Gilat Satellite Networks Ltd. Q3 FY2024 earnings call

• Defense business: Strategic pillar for Gilat, growing demand for defense SATCOM solutions driven by NGSO proliferation and macro political events. Signed over $5 million in contracts with US DoD, awarded $4 million for DataPath DKET 3421 terminals, $3 million for technical and field services, and over $2 million for Wavestream components. - In-flight connectivity business: Executing well, received over $12 million order from a leading satellite operator, acquisition of Stellar Blu Solutions expected to close by year-end pending govt approvals. - Peru business: Progressing with Amazonas region expansion project, operational phase expected to begin end of year, collected additional $4 million from arbitration in Peru. - Other initiatives: Making progress with SkyEdge IV cloud transformation and next-generation LEO ground segment systems, secured approx $15 million in orders from satellite operators for advanced solutions.

Revenue for the third quarter of 2024 was $74.6 million, which was 17% higher than the third quarter of the previous year ($63.9 million). The Satellite Networks segment had revenues of $51.7 million in Q3 '24 compared to $40.7 million in the same quarter last year. The Integrated Solutions segment had revenues of $13 million in Q3 '24 versus $11 million in the same quarter last year. The Network Infrastructure and Services segment had revenues of $9.8 million in Q3 '24 compared to $12.2 million in the same quarter last year. Excluding DataPath, organic revenue decreased by 10% year-over-year. Non-GAAP gross margin was 38%, and adjusted EBITDA reached $10.7 million, a 13% increase over Q3 of the previous year.

• Narrowed revenue guidance to a range of $305 million to $315 million, representing year-over-year growth of 17% at the midpoint, mainly due to termination of activities in Russia. - Raised and narrowed GAAP operating income guidance to between $24 million and $26 million, mainly due to $11 million proceeds from arbitration in Peru. - Narrowed adjusted EBITDA guidance to a range of $41 million to $43 million, representing year-over-year growth of 15% at the midpoint.

• Termination of activities in Russia due to limitations and constraints, which will impact revenue. - Delay in closing the acquisition of Stellar Blu Solutions, pending govt approvals. - CFIUS approval delay for the Stellar Blu acquisition. - Market competition in various projects such as the EU's Iris Square initiative.

Q: Ryan Koontz of Needham & Company asked about Russia pull out and organic business tracking, and Peru business.

A: Adi Sfadia said they are exiting Russia, Russia was a business of around $10 million a year; in Peru, they have construction and operational phases with recurring revenues.

Q: Louie DiPalma of William Blair asked about Europe's Iris Square and OneWeb Gen 2.

A: Adi Sfadia said Gilat has subsidiaries in EU, expects RFP soon; Gil Benyamini said to refer to Eutelsat on OneWeb Gen 2 implications.

Q: Unidentified Analyst asked about guidance, Stellar Blu, and SCPC mode.

A: Gil Benyamini said it's a mix of better gross margin and operational efficiency; Adi Sfadia said strategic rationale of Stellar Blu acquisition still in place, SCPC mode already part of guidance.

Q: Chris Quilty of Quilty Analytics asked about Iris Square timeline, virtualization, DoD programs, and cellular backhaul.

A: Adi Sfadia said Iris Square is a few years out, SkyEdge IV shifting to cloud, exploring DoD programs with DataPath, project shifting to the right in cellular backhaul.

Q: Gunther Karger of Discovery Group asked about CFIUS approval delay and US administration change impact.

A: Adi Sfadia said CFIUS taking longer but no specific issues, change in administration not affecting DataPath business much