Gilat Satellite Networks Ltd. (NYSE: GILT)

Gilat's Q1 2025 financial performance was characterized by strong top-line growth and strategic investments that impacted near-term profitability. Revenue increased 21% year-over-year to $92 million, demonstrating the company's ability to capitalize on growing demand in both defense and commercial satellite markets.

The GAAP operating loss of $2.7 million compared to an operating income of $5.4 million in Q1 2024 was primarily attributable to the $3.6 million loss from Gilat Stellar Blu's ramp-up process. This loss reflects the company's strategic investment in its next-generation In-Flight Connectivity (IFC) business, which is expected to become a significant growth driver as the product matures.

Non-GAAP operating income of $5.2 million, while down 21% from $6.6 million in Q1 2024, provides a clearer view of the underlying operational performance. The decline was driven by amortization of purchased intangibles from the Stellar Blu acquisition, earnout liabilities, and other one-time acquisition-related costs.

Adjusted EBITDA performance showed the impact of the Stellar Blu investment, coming in at $7.6 million compared to $9.3 million in Q1 2024. However, excluding the Stellar Blu ramp-up loss, Adjusted EBITDA would have been $11.2 million, indicating strong operational cash generation from the core business.

The company's strategic investments in growth initiatives, particularly in defense and next-generation satellite solutions, position Gilat well for future revenue expansion and margin improvement as these initiatives mature and scale.

Gilat operates through two primary business segments: Gilat Defense and Gilat Commercial, each experiencing distinct market dynamics and growth trajectories:

Gilat Defense

Gilat Defense experienced significant momentum during Q1 2025, fueled by growing global demand for secure, mission-critical communications. The segment's strong performance was driven by macro-geopolitical factors that are increasing investment in defense communications worldwide.

Recent contract wins demonstrate the segment's competitive strength:

• Over $15 million in orders from leading satellite operators
• Multimillion-dollar order from a global defense organization
• Over $11 million defense contract from a leading UAV company
• Up to $23 million multi-year contract to service satellite transportable terminal units for US DoD customers
• $6 million defense contract to provide military communications solutions in Asia-Pacific
• $4 million in orders for advanced portable satellite terminals from global defense customers
• Over $5 million to support critical connectivity for defense forces

Gilat Commercial

Gilat Commercial continued its expansion across multiple verticals. The IFC (In-Flight Connectivity) business showed promise with Gilat Stellar Blu's Sidewinder ESA now flying on over 150 aircraft. Strong customer feedback and additional orders are expected soon.

The commercial segment is focusing on:

• Expanding partnerships to enter new applications such as ISR (Intelligence, Surveillance, and Reconnaissance) and VVIP aviation
• Developing OEM installation capabilities and broader modem compatibility
• Establishing Sidewinder as the go-to multi-orbit IFC solution
• Pursuing opportunities in cellular backhaul, enterprise connectivity, and broadband access markets

While Stellar Blu's ramp-up process created near-term margin pressure, the strategic value of this acquisition is becoming increasingly apparent as the technology gains market traction and customer acceptance.

Gilat's comprehensive technology portfolio positions the company as a leader in satellite networking solutions across multiple applications and market segments:

Core Technology Platforms

• Multi-Orbit Solutions: Advanced technologies for GEO, MEO, and LEO satellite constellations
• Very High Throughput Satellites (VHTS): Next-generation solutions for software-defined satellites
• Satellite On-the-Move (SOTM): High-performance antennas for mobile applications
• Solid State Power Amplifiers (SSPA): Highly efficient, high-power amplification solutions
• Integrated Ground Systems: Comprehensive solutions for commercial and defense applications

Sidewinder ESA Success Metrics

• Currently flying on over 150 aircraft
• Strong customer feedback driving additional orders
• Expansion into new applications including ISR and VVIP aviation
• Development of OEM installation capabilities
• Enhanced modem compatibility for broader market appeal

Market Applications

Gilat's technology serves diverse end markets including:

• Defense and military communications
• Commercial aviation and in-flight connectivity
• Cellular backhaul and telecommunications
• Enterprise and government connectivity
• Critical infrastructure protection
• Broadcast and media services
• Cybersecurity services

The company's focus on innovation and R&D ensures its technology remains at the forefront of satellite communications, enabling it to capture opportunities in emerging markets and applications.

Gilat's strategic initiatives focus on capitalizing on the growing demand for satellite-based communications across defense and commercial markets:

Organizational Excellence

• New Organizational Structure: Implementation showing positive impact on execution and operational efficiency
• Segment Focus: Clear distinction between Gilat Defense and Gilat Commercial enables targeted growth strategies
• Operational Optimization: Streamlined processes improving responsiveness to market opportunities

Defense Market Expansion

• Leveraging macro-geopolitical factors driving increased defense spending
• Expanding portfolio of mission-critical communication solutions
• Building strategic partnerships with defense organizations globally
• Investing in next-generation technologies for military applications

Commercial Market Development

• Stellar Blu integration and product development completing successfully
• Sidewinder ESA establishing market leadership in multi-orbit IFC solutions
• Partnership expansion for new applications and markets
• OEM relationship development for broader market penetration

Innovation and Technology

• Continued investment in R&D for next-generation satellite technologies
• Development of software-defined satellite solutions
• Enhancement of cybersecurity capabilities
• Cloud-based platform development for improved scalability

CEO Adi Sfadia emphasized the company's strategic position: "Based on our strong beginning to 2025 and as Stellar Blu's ramp up finalizes, we are on track to deliver a record year in both revenues and non-GAAP profitability as we capture the expanding opportunities in mission-critical communications and next-generation satellite solutions."

Gilat reiterated its ambitious guidance for 2025, reflecting confidence in the company's ability to execute on its growth strategy and capitalize on market opportunities:

Full-Year 2025 Guidance

• Revenue: $415 - $455 million (representing 42% growth at midpoint)
• Adjusted EBITDA: $47 - $53 million (representing 18% growth at midpoint)

Growth Drivers Supporting Guidance

• Defense Momentum: Strong order book and pipeline supporting continued growth
• Stellar Blu Ramp-Up: Expected completion of ramp-up process with improving profitability
• IFC Market Expansion: Growing adoption of Sidewinder ESA and new applications
• Operational Leverage: Margin expansion as revenue scales and integration costs decline

Key Assumptions

• Continued strong demand in defense markets driven by geopolitical factors
• Successful completion of Stellar Blu integration and ramp-up process
• No significant adverse changes in global economic conditions
• Continued execution on major customer contracts and new order intake

The significant revenue growth guidance reflects the company's expanded addressable market following the Stellar Blu acquisition and the strong momentum in defense applications. The projected improvement in Adjusted EBITDA demonstrates management's confidence in achieving operational leverage as the business scales.

Management's guidance for 2025 positions the year as a potential inflection point for Gilat, with the company expected to achieve record financial performance while establishing stronger market positions in both defense and commercial segments.