.
Gunther Karger: Even compete some of that please.
Gunther Karger: Yes.
Speaker Change: So in general it's too early to assess the effect.
Gunther Karger: Because.
Gunther Karger: It's our emerging daily.
Gunther Karger: We did an analysis and we understood that the.
Gunther Karger: Based on the existing rates the effect is.
Gunther Karger: He is not significant in addition, before all the turmoil started where they identify its going to start and we started to shift some of the raw material sourcing from.
Gunther Karger: Hi to load all these countries.
Gunther Karger: Shift a lot of.
Gunther Karger: Production into the U S, especially for the products that we manufacture to the U S. Dod.
Gunther Karger: So in general I think that overall at least as it seems like now that the effect is not.
Gunther Karger: He is not.
Gunther Karger: We are still monitoring closely the situation and react based on actual news. Hello? Yes. Yes, thank you. In other words, it seems like the situation... Unstable, rather than unstable, would that be a correct term? Again? Yes, yes, yes. Thank you very much, Adi. Thank you, Gunther.
Gunther Karger: We are still monitoring closely the situation and react based on the <unk>.
Gunther Karger: Based on.
Gunther Karger: Sure.
Gunther Karger: Okay.
Gunther Karger: Hello, Yes.
Yes. Thank you.
Gunther Karger: Otherwise since it seems like.
Gunther Karger: The situation is stable.
Gunther Karger: Stable on stable, but that'd be helpful.
Gunther Karger: Correct statement.
Gunther Karger: Again.
Gunther Karger: Yes, yes, yes.
Gunther Karger: Okay. Thank you very much how do you think youre going to.
Gunther Karger: Yeah.
Speaker Change: There are no further questions at this time, Mr being a meaning would you like to make your concluding statement.
Unknown Executive: There are no further questions at this time.
Gil Benyamini: Mr. Benyamini, would you like to make your concluding statement? Yes, 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 to speak to you on our next call. Thank you very much and have a great day. Thank you.
Speaker Change: So I want to thank you all for joining us on this call and for your time and attention and we hope to see you soon or speak to you on our next call. Thank you very much and have a great day.
Speaker Change: Thank you. This concludes <unk> first quarter 2025 results conference call. Thank you for your participation you May go ahead and disconnect.
Unknown Executive: This concludes Gilat's first quarter 2025 results conference call. Thank you for your participation. You may go ahead and disconnect.
Okay.
Speaker Change: Okay.
Speaker Change: Thanks.
Unknown Executive: Thanks for watching!
Speaker Change: [music].