Gilat Satellite Networks Ltd. (GILT) Q4 2024 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by. Welcome to Gilat's Fourth Quarter 2024 Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded, February 12, 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, www.gilat.com. I would now like to hand over the call to Ms. Mayrav Sher, Head of Finance and IR. Ms. Sher, please go ahead.

Yes. Thank you, operator. Good morning, and good afternoon, everyone. Thank you for joining us today for Gilat's Fourth Quarter 2024 Results Conference Call and Webcast. I am Mayrav Sher, Gilat's Head of Finance and Investor Relations. The earnings press release that was issued can be found in the Investor Relations section of our website at www.gilat.com. Also, a recording of this call will be available beginning at approximately noon Eastern Time today, February 12, and a webcast on Gilat's website for a period of 30 days. Also, please note that statements made on this earnings call that are not historical facts may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All such forward-looking statements, including statements regarding future financial operating results, involve risks, uncertainties and contingencies, many of which are beyond the control of Gilat and which may cause actual results to differ materially from anticipated results. Gilat is under no obligation to update or alter these forward-looking statements, whether as a result of new information, future events or otherwise, and the company explicitly disclaim any obligation to do so. More detailed information about risk factors can be found in Gilat's reports filed with the Securities and Exchange Commission. Also on today's call, management will refer to non-GAAP measures. The company believes these non-GAAP measures assist management and investors in comparing the company's performance across reporting periods on a consistent basis by excluding these noncash, nonrecurring or other charges that it does not believe are indicative of its core operating performance. The reconciliation of GAAP results to non-GAAP measures can be found in the fourth quarter of fiscal year 2024 earnings press release that the company issued and furnished to the SEC earlier today on Form 6-K. With that, let me turn to introduction. On the call today are Mr. Adi Sfadia, Gilat's CEO; and Mr. Gil Benyamini, Gilat's CFO. I would now like to turn the call over to Adi Sfadia. Adi, go ahead, please.

Thank you, Mayrav, and good day to everyone. Thank you for joining us today to discuss our fourth quarter and full year 2024 earnings results. On the call, we will highlight key achievements for the quarter and talk about our opportunities and plans to accelerate revenues in 2025 as we capitalize on the acquisition of Stellar Blu and DataPath and continue to drive innovation. We finished 2024 with a strong fourth quarter, achieving a strong adjusted EBITDA and accelerating our revenue growth. Q4 revenue reached $78.1 million, driving full year revenues to $305.4 million, a 15% increase year-over-year. Adjusted EBITDA also saw significant growth with Q4 reaching $12.1 million and the full year hitting $42.2 million, a 16% growth year-over-year. This performance highlights Gilat's strong execution, strategic growth and dedication to delivering value. Overall, 2024 has been profitable and successful year for the company. Before we proceed to the business review, I would like to share some information about the organizational change we are undergoing. As part of our ongoing efforts to streamline operations, and increase our focus and resources on our main growth engines, we are pleased to announce our new organizational structure and reportable segments. This new structure is an outcome of a strategic process which we identified our main growth opportunities and that also led to our recent acquisition of DataPath and Stellar Blu. Our new organizational structure will allow us to focus more precisely on serving the growing defense market and the increasing opportunities in the commercial, NGSO and VHTS markets, specifically the IFC segment. We also believe that this structure will provide investors with greater insight into Gilat's business lines and simplify the understanding of our operations. As of January 1st, 2025, the company is divided into 3 new divisions: Gilat Defense, Gilat Commercial and Gilat Peru. Let me take a moment to explain in more detail. I will start with Gilat Defense. About 2 years ago, we identified defense as a market with significant potential for our growth. The demand for government and defense Satcom solutions is growing and is driven by macro political dynamics and the increasing need for multi-orbit connectivity strategies. Defense organization require multiple layers of communication redundancy to ensure high availability, making Satcom a critical component of mission success. Recognizing these trends, we acquired DataPath in 2023 and now have created Gilat Defense division specifically to meet these demanding needs. The newly formed Gilat Defense division is dedicated to meeting the specific needs of defense integrators, military and government organizations worldwide with a strong focus on the U.S. Department of Defense. By integrating products from the wide portfolio of Gilat, Wavestream and DataPath, the Gilat Defense division delivers secure, rapid deployment solutions and battlefield connectivity. Moving to Gilat Commercial. The satellite industry is rapidly shifting towards multi-orbit connectivity, driven by the need for greater resiliency, flexibility and seamless global coverage. At the same time, the push for digital inclusion and the growing demand for in-flight connectivity are reshaping the commercial market. To address these evolving needs, we established the commercial division. Our acquisition of Stellar Blu serves as one of the cornerstones of this division, strengthening our position in the high-growth IFC market and enabling us to provide cutting-edge connectivity solutions that meet the demands of passengers, airlines and service providers worldwide. Gilat's Commercial division is focused on providing advanced broadband satellite communication network solutions for enterprises and cellular backhaul being the partner of choice for the global and regional satellite operators for HTS, VHTS and NGSO constellations with turnkey solutions for service providers, MNOs, satellite operators and enterprises. The third division is Gilat Peru. Latin America in general and specifically Peru faces enormous challenges in terms of connectivity, especially in rural and hard-to-reach geographies. Gilat Peru is focused on digital and social inclusion and end-to-end telco solutions focusing on government solutions across Peru. Gilat Peru plays a vital role in bridging the digital divide, connecting underserved communities and delivering high-quality telecommunication services. More specifically, Gilat Peru focuses on telecom services and the operation and implementation of large-scale network projects. Gilat Group provides terrestrial fiber optic, wireless network and satellite network construction, implementation and operations. You can find a link to a dedicated presentation for the matter in the Q4 press release and our website in the Investor Relations section. Now let's move to the business review of the fourth quarter. The first highlight I would like to discuss is the closing of our Stellar Blu acquisition, which completed on January 6, 2025. The acquisition marks a significant milestone in Gilat's strategy to expand our leadership in the IFC market. As discussed before, this acquisition enhanced our capabilities to deliver advanced multi-orbit ESA solutions and strengthen our position in the commercial aviation, making us the market leader in this rapidly growing sector. Stellar Blu brings unique expertise in satellite communications and system integrations for aviation, complementing our existing solutions and extending our reach to key commercial partners. The addition of Stellar Blu strengthened our position to capture a larger share of the IFC market. In addition, Stellar Blu continues to make progress in extending its product line into the defense sector, aero applications. We're already seeing strong early results, promising partnerships and significant new business opportunities. Building on this momentum, Stellar Blu has made significant strides in the IFC market. With over 125 multi-orbit ESA aero terminals shipped to date and activation is well underway, Stellar Blu is leading the way in next-generation aviation connectivity. Our production capacity is scaling to meet this growing demand. During Q4, we received very significant orders of approximately $19 million for network equipment from our IFC partners, successfully expanding our deployments with them. These are very large-scale IFC operating networks over multi-orbit constellation. Also, Gilat Wavestream demonstrated consistent growth and continued success with SSPA and terminal-related avionics products dedicated to the IFC market. Our strong partnership with Intelsat continues to drive growth, expanding beyond commercial aviation into business aviation and maritime. Leveraging our SkyEdge family of VSAT platform, Intelsat is enhancing its global Satcom network to deliver seamless high-performance connectivity across diverse orbital assets. This expansion reinforce our position as a key technology provider and open new long-term revenue opportunities. As we look ahead to 2025, we see significant opportunities for our IFC product portfolio as multi-orbit constellations grow in capacity and coverage. In the fourth quarter, we saw strong demand in the NGSO market with Gilat Wavestream LEO gateway Solid State Power Amplifiers product portfolio, a category leader playing a key role in supporting LEO constellations. In 2024, SES successfully launched its service for O3b mPOWER, a major milestone that underscores the strength and advanced capabilities of our SkyEdge IV platform. This launch cements our leadership in next-generation satellite networking, demonstrating our ability to support highly flexible software-defined satellite services. At the same time, Intelsat expanded its multiservice network choosing Gilat technology for its maritime and business aviation sector. This highlights the confidence that the leading satellite operators have in our solutions and reinforced our growing role as a key technology provider across multiple verticals. These achievements further validates our strategy of delivering cutting-edge future-proof satellite communication solutions. As we look ahead to 2025, we are well positioned to secure very significant orders for our LEO gateway products while also anticipating growth with SES and Intelsat's multi-orbit and cloud strategy. In addition, the recent award of the IRIS2 constellation by the EU to the Space Rights Consortium that includes Eutelsat, SES and Hispasat is a positive development with significant opportunities and potential. Turning to defense. We concluded the year with significant wins for Gilat DataPath securing key deals for our portable and transportable products. This success includes contracts with both the U.S. DoD and international defense organizations, further solidifying our position in the critical market. Specifically, in the fourth quarter, we received approximately $9 million in orders from the U.S. DoD and other international defense organizations. 2024 was the first full year of DataPath operating under Gilat, and we couldn't be more pleased with the results. Gilat DataPath transportable and portable products have gained success with various defense organizations all over the globe. At the same time, we have been advancing our defense strategy by adapting SkyEdge IV to meet military requirements and developing our next-generation GLT software-defined radio modem tailored to the evolving needs of the defense market. As we look ahead to 2025, we are planning significant investments in Gilat Defense, substantially increasing our R&D efforts to introduce more product, solutions and features. Additionally, we will increase Gilat Defense sales and marketing investment to approach the defense market channels and customers. We see significant opportunities for Gilat Defense unified solutions, seamlessly integrating the expertise and technologies of Gilat, DataPath and Wavestream to provide a comprehensive mission-critical offering for the defense government customers worldwide. In Peru, we experienced solid growth this year, securing $20 million in orders from major players in the country's communication sector. A key highlight was our partnership with IPT, Internet Para Todos, a consortium of Telefonica and Facebook that is expanding and extending its network reach to more communities. Our efforts remain focused on bridging the digital divide, enabling underserved communities to gain access to high-quality Internet connectivity. Looking forward, we have a robust pipeline for 2025 with large opportunities emerging such as the progression of significant RFPs with Pronatel and the Peruvian government, along with several upcoming project expansions and extensions. Given our expanding opportunity set in 2025, we expect another year of top line and profit growth. We expect 2025 revenues of between $415 million and $455 million. We expect an adjusted EBITDA of between $47 million and $53 million. Looking ahead, Gilat is well positioned for continued growth driven by strong market tailwinds, including increasing satellite size, declining launch costs and growing data transfer demand. Our SkyEdge IV platform, particularly with VHTS and NGSO technologies, is ideally suited to capitalize on these trends. Our commercial business bolstered by Stellar Blu is poised for significant expansion as we establish our leadership in the expanding ESA for IFC market. Our portfolio of ESA products and multi-orbit solutions will be instrumental in capitalizing on the increasing demand for IFC by airlines and passengers. Our defense business also maintained strong momentum with increased orders and awards as Gilat DataPath leverage our expertise in supporting operations in most challenging environments. The Defense segment represents a significant growth opportunity, and we are pleased with our progress in meeting government and military customer needs with innovative satellite solutions. And with that, I will hand over the call over to Gil Benyamini, 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 GAAP and non-GAAP basis. I will now walk through our financial highlights for the fourth quarter of 2024, followed by a review of the full year performance. As Adi mentioned earlier, we are very pleased with our performance this year. We closed the year with strong momentum, delivering sustained improvement in our results, including significant year-over-year growth in both revenue and profitability. 2024 was a pivotal year for Gilat marked by the strategic acquisition of Stellar Blu, which we expect to further accelerate our growth. Notably, the acquisition was completed after the balance sheet date and is therefore not reflected in our 2024 financials. In terms of our financial results, revenue for the fourth quarter were $78.1 million, 3% increase compared to $75.6 million in Q4 '23. For the full year, revenues totaled $305.4 million, reflecting 15% growth from $266 million in 2023. The increase was primarily driven by growth in the defense vertical. In terms of revenue breakdown by segment, Q4 '24 revenues for the Satellite Networks segment were $49.1 million compared to $53.5 million in the same quarter last year. The decline was primarily due to termination of our activity in Russia. Q4 '24 revenues of the Integrated Solutions segment were $17.3 million compared to $9.5 million in the same quarter last year. The increase was primarily driven by higher revenues from the defense vertical. Q4 '24 revenues of the Network Infrastructure and Services segment were $11.8 million compared to $12.6 million in Q4 '23. I would now like to review our fourth quarter results, starting with GAAP basis before moving to the non-GAAP. Our GAAP gross margin in Q4 '24 improved to 39.7% compared to 38.2% in Q4 '23. GAAP operating expenses in Q4 '24 were $18.3 million compared to $26 million in Q4 '23. The decrease is primarily due to profits from arbitration in Peru, which were recorded as other operating income in Q4 of [ '24. ] GAAP operating income in Q4 '24 was $12.8 million compared to $2.9 million in Q4 '23. The increase was driven by proceeds from the arbitration in Peru, as previously mentioned. GAAP net income in Q4 '24 was $11.8 million or diluted income per share of $0.21 compared to $3.4 million or a diluted income per share of $0.03 in Q4 '23. Moving to non-GAAP results. Our non-GAAP gross margin in Q4 '24 improved to 40.4% compared to 39.1% in Q4 '23. Non-GAAP operating expenses in Q4 '24 were $21.9 million compared to $23.4 million in Q4 '23. Non-GAAP operating income in Q4 '24 was $9.7 million compared to an operating income of $6.1 million in Q4 '23. Non-GAAP net income in Q4 '24 was $8.5 million or a diluted income per share of $0.15 compared to a net income of $6.5 million or income per share of $0.11 in Q4 '23. Adjusted EBITDA in Q4 '24 was $12.1 million compared to an adjusted EBITDA of $9.4 million in Q4 '23. For the full year, adjusted EBITDA was $42.2 million compared with an adjusted EBITDA of $36.4 million in 2023. Moving to our balance sheet. As of December 31st, '24, total cash, cash equivalents and restricted cash, net of loans were $118 million compared to $106 million on September 30, '24, and compared to $95 million in December 31st, '23. The increase was mainly driven by our ongoing operations as well as from the arbitration process in Peru. In terms of cash flow, we generated $16.3 million from operating activities in Q4 '24. DSOs, which exclude receivables and revenues of our terrestrial network construction projects in Peru were 71 days, down from 83 days in previous quarter due to both increased revenues and higher collections. Our shareholders' equity as of December 31st, '24, totaled $304 million compared with $275 million at the end of '23. Looking ahead, as Adi mentioned, we expect a strong 2025 with projected revenues between $415 million and $455 million. In addition, we expect adjusted EBITDA to range between $47 million and $53 million. We do not provide forward-looking guidance on a GAAP basis because we are unable to reasonably provide forward-looking guidance for certain financial data, such as amortization of purchased intangibles and earn-out based expenses related to recent acquisitions. As a result, we are not able to provide a reconciliation of GAAP to non-GAAP financial measures for forward-looking data without unreasonable effort. That concludes my financial review. I would now like to open the call for questions. Operator, please?

[Operator Instructions] The first question is from Sergey Glinyanov from Freedom Brokers.

I would like to start my congratulations making another successful year with Gilat. And yes, my first question is related to Stellar Blu. And previous guidance was roughly $120 million to $150 million for 2025. Is that guidance still relevant?

Sergey, yes, this guidance is still relevant, and it is included in the overall guidance.

Will this segment be divided regarding the new organizational structure?

Stellar Blu is not a reportable segment. It's managed part of the commercial division with a lot of synergies between Gilat old IFC subsegment and Stellar Blu. So the overall results will be consolidated under the Gilat Commercial division.

Okay. Got it. Could you provide us any details about any costs related to the new organizational structure that will be incurred?

In our website, we added a short presentation about the segment change that we made. And we also provided unaudited high-level financial results for 2023 and 2024, which I believe can help analysts and investors to rework their model.

Okay. Got it. And my final question is, there was a little improve of EBITDA margin in 2024. As we can look at your EBITDA 2025 guidance, there is a little decrease in margin in the midpoint and it's around 2 percentage points. Is it primarily because of Stellar Blu and R&D and marketing standards, right?

Yes. In general, Stellar Blu has a lower gross profit than Gilat usual gross profit. And of course, it affects the EBITDA. We need to remember that Stellar Blu are in its production ramp-up phase. So we do expect them to be EBITDA positive for the year, and we do expect them to be more than 10% EBITDA in the second half of the -- during the second half of the year. In addition, we are planning to increase significantly our investment in the defense division, especially in R&D and sales and marketing. So if you combine all of this, this is the main reason why the overall EBITDA ratio for 2025 is slightly lower than 2024, but we do expect a significant improvement in '26 onwards.

The next question is from Louie DiPalma of William Blair.

Have the discussions -- the very early discussions with IRIS2 been positive? And what is the expected time line for contracts associated with IRIS2 and the deployment?

So the initial discussion with the consortium are in a very friendly way. But -- and the IRIS2 consortium issued some RFIs at the beginning of mid-2024. Now with the awards, we expect them to issue either additional set of RFIs or set of RFPs probably towards the mid half of the year or probably Q3 this year. Based on what they said they -- based on what they are saying, they expect to provide awards before the end of the year and sign agreements during early 2026. But I think it's a very aggressive time line. So I would expect a bit delay in those time frames.

Great. That makes sense. And can you talk about trends within the defense vertical? With the new reporting segments, you forecast strong growth in defense. And what does the pipeline look like in terms of future contract awards and opportunities with your different products?

Yes. So I can share slightly more light on this exciting new Gilat Defense. So I think that the cornerstone is our acquisition of DataPath that in 2024 did slightly more than $50 million, and we expect them to grow in 2026 -- '25 as well. So we are seeing both business with the U.S. DoD, but also international. We are seeing a lot of synergies with Gilat salesforce worldwide trying to sell DataPath solutions and the pipeline is increasing for both portable and transportable solutions. On the other side, DataPath is leveraging their relationship with the DoD and the U.S. Army to bring Gilat networking and modem solutions into the DoD. We are seeing a lot of excitement there. We're starting to engage with meetings that we haven't been able to engage for years. In parallel, we are trying to leverage our relationship with the global satellite operators like SES and Intelsat and that they already have a huge network of Gilat to leverage this network and to penetrate with Gilat modems into the DoD, again, leveraging the networks that they already bought. We recently announced that we are far and default compliant with our products those are eligible to be sold to the U.S. DoD. And in addition, we are able to manufacture them locally in the U.S. So we are slightly but promising jumping on every barrier that we had in the past. And we are seeing a lot of excitement both internally and externally about this. We are trying to bid for very large programs that will include also development efforts. And I think that 2025, we will see a significant booking increase and the outcome in revenues will come in 2026 onwards. We said several times in the past that growth in this segment won't be linear because it's a project and program based. And we are aiming to get at least 1 or 2 very large awards to support the future growth.

Sounds good. And as it relates to Peru, you guided for a decline for revenue in 2025. But going forward beyond 2025, should there be stability? Or will Peru continue to trend lower?

So first of all, looking forward, we believe that Peru is going to grow. In 2025, we see some delays in renewal of some of the recurring contracts. So this might push revenues down a little bit. But overall, most of Peru's revenues are for longer terms, and we definitely see a long-term growth trajectory for Peru.

I would like to add that in 2024, we had some construction revenues, some leftovers from past transaction and some expansion that we got an award at the beginning of 2024, and we are expecting to start seeing operational revenues from this project in 2025. So I think that it's a bit misleading if you reduce the construction revenues on operations side, you will see growth year-over-year.

And also, Adi, you indicated that you have shipped 125 of the ESA antenna systems with Stellar Blu. And I was wondering, could you provide an update in terms of where Stellar Blu stands in terms of the contingent payments?

I think it's really in early stages right now. The first milestone is to deliver several hundreds of units in a grid margin. The first units usually are more costly than the production ramp-up units because as part of the ramp-up, you learn and fix the issues. I think we are in a good position to reduce the terminal costs, but it's really too early to talk about the earn-out. The first earn-out will be end by midyear. So I guess that during the second quarter, we'll be able to give some more light on it.

The next question is from Ryan Koontz of Needham & Company.

Most of my questions have been answered here. But with regard to the production ramp there at Stellar Blu, can you refresh us on where the company was in Q4 and what you anticipate that volume ramp to look like as we go through the first half of '25?

Yes. So Q4 was the initial production ramp-up of production. They delivered around 75 units in Q4. They have several terms of active systems that have already been installed and activated on aircraft. And until now, I think the customers are very happy. The systems performed very well. So I think we are on the right direction.

That's great. Great to hear those are installed and performing well. And on the commercial side, relative to your historical numbers there, the decline you saw in '24, can you remind us if there was some Russia impact there exiting Russia. Can you remind us of that impact in '24 versus '23?

Russia used to be around $20 million, give or take, per year. In 2024, I guess we had slightly around 50% out of it. And in 2023, we've been -- I don't remember the exact number, Gil, maybe you remember?

The decline was about $10 million a year ago. This is more or less the number.

Got it. All right. Great. And just in terms of the competitive environment, maybe going back to IFC here. What's that competitive environment like for you now post Stellar Blu deal closing? And how do you see this market developing versus the opportunities and competitors out there?

So there is a direct and indirect effect. On the direct effect, I think that today with Stellar Blu, we have the leading multi-orbit ESA terminal that has the best swap and cost. Swap is a size, weight and power and cost that is available today in the market. We have a lot of opportunities with several service providers and aircraft manufacturers. I think that being a line fit in one of the large aircraft manufacturers is one of our top objectives for 2025 and 2026. About the indirect competition, it's always there. Our customers compete against each other and against Starlink. But overall, the fact that the industry is shifting to free WiFi significantly increased the potential growth in this market in general and for Gilat.

The next question is from Chris Quilty from Quilty Analytics.

It's Quilty Space. I got it wrong. Apologies for the background noise I'm driving. Gil, quick question or follow-up on the top line guidance, just to make sure I have the pieces. You're still looking for order of $120 million to $150 million in Stellar Blu. I think we're talking about a $10 million headwind from Russia. And I missed the sort of order of magnitude on the Peru business in terms of the headwind. Once we back that out, what are we looking at for -- and again, I don't want to look necessarily on the traditional businesses the way you had it organized by segment. But if I did and look at sort of amplifiers versus modems and those buckets, where are you seeing growth and/or the faster growth in the business lines?

Yes. So obviously, in the IFC with the acquisition, we see the highest growth. We also see growth in our defense vertical now becoming a segment. And we provided some guidance under this segment to grow from 98 in 2024 to 100 to 110 in 2025. We have some headwinds in Peru, as mentioned. And at the end of the day, our focus area in the IFC, in the defense and in the VHTS and NGSO, these are the areas that we believe that most growth will come from.

Understand. And maybe just specifically on the power amplifier side of the business, are you still chasing large opportunities there on the NGSO side?

Yes, definitely, we do. And we also -- on the overall [ FCA ] business, we also project growth next year.

Great. Back to Stellar Blu, I think you've got 2 sizable customers there, and I think some of the earn-out is related to bringing on other large customers. Where do you sit in that process in terms of negotiations? Is it still looking like that's a 2025 event? Or does it get pushed further out?

I think we are pursuing it in 2025. Right now, we believe it will be closed before year-end. But of course, it can slip later on. But we have a very large backlog and a lot of opportunities. And when Intelsat and Panasonic gets more and more awards, we expect them to place additional orders. And with the large aircraft manufacturers, we are aiming to close as soon as possible in 2025.

Got you. Follow-up on Peru. Even with the lower revenues, is it fair to assume profitability is even or up as you shift down to the hardware business and into service?

So the service revenues are associated with higher profitability. So it compensates the decrease in revenue.

Got you. And Gil, you mentioned higher R&D spending in the defense area. What sort of order of magnitude of spending? And are there specific areas where you see more opportunity?

So most of the investment is aimed towards new modems and family of terminals and other large projects that we aim to participate in. That -- at the end, we'll have to see how much of the overall R&D will be allocated to the defense, but it's in the magnitude of a few million dollars. And in the overall, we expect R&D to be more or less at the same level that it is this year. So it's mainly internal allocation.

On top of that, it's the R&D of Stellar Blu. So at the end, you will see a significant increase in R&D. In general, we are aiming to add more features for SkyEdge IV to support defense applications. The main focus is on security features, adding transit and fix capabilities, developing our next-generation GMP and highly secured modem. And also some flat panel and electronically steered antennas with a focus on the UAV market. So all in all, you will see a significant increase in the R&D of the defense.

Adi, speaking of SkyEdge IV, you guys had a great year in '23 of growth there. '24 seems like it was sort of flat. And I'm talking about the commercial side, sort of 5G cellular backhaul. What's the outlook? Do you see programs picking back up in '25? Or is it another sort of flattish year on the commercial side?

I think that right now, there is -- as long as the large satellite manufacturers keep on delaying the launch of new satellites, the new SDS satellites, I think it will be a bit flattish in terms of new networks because usually, the large networks that we sell are touching with new satellite launch. But we do expect to see revenues of next-generation SkyEdge IV shifting to virtual platform and cloud-based solution where the SkyEdge IV will run on native cloud. So we do expect to see some new wins over there. But again, once the satellite manufacturers will start launching new satellites, we will return to significant growth on the networking side.

Great. Last question, and sorry, I'm all over the map here. But back to Stellar Blu. What are -- and this is kind of a high-level thought in the market. Obviously, SpaceX has made a mark in IFC. Hughes, I think, is shipping their single-beam antenna, but flat panel antenna is still relatively new in the market. Where do you see the trends going in terms of the single beam, dual beam, multi-beam, multi-orbit, Ka-band, Ku-band, multi-band in terms of where the customers are asking for solutions.

Yes. So I think that right now, Stellar Blu is, I think, the best technology available. But all the antennas today are supporting single beam. The next generation will support dual beam on the receive side. Ka or Ku/Ka, Ku/Ka antennas is also something that I think that the industry is considering. But up until now, it wasn't that of a big success. As for Ka, I think that there is a lot of opportunities over there once we'll see Telesat constellation is ramping up. So I think we might see some new development over there.

The next question is from Gunther Karger of Discovery Group.

Very good results. Congratulations. A technology question. Can you hear me all right?

Yes, we can.

Great. It's a technology-oriented question. Regarding Stellar Blu, the IFC market traditionally is the passenger area. What about the operational area? Will the Stellar Blu acquisition enable encroachment into the operational communications, a ground communications, avionics and things of this type?

Stellar Blu is focused on delivering the electronically steered antenna. They have no intention of going to air to ground. And in terms of operation, I'm not sure I fully understand your question. So I'll refer to 2 parts. Of course, Stellar Blu provides services and maintenance services on the platform that they are selling, but they have no intention to compete with the service provider, meaning their customers, if this is what you asked.

Yes. I was thinking more of the operational communications, which is currently primarily HF, VHF ground. And as the systems move to the satellite area and you have onboard antennas and communication facilities. I'm just wondering if the Stellar Blu would allow the movement of operational communications to that area away from the traditional HF, VHF systems.

On the aircraft side, theoretically, it's doable, but it's -- today, it's regulated communications. So I don't have details if they can change this regulation to allow the use of this antenna for the aircraft operation.

[Operator Instructions] There are no further questions at this time. Mr. Benyamini, would you like to make your concluding statement?

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 speak to you in our next call. Thank you very much, and have a great day.

Thank you. This concludes Gilat's Fourth Quarter 2024 Results Conference Call. Thank you for your participation. You may go ahead and disconnect.