Gilat Satellite Networks Ltd. (GILT) Earnings

Management highlights

- Strategic Transactions * Gilad signed a definitive agreement to acquire most of ComTech's satellite and space communications segment. The transaction is expected to more than double Gilad's defense revenue, expand its position in mission-critical defense SATCOM, strengthen its U.S. presence, and broaden its technology portfolio. Closing is expected by the end of 2026, pending regulatory approvals (HSR, CFIUS) and customary closing conditions. * The company met its Stellar Blue acquisition earn-out milestone deadline in June 2026 without meeting the required criteria, so it is now free from all remaining earn-out obligations. Q2 2026 was a record quarter for Stellar Blue terminal deliveries, with over 200 units shipped. - Defense Segment Operations * Global demand for resilient, mobile, rapidly deployable SATCOM solutions for contested environments has increased following recent conflicts. Gilad received a $11 million order to supply SATCOM terminals and field services to the U.S. Department of War, and a multi-million dollar order for custom SATCOM terminals from a European Ministry of Defense, expanding its footprint in both markets. During EuroSat Week, the company launched the VIPER-KA, a new KA-band ESA terminal for small-to-medium unmanned aerial vehicles (UAVs) that supports multi-orbit connectivity for ISR and tactical UAV missions. - Commercial Segment Operations * The company received over $20 million in orders for SkyEdge platforms and services from leading global satellite operators, as the industry transitions to multi-orbit network architectures. It also received a $43 million order from a leading IFC service provider for Sidewinder ESA terminals (for both line-fit and retrofit installation). * Boeing line-fit certification for Sidewinder is progressing, with first unit deliveries expected in Q4 2026. Gilad has also started the line-fit approval process with Airbus and received an initial order as part of this effort, expanding Sidewinder's total addressable market in commercial aviation. Slightly more than 600 Stellar Blue/Sidewinder terminals are currently installed and operating, with installation timelines controlled by customer and airline maintenance schedules. - Peru Segment Operations * Gilad completed infrastructure upgrade work in the first three project regions and moved into the operational phase. The Cusco region project is expected to be completed in Q3 2026. Management is advancing discussions for project expansions and pursuing additional large-scale connectivity projects to support Peru's national social inclusion initiative. Following completion of a large $85 million expansion project signed in Q3 2025, the majority of Peru segment revenues are now recurring long-term service revenues.

Guidance

- Management reiterated its full year 2026 guidance, maintaining the prior revenue range of $500 million to $520 million (representing 13% year-over-year growth at the midpoint), and adjusted EBITDA range of $61 million to $66 million (representing 19% year-over-year growth at the midpoint, with continued margin expansion). - The guidance is maintained despite unfavorable unfavorable movements of the Israeli shekel versus the U.S. dollar, which are expected to increase operating expenses by $3 million to $5 million in the second half of 2026. - Management confirms that its prior forecast for defense segment revenue remains on track, with significantly higher revenue expected in the second half of 2026 compared to the first half, aligned with existing backlog and expected delivery schedules.

Segment performance

Total Q2 2026 revenue was $122.7 million, a 17% year-over-year increase. 1. Commercial segment: Q2 2026 revenue was $83 million, up 20% year-over-year from $69.1 million, contributing 67.6% of total Q2 revenue. Growth was driven primarily by in-flight connectivity (IFC) vertical revenues. 2. Defense segment: Q2 2026 revenue was $22.5 million, up 12% year-over-year from $20 million, contributing 18.3% of total Q2 revenue. 3. Peru segment: Q2 2026 revenue was $17.2 million, up 8% year-over-year from $15.9 million, contributing 14.1% of total Q2 revenue.

Risks & headwinds

- Forward-looking results are subject to material uncertainty from risks including: uncertain global economic conditions, reduced revenue from key customers, delays or cuts to U.S. and foreign military spending, slow global adoption of new company products, and supply chain disruptions or delays for raw materials and components caused by business conditions, global conflicts, weather and other external factors outside the company's control. - The ComTech acquisition remains pending and subject to regulatory approvals that may not be received, or may be delayed, preventing closing on the expected timeline. - Exchange rate volatility (specifically weakness of the Israeli shekel against the U.S. dollar) creates upward pressure on operating expenses in the second half of 2026, which could pressure margins if not offset by operating leverage from higher revenue. - Hughes (a major competitor) entering Chapter 11 bankruptcy creates some customer uncertainty, but also creates penetration opportunities for Gilad.

Analyst Q&A

• Q: Will Hughes' Chapter 11 bankruptcy create any opportunities for Gilad? /

  A: Hughes is a long-time competitor (and minor customer/supplier) for Gilad, with only an insignificant amount of outstanding debt from Hughes that is not material to Gilad's results. Management expects that customer uncertainty around working with a bankrupt company will create opportunities for Gilad to penetrate new customers that require long-term development and service commitments.

• Q: Will the defense segment still see much higher revenue in the second half of 2026 compared to the first half, as originally forecast? /

  A: The original forecast remains aligned with current backlog and expected delivery schedules, so the significantly higher second half defense revenue trajectory is still on track. Commercial segment revenue came in better than expected in Q2 2026 due to higher Sidewinder terminal deliveries and network equipment shipments.

• Q: What new trends is Gilad seeing in the defense market right now? /

  A: Recent events in the Middle East have increased demand for mobile SATCOM gateways to replace vulnerable fixed infrastructure, which is creating strong new growth for Gilad. Management also sees a fast-growing new market for SATCOM terminals for loitering munitions, and is actively evaluating developing customized solutions for this high-growth segment.

• Q: What factors will drive second half 2026 margin relative to the first half? /

  A: Higher second half revenue will create positive operating leverage that supports margin, but unfavorable Israeli shekel U.S. dollar exchange rate movements will add $3 to $5 million in unexpected operating expenses, which will create offsetting downward margin pressure.

• Q: How will the acquired ComTech satellite business be structured internally after closing? /

  A: Approximately 70-80% of ComTech's acquired revenue is defense-related and 20-30% is commercial. The acquired business units will be split between Gilad's existing defense and commercial segments aligned with their end markets, for example ComTech's modem business will be integrated into the defense segment.