Gilat Satellite Networks Ltd.

Ladies and gentlemen, thank you for standing by. Welcome to GILOT'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 19th, 2025. By now, you should have all received the company's press release. If you have not received it, please view it in the news section of the company's website, .gilot.com. 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. Thank you for joining us for GILOT Satellite Network's earnings conference call for the first quarter of 2025. With us on the call are Mr. Adi Safia, GILOT's CEO, and Mr. Gil Benyaminni, GILOT's CFO. The earnings press release was issued earlier today and is available on GILOT's website underneath the investor relations section. Before turning the call over to management, I would like to remind everyone that some statements made during this conference call contain forward-looking statements based on current expectations. Actual results could differ materially from those projected as a result of various risks and uncertainties. The potential risks and uncertainties that could cause actual results to differ materially include uncertain global economic conditions, reductions in revenues from key customers, delays or 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, whether or other factors not under our control. The company cautions investors not to place undue reliance on forward-looking statements, which reflect the company's analysis as of today's date. The company undertakes no obligation to publicly update forward-looking statements to reflect subsequent events or circumstances. Further information on these factors and other factors that could affect GILOT's financial results is included in the company's filings with the SEC, including the latest quarterly report on Form 10Q. In addition, on today's call, management will refer to certain non-GAAP financial measures that management considers to be useful and differ from GAAP. These non-GAAP measures should be considered supplemental to configuring corresponding GAAP figures. With that, I would now like to turn the call over to Mr. 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 earnings 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 GILOT defense, GILOT commercial, and GILOT 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 GILOT defense solutions. We are already seeing the benefits of this change, particularly in our main growth engines, defense, VHTS, and NGSO constellations, and in-flight connectivity. We began 2025 with a good first quarter. Q1 revenues reached $92 million, a 21% increase year over year. Adjusted EBITDA was $7.6 million. Q1 2025 was the first quarter we included Stellar Blue's results in our financial results. Stellar Blue contributed about $25 million to our top line and incurred an adjusted EBITDA loss of about $3.6 million. Excluding the loss, our adjusted EBITDA for the quarter was about $11.2 million, representing a 20% year over year increase. Stellar Blue's yearly performance remains on track, with revenue expectation of between $120 and $150 million. We also expect Stellar Blue to reach a 10% adjusted EBITDA margin run rate during the second half of the year. Before reviewing the performance of each division, I want to address the impact of the current global macroeconomic turmoil and the shifting international trade policies and tariffs on Gilad business. The global economic uncertainty and the shifting international trade policies are creating new challenges. It is still too early to fully assess the impact as new facts emerge daily. Recognizing these strengths early, we proactively initiated 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. We intend to monitor the worldwide development closely, and we'll adapt our strategies as needed to ensure business continuity and minimize potential disruption. Now on the business review. We had a strong start to the year with the successful launch of the Gilad 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 Gilad defense business. The dynamic macro geopolitical landscape is driving increased defense budgets, and accordingly there is a growing demand for secure, high-performance communication over satellites. We are well positioned to meet these mission-critical needs. We are seeing demand from diverse geographical markets, including North America, Europe, and the Asia-Pacific region. In Europe specifically, recent events have accelerated efforts to develop sovereign communications networks with growing investments from both the European Union and individual countries. This trend is creating significant opportunities, and we believe Europe will become an increasingly important market for Gilad defense going forward. In Q1, our world spent a diverse global customer base, reflecting demand for a broad range of products and services. This broad portfolio, coupled with our global presence, continues to position us as a trusted and reliable partner for defense organizations worldwide. During Q1, Gilad defense was awarded over $5 million to support critical connectivity for the US DoD and international defense forces with our Decat 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. Gilad DataPass was also awarded up to $23 million for a multi-year contract to service satellite transportable terminals for the US DoD customers. Gilad DataPass will deliver critical program management, field services, and technical support, ensuring operation readiness and continued reliability of these vital communication assets. Gilad DataPass was also awarded a contract of more than $11 million for Decat 3420 terminals to a leading UAV company. 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 -the-art defense communication systems. These wins validate the strengths of our integrated technologies across Gilad defense product clients and highlight the increasing trust customers have in our ability to deliver mission-critical communication in challenging environments. As I mentioned during the fourth quarter call, we are increasing our investment in allocating more resources to R&D as well as to sales and marketing at Gilad Defense in 2025. This quarter, we launched several new products including our new GLT modem, the Aquarius Pro DS modem, and the Gilad DataPass 2.6 meter terminal. We are highly optimistic that these products will be adopted to serve on GEO, MEO, and MEO constellations for critical government applications. We plan to continue investing significantly in Gilad Defense as we execute our strategy to lead in this important sector. Turning to our commercial business, we are seeing continued momentum in both system deliveries and customer expansions as airlines prioritize next-generation connectivity experience for passengers including free Wi-Fi plans and connectivity on regional jets. We received the $15 million in orders from various satellite operators including for our SkyH4 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. These developments underscore the increasing demand for our solutions in this rapidly evolving market. Also, in the IFC sector, with respect to Stellar Blue, InterSat 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 Sidewinder ESA by Panasonic, one of the major IFC service providers, further validating its leadership in the market. 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. GILAD is expanding its strategic collaboration with partners to drive the advancement of next-generation aviation ESA terminals. This development project focused on further developing our Sidewinder ESA and also extended 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 offerability with Boeing as part of Boeing's technical service agreement. The platform is progressing through OEM qualification with availability expected in early 2026. 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 GILAD 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. 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 health care. 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 GILAD Peru to compete on projects worldwide, with multiple digital inclusion projects currently in the pipeline, reflecting the strong momentum we are seeing in this important area. 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. Additionally, we successfully transferred the IKA Transport Network to Pornatel, the first such transfer, and are working towards transferring the additional region's transport network as well. 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. GILAD 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. Our defense business is off to a strong start this year, benefiting from strong tailwinds driven by the macroeconomic developments. GILAD Defense is building momentum and expanding 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 Sidewind 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. We are encouraged by the momentum across our business segments 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 over the call to Gil Binyamini, 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 basis. I will now talk through our financial highlights for the first quarter of 2025. As Adi mentioned, we are very pleased with our first quarter performance. We completed the acquisition of Stellar Blue on January 6, 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 Q124. 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 the Peru segment. In terms of the revenue breakdown by segments, Q125 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 Stellar Blue, which contributed $25 million to our revenue, partially offset by the termination of our activity in Russia in 2024. Q125 revenues for the defense segment were $23 million compared to $17.2 million in the same quarter last year. The 34% increase was primarily driven by high deliveries to our defense customers in the U.S. and Asia. Q125 revenues for the Peru segment were $4.8 million compared to $17.7 million in Q124. The decline is primarily attributed to delays in renewing several projects, postponing major project bids, and slower progress on expanding existing projects. Additionally, in Q124, we recorded revenues from the construction phase of the Amazonus project expansion, which was completed during the year. We are currently awaiting front-end inspection and approval to transition to the operational phase. Furthermore, some equipment deliveries are expected later in this year. Our GAAP gross margin in Q125 decreased to .9% compared to .9% in Q124. The decrease is primarily due to lower margins in Stellar Blue as it ramps up production, as well as amortization of purchased intangibles and lower gross margins in Peru. GAAP operating expenses in Q125 were $31.1 million compared to $22.7 million in Q124. The increase is primarily due to the consolidation of Stellar Blue, amortization of purchased intangibles, transaction costs, and other income recognized in Q124. GAAP operating loss in Q125 was $2.7 million compared to GAAP operating income of $5.4 million in Q124. The decrease was driven by acquisition-related expenses and purchased intangibles amortization and the absence of proceeds from arbitration in Peru that was recognized in Q124. GAAP net loss in Q125 was $6 million or a loss per share of $0.10 compared to GAAP net income of $5 million or diluted income per share of $0.09 in Q124. Moving to non-GAAP results, our non-GAAP gross margin in Q125 decreased to .7% compared to .8% in Q124. Non-GAAP operating expenses in Q125 were $24.1 million compared to $22.2 million in Q124. And non-GAAP operating income in Q125 was $5.2 million compared to $6.6 million in Q124. The non-GAAP net income in Q125 was $1.8 million or a diluted income per share of $0.03 compared to a net income of $6 million or income per share of $0.11 in Q124. Adjusted EBITDA in Q125 was $7.6 million compared to an adjusted EBITDA of $9.3 million in Q124. The decrease in the adjusted EBITDA is primarily due to Stellar Blue losses in the first quarter. Our Q125 organic adjusted EBITDA excluding Stellar Blue losses was $11.2 million, a 20% increase compared with Q124. Moving to our balance sheet. On January 6, the company secured the $100 million credit line from a bank consortium from which it utilized $60 million to finance the acquisition of Stellar Blue. As a result, as of March 31, 2025, total cash and cash equivalents and restricted cash were $164.3 million or approximately $3.8 million net of loans compared to $118.2 million on December 31, 2024. In terms of cash flow, we used $6.6 million for operating activities in Q125 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 quarters. Our shareholders' equity as of March 31, 2025, totaled to $300 million compared with $304 million at the end of 2024. Looking ahead, as Adi mentioned, we are reiterating our guidance for 2025 with projected revenue between $415 million and $455 million, representing -over-year growth of 42% at the midpoint. Adjusted EBITDA is expected to be between $47 and $53 million, representing -over-year growth of 18% at the midpoint. That concludes my financial review. I would now like to open the call for questions. Operator, please go ahead.

Thank you. Ladies and gentlemen, at this time we will begin the question and answer session. If you have a question, please press star 1. If you wish to cancel your request, please press star 2. If you are using speaker equipment, kindly lift the handset before pressing the numbers. Please stand by while we poll for your questions. The first question is from Louis de Palma of William Blair. Please go ahead. Adi and Gil,

good afternoon.

Hi, Louis. How are you?

I'm doing great. My first question is, 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's defense increased budget. Nothing yet materialized, but we are seeing a lot of demand, requests for RFPs and things like that. So we believe that at midterm we will see a decent business from Europe that will support our growth in defense.

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 adaptations 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.

Great. Thanks. 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?

So Peru linearity is a bit challenging. So we do expect the revenue run rate to be in 45 to 50 million dollars. This quarter 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 seven or eight million dollars of hardware revenue every year. In addition, there are several large projects, especially large expansions of existing projects where we are not competing against others. It's just 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.

Great. That's it for me. Thanks.

Thank you, Luis. See you soon.

The next question is from Ryan Koontz of Needham and Company. Please go ahead.

Hi. Can you hear me okay, Jonathan? Yes,

we do.

Great. Sounds like your organic growth in defense is going quite well and you're stepping up off that a little bit there to make some investments in both R&D and sales. My question then really is more about the commercial side, how that's evolving, 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 -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 second question related to that 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 competitive bidding going on kind of on a periodic basis? Thanks.

Okay. So in terms of progress at Stellar Blue, I think we made very good progress during the quarter. One of the main risks in the acquisition was it's a new product in the production from a startup company and the market acceptance and the feedback we are getting is really amazing. More than 150 aircraft already installed, performed 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. The new unit is under underqualification and certification processes and we expect that by 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 way. So we remain with our guidance for Stellar Blue of revenues of between $120 to $150 million with reaching a run rate of just a dividend of more than 10% sometimes during the second half of the year. 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 Stellar Blue along the year. As for selling efforts, most of the technology sales is with the 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. I think they need to go and fight in the market with the airlines to get the awards over there. And when needed, we are supporting them. I think that our superior technology helps them in the competitive market environments.

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 the differentiation there compared to your current generation product? What's coming at the end of the year? When do you think it might start to achieve revenue?

In general, it's to take the existing sidewinder ESA and adjust it a little bit to support military defense, ISR, and VVIP aircrafts. We expect that we already started the work and we expect it to be finished some during 2025 and some early 2026. We do expect to get some orders if not by the end of the year, then early next year.

All right, great. That's all I have for you. Thank you.

Thank you, Ryan.

The next question is from Sergey Glynyanov of Freedom Broker. Please go ahead.

Hello, Adi, Gil. How is it going?

Hi, Sergey.

Thank you for taking my question. 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, before the end of the year, to reach about 100 units per month. Right now, in most of the units, we are give or take very close to this production capabilities, except from 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 alternatives. So I believe that towards the end of Q2, early Q3, we will reach close to 100 units per month.

Yeah, sounds great. And so let you mention that you have not worked at this point closely for now because it's 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 -Bueh-Essai. But what delivery structure in terms of primary and secondary aviation markets do you expect for this year and for long term?

OK, so you're talking about the breakdown between line fit and retrofit. So currently in 2025, 100 percent 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.

Yeah, got it. And as you mentioned, you like to expand the winder application in ISR and VVIP. Does it not harm your original product like ESR 2030? Or maybe you can put some colors about that?

Sure, sure. First of all, for the same market segment, in some cases we have more than one product. The ESR 2030 is a LEO-only antenna that can work on KU, meaning on one web constellation. The side winder 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.

Okay, thank you. That's all from me. Thank you very much.

Thank you, Sergey. The next question is from Chris Quilty of Quilty Space. Please go ahead.

Thanks, Adi. I just wanted to follow up on the side winder. I think you mentioned you're working towards defense.

Yes. Chris, we lost you. Chris? I'm

checking this out. The next question is from Omri Afroni 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 do 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. 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 an 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 new Stellar Blue antenna will be line fitted into the Boeing production. Is that right?

Correct. It's an inter-start. We'll be able to inter-start up on a sonic or any other customer will be able to install the side window antenna in Boeing premises.

OK, so that's where so that will trigger the $25 million of earn-out or it's not part of it.

This is as I said earlier, this is not part of the earn-out. This is a specific agreement was signed before we signed the agreement.

OK, and it

will be part of Boeing portfolio and you will be able to order this with the aircraft. Then it can be can trigger an out payment.

OK, got it. Thanks for that clarification. And about EBITDA, 10% EBITDA run rate in the second half of the 25. One of the one of the steps in the earlier and outs was to get into the profitability of the Stellar Blue products. Is it does the lower EBITDA now from the products have any effects on the earn-out you need to give to Stellar Blue or the stage one and stage two and out it's still in place?

So it's a good question with a very long answer. So in general, when we build the year and out, we build it in a way, especially the first turn out is to reduce reduce significantly the production risk. 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 year and out require because of this missing component that I explained earlier. And because it's the first unit, they are slightly more expensive in terms of cost than what we expect the usual run rate will 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 margin with with Stellar Blue. So if you summarize what I said, then right now, the first turn out is not on track from payment perspective. Still, we have seven weeks until the end of the quarter and everyone at Stellar Blue is working very hard in order to meet the earn-out to expand deliveries and to reduce the cost. As for the second year and out, 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.

OK, got it. Thanks for taking my questions.

Pleasure.

The next question is from Chris Quilty of Quilty Space. Please go ahead.

Thanks, guys. Can you hear me?

Yeah, we

hear you great. That's better.

OK, 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 of planes.

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 Intel SAT and the Panasonic of the world. And we do expect them to place some orders in the next few weeks or months.

Correct. But presumably that's based upon orders that Intel SAT has already won with airlines.

Correct. They are ordering for inventory, but against the business that they already won. Perfect.

Also, you mentioned a UAV terminal during I think the script. That's the first one I can recall. I mentioned that

we sold a DCAT transportable terminal to a leading UAV company. It's part of their portfolio to manage the UAVs.

Got it. If I can switch real quick just to the balance sheet. This is the first 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 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 accounting. It means that we consolidate all of the assets and liabilities of Stellar Blue into the balance sheet. 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 earn out according to modeling the earn out in present values. 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 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. And of course we have financing expenses for the loan in the P&L.

I 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 all the amortization? It

is not fully capturing the whole picture, mainly because of the backlog asset, which is not so linear. I would say that about $3.5 million of amortization are expected quarterly

during

the first year. Including the backlog? Including the backlog, of course.

Okay. Great. And the large gateway orders, that's still something that we expect to happen sometime here in 2025?

Yes. Are you talking about the SkyH4 gateway, or are you talking about the LEO constellations?

LEO constellations.

LEO constellations, you know, the SkyH4 for MIO and JIO, we do expect to have large orders. On the LEO constellations, so as I said in the last call, OneWeb right now, OneWeb Gen2 is right now on halt, until you just start to better understand the synergies between OneWeb and Iris Square. With Iris Square, we expect to get RFIs and RFPs during the, 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 too early next year. But at least from discussing with different parts of the consortium, they are on track with their plans. We received some kind of questionnaire about in what areas do we want to compete and things like that. So in general, we see that the plans are on track. In addition, we do expect to get a large order to SSPA for existing LEO constellations, which we cannot name the name of the customer.

Great. Final question, Gil, just to clarify for the full year guidance, Q1 using the 7.6 million reported or the 11.2 that would reflect the extra charges to Stellar Blue.

No, the 7.6.

It's the 7.6, yes.

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. So I think that the best way to look at the GILAT results is the current quarter or the current four trailing quarter with a 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 percent of our backlog covering the revenues for the year and additional pipeline of opportunities that we have in front of us.

Great. And 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? 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 months report with the prospectus that we are maintaining and filing pro forma is required only to maintain those kind of those kind of reports. 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.

Great. Thank you and good luck for the balance of the year here.

Thank you, Chris. Thank you.

The next question is from Gunther Carver of Discovery Group. Please go ahead.

Yes, thank you. Can you hear me all right? Yes,

Gunther.

Oh, great. Thank you. Yes. I missed part of your comments on the effect of the tariffs. Could you kind of repeat some of that, please?

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 products that we manufacture to the U.S. DOD. So in general, I think that overall, at least it seems like, now that the effect is not high, we are still monitoring closely the situation and react based on the actual news.

Hello? Yes. Yes, thank you. In other words, it seems like the situation is rather stable rather than unstable. Would that be a correct statement?

Again?

Yes.

Yes.

Thank you very much, Artie.

Thank you, Gunther.

There are no further questions at this time. Mr. Bignamini, 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. This concludes Gielat's first quarter 2025 results conference call. Thank you for your participation. You may go ahead and disconnect.