Gilat Satellite Networks .(GILT) - 2025 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenues for Q2 2025 reached $105 million, a 37% increase year over year from $76.6 million in Q2 2024 [21] - Adjusted EBITDA was $11.8 million, a 17% increase from the same quarter last year, with an organic adjusted EBITDA of approximately $13.3 million, representing a 32% year-over-year increase [8][24] - GAAP net income for Q2 2025 was $9.8 million, or diluted income per share of $0.17, compared to $1.3 million or diluted income per share of $0.02 in Q2 2024 [23] Business Line Data and Key Metrics Changes - Commercial segment revenues were $69.1 million, a 59% increase from $43.4 million in Q2 2024, primarily due to the acquisition of Stellar Blue, which contributed $36 million [21][22] - Defense segment revenues remained stable at $20 million, similar to Q2 2024 [22] - Peru segment revenues increased to $15.9 million from $13.9 million in Q2 2024 [22] Market Data and Key Metrics Changes - The defense division is experiencing increased demand due to geopolitical tensions, with over $8 million in orders from the Israeli Ministry of Defense [9] - Gilat's commercial business saw over $47 million in orders from tier one satellite operators, reflecting strong demand for multi-orbit ground segment technologies [12] - Gilat Peru received over $60 million in new orders for upgrading regional network infrastructure, highlighting the company's commitment to digital inclusion [14][15] Company Strategy and Development Direction - The company is focused on capturing growth opportunities from the acquisition of Stellar Blue and investing in Gilat Defense to drive revenue growth in 2026 [7] - Gilat aims to expand its leadership across key verticals and deepen relationships with strategic partners, leveraging strong customer demand and a differentiated technology portfolio [14] - The company is transitioning to a software-defined infrastructure, enhancing its positioning in the satellite communication market [17][18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to meet customer demand and improve margins in the second half of 2025, particularly for Stellar Blue [30][32] - The outlook for 2025 has been improved, with revenue guidance narrowed to $435 million to $455 million, representing a year-over-year growth of approximately 46% at the midpoint [26] - Management noted ongoing interest in defense solutions from multiple regions, including North America, Europe, and Asia Pacific, indicating a robust pipeline for future growth [9][62] Other Important Information - The company secured a $100 million credit line to finance the acquisition of Stellar Blue, with total cash and equivalents at $65.4 million as of June 30, 2025 [25][26] - The GAAP gross margin decreased to 30.4% from 34.7% in Q2 2024, primarily due to lower margins in Stellar Blue as it ramps up production [22][23] Q&A Session Summary Question: What is the status of the ramp at Stellar Blue and margin expectations? - Management indicated that production ramp-up is progressing, with expectations for improved margins in the third and fourth quarters [30][32] Question: What is the fulfillment model for the SkyEdge four virtualization win? - The initial order involves operating software on cloud commercial off-the-shelf equipment, with flexible business models including CapEx and subscription options [34][35] Question: Are there any major decisions coming in Peru that could improve top-line growth? - Management expects significant orders in the coming months and participation in large RFPs from the Peruvian government [36] Question: What are the main contributors to the improved guidance? - Improved visibility from Stellar Blue and recent business awards contributed to the increased guidance for the year [42] Question: What is the backlog for Stellar Blue and future shipments? - The backlog includes close to 1,000 aircraft, with expectations for large orders in the coming weeks [45] Question: What is the status of the defense division and demand from the Israeli defense ministry? - There is strong interest from several countries, with ongoing proof of concept and demo sessions, and several large orders announced [62]