Gilat Satellite Networks Ltd. (GILT) Q1 2025 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by. Welcome to Gilat'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. [Operator Instructions] 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 www.gilat.com. I would now like to hand over the call to Mr. Alex Villalta of Alliance Advisors IR. Mr. Villalta, would you like to begin please?

Thank you, operator, and good morning and afternoon to everyone. Thank you for joining us for Gilat Satellite Networks' Earnings Conference Call for the first quarter of 2025. With us on the call are Mr. Adi Sfadia, Gilat's CEO; and Mr. Gil Benyamini, Gilat's CFO. The earnings press release was issued earlier today and is available on Gilat'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 US and foreign military spending, acceptance of new products on a global basis, and disruptions or delays in supply of raw materials and components due to business conditions, global conflicts, weather 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 Gilat's financial results is included in the company's filings with the SEC, including the latest quarterly report on Form 10-Q. 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 Gilat Defense, Gilat Commercial and Gilat Peru Division, 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 Blu and the continued strong demand for Gilat 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 Blu's results in our financial results. Stellar Blu 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 Blu's yearly performance remains on track, with revenue expectation of between $120 million and $150 million. We also expect Stellar Blu 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 Gilat 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 trends early, we proactively initiated adjustment to our raw material sourcing several months ago. This involves strategically shifting from higher to lower tariff countries and to the US. Importantly, a significant share of our US Defense business is sourced and manufactured domestically in the US, supporting stability in this environment. We intend to monitor the worldwide development closely and will 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 successful launch of Gilat 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 Gilat 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 for diverse geographical markets, including North America, Europe and Asia Pacific region. In Europe specifically, recent events has accelerated efforts to develop sovereign communications networks with growing investments from both the European Union and in individual countries. This trend is creating significant opportunities, and we believe Europe will become increasingly important market for Gilat Defense going forward. In Q1, awards spanned a diverse global customer base, reflecting demand for a broad range of products and services. This broad portfolio, coupled with our global presence, continue to position us as a trusted and reliable partner for defense organizations worldwide. During Q1, Gilat Defense was awarded over $5 million to support critical connectivity for the US DoD and international defense forces, with our DKET terminals and field support services. We also secured a $4 million in order for unique CCT portable satellite terminals for global defense customers and another $6 million contract in Asia for our market-leading SkyEdge platform. Gilat DataPath was also awarded up to $23 million for a multi-year contract to service satellite transportable terminals for the US DoD customers. Gilat DataPath will deliver critical program management, field services and technical support, ensuring operation readiness and continued reliability of these vital communication assets. Gilat DataPath was also awarded a contract of more than $11 million for DKET 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 state-of-the-art defense communication systems. These wins validate the strength of our integrated technologies across Gilat Defense product lines 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 Gilat Defense in 2025. This quarter, we launched several new products, including our new GLT modem, the Aquarius Pro DS modem and the Gilat DataPath 2.6 meter terminal. We are highly optimistic that these products will be adopted to serve on GEO, MEO and LEO constellations for critical government applications. We plan to continue investing significantly in Gilat 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 airline prioritize next-generation connectivity experience for passengers, including free WiFi plans and connectivity on regional jets. We received $15 million in orders from various satellite operators, including for our SkyEdge IV platform to support IFC services and for high-performance SSPAs 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 Blu, Intelsat 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. Gilat 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 extend 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 SkyEdge IV and SkyEdge II-c baseband 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 SkyEdge IV, positioning Gilat 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 healthcare. 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 Gilat 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 Ica transport network to Pronatel, the first such transfer and are working towards transferring the additional regions transport network as well. While the strong pipeline remains intact, several large projects, be it renewals, expansions and extensions continue to face delays. That said, we remain optimistic about future opportunities in Peru. I'm pleased to say that we continue to have a strong backlog and a healthy pipeline. Therefore, we feel comfortable reiterating our 2025 annual guidance. Gilat 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 development. Gilat 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 Blu's innovative Sidewinder 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 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 a GAAP and non-GAAP 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 Blu on January 6th, 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 Q1 '24. The increase was led by the Commercial segment due to the acquisition of Stellar Blu, combined with the growth in the Defense segment and offset by lower revenue in the Peru segment. In terms of the revenue breakdown by segment, Q1 '25 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 Blu, which contributed $25 million to our revenue, partially offset by the termination of our activity in Russia in 2024. Q1 '25 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 US and Asia. Q1 '25 revenues for the Peru segment were $4.8 million compared to $17.7 million in Q1 '24. The decline is primarily attributed to delays in renewing several projects, postponing major project bids and slower progress on expanding existing projects. Additionally, in Q1 '24, we recorded revenues from the construction phase of the Amazonas project expansion, which was completed during the year. We are currently awaiting Pronatel inspection and approval to transition to the operational phase. Furthermore, some equipment deliveries are expected later in this year. Our GAAP gross margin in Q1 '25 decreased to 30.9% compared to 36.9% in Q1 '24. The decrease is primarily due to lower margins in Stellar Blu as it ramps up production as well as amortization of purchased intangibles and lower gross margins in Peru. GAAP operating expenses in Q1 '25 were $31.1 million compared to $22.7 million in Q1 '24. The increase is primarily due to the consolidation of Stellar Blu, amortization of purchased intangibles, transaction costs and other income recognized in Q1 '24. GAAP operating loss in Q1 '25 was $2.7 million compared to GAAP operating income of $5.4 million in Q1 '24. The decrease was driven by acquisition-related expenses and purchased intangibles amortization and the absence of proceeds from an arbitration in Peru that was recognized in Q1 '24. GAAP net loss in Q1 '25 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 Q1 '24. Moving to non-GAAP results. Our non-GAAP gross margin in Q1 '25 decreased to 31.7% compared to 37.8% in Q1 '24. Non-GAAP operating expenses in Q1 '25 were $24.1 million compared to $22.2 million in Q1 '24 and non-GAAP operating income in Q1 '25 was $5.2 million compared to $6.6 million in Q1 '24. The non-GAAP net income in Q1 '25 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 Q1 '24. Adjusted EBITDA in Q1 '25 was $7.6 million compared to an adjusted EBITDA of $9.3 million in Q1 '24. The decrease in the adjusted EBITDA is primarily due to Stellar Blu losses in the first quarter. Our Q1 '25 organic adjusted EBITDA, excluding Stellar Blu losses, was $11.2 million, a 20% increase compared with Q1 '24. Moving to our balance sheet. On January 6th, the company secured a $100 million credit line from a bank consortium from which it utilized $60 million to finance the acquisition of Stellar Blu. As a result, as of March 31st, '25, total cash and cash equivalents and restricted cash were $64.3 million or approximately $3.8 million net of loans compared to $118.2 million on December 31st, 2024. In terms of cash flow, we used $6.6 million for operating activities in Q1 '25 to support the working capital needs of Stellar Blu 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 the previous quarter. Our shareholders' equity as of March 31st, '25 totaled to $300 million compared with $304 million at the end of '24. Looking ahead, as Adi mentioned, we are reiterating our guidance for 2025, with projected revenue between $415 million and $455 million, representing year-over-year growth of 42% at the midpoint. Adjusted EBITDA is expected to be between $47 million and $53 million, represented year-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. [Operator Instructions] The first question is from Louie DiPalma of William Blair. Please go ahead.

Adi and Gil, good afternoon.

Hi, Louie. How are you?

Doing great. My first question, 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 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 the midterm, we'll see 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 adaptation to the terminal and now we are in the certification process. So it seems like that 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 Peru revenue run rate to be $45 million to $50 million. This quarter it 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 $7 million or $8 million of hardware revenue every year. In addition, there are several large projects, especially large expansions of existing projects where we do not compete 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 levels that we saw in recent years.

Great. That's it for me. Thanks.

Thank you, Louie. See you soon.

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

Hi. Can you hear me okay, gentlemen?

Yes, we do.

Great. Sounds like your organic growth in Defense is going quite well, and you're stepping up OpEx 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 Blu unit and its integration with the balance of your commercial business. From a sales perspective, do you feel like you have sufficient go-to-market resources in place today to achieve your goals you've set for Stellar Blu or is that something you're still adding on? And second question related to that is, is the nature of these relationships, these sales relationships, is it generally more technical and 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 Blu, I think we made a very good progress during the quarter. One of the main risks in the acquisition was the -- it's a new product introduction from a start-up 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 manufacturer. We identified ahead of time and we are working internally on replacing this unit. The new unit is under qualification and certification processes. And we expect that during towards 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 year. So we remain with our guidance for Stellar Blu of revenues of between $120 million to $150 million with reaching a run rate of adjusted EBITDA 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 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 Blu along the year. As for selling efforts, most of the technology sales is with Intelsat 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 Intelsat and Panasonic. 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. I appreciate that. And you mentioned on the call earlier, a next-generation product coming. I assume that's coming from the Stellar Blu side. Can you walk through kind of the differentiation there compared to your current generation product? What's coming at the end of the year? And when do you think it might start to achieve revenue?

Yes. So in general, it's to take the existing Sidewinder ESA and adjust it a little bit to support military defense, ISR and VVIP aircraft. We expect, 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 to do. Thank you.

Thank you, Ryan.

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

Hello, Adi, Gil. How it's 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 to 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 alternative. So I believe that towards the end of Q2, early Q3, we will reach to our -- close to 100 units per month.

Yes. Sounds great. And so that you mentioned that you have not worked at this point closely for now because the certification you should pass. And in terms of primary and secondary aviation market, 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?

Yes, 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 Stellar Blu ESA. But what delivery structure in terms of primary and secondary aviation market you expect for this year and for long-term?

Okay. So, you're talking about the breakdown between line-fit and retrofit. So currently, in 2025 100% 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.

Yes. Got it. And Adi, you mentioned, you'd like to expand Sidewinder 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. 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 OneWeb constellation. The Sidewinder 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. Got it. 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 Sidewinder. 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 Efroni 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 should -- you're going to deal with Stellar Blu? Is it a piece of the $25 million of the strategic contracts that if Stellar Blu 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 earn-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 Blu antenna will be line fitted into the Boeing production? Is it right?

Correct. Intelsat will be able -- Intelsat or Panasonic or any other customer will be able to install the Sidewinder antenna in Boeing premises.

Okay. So that's -- so that will trigger the $25 million of earn-out or it's not part of it?

No. This is, as I said earlier, this is not part of the earn-out. This is a specific agreement that was signed before we signed the agreement. For example, it will be part of Boeing portfolio and you will be able to order this with the aircraft then it can trigger earn-out payment.

Okay. Got it. Thanks for that clarification. And about EBITDA, 10% EBITDA run rate in the second half of '25. One of the steps in the early earn-outs was to get into the profitability of the Stellar Blu products. Does the lower EBITDA now from the products have any effect on the earn-out you need to give to Stellar Blu or the Stage 1 and Stage 2 earn-out is still in place?

So it's a good question with a very long answer. So in general, when we build the earn-out, we build it in a way especially the first earn-out is to 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 earn-outs require because of this missing components that I explained earlier. And because it's the first units, they are slightly more expensive in terms of cost than what we expect usual run rate will be. We are already starting to see the cost reduction. And we do expect that during the third quarter, we will reach to the expected costs and margins with Stellar Blu. So if you summarize what I said, then right now, the first earn-out is not on track from payments perspective. Still, we have seven weeks until the end of the quarter. And everyone at Stellar Blu is working very hard in order to meet the earn-out to expand deliveries and to reduce the costs. As for the second earn-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.

Okay. Got it. Thanks so much for taking my questions.

Pleasure.

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

Thanks, guys. Can you hear me?

Yes, we hear you great.

That's better. Okay. 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 Intelsat 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 Intelsat has already won with airlines?

Correct. They are not -- they are ordering for inventory, but against the business that they already won.

Perfect. Also, you mentioned UAV terminal during, I think, the script. That's the first one I can recall the size orders.

I mentioned that we sold a DKET 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 since this is the first we've kind of seen Stellar Blu 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?

Yes. Sure. So of course we applied acquisition accounting. It means that we consolidate all of the assets and liabilities of Stellar Blu 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 and 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 assets, 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.

Understand. And so, I mean, what should we model ballpark for amortization this year or maybe just D&A? 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.

Without the backlog?

During the first year.

Including the backlog?

Including the backlog, of course.

Okay. Great. And the large gateway orders, is that still something that we expect to happen sometime here in '25?

Yes. Are you talking about the SkyEdge IV gateway or you're talking about the LEO constellations?

LEO constellation.

LEO constellation, the SkyEdge IV for MEO and GEO, we do expect to have large orders. On the LEO constellation, so as I said in the last call, OneWeb right now, OneWeb Gen 2 is right now on halt until Eutelsat will better understand the synergies between OneWeb and IRIS². With IRIS², we expect to get RFIs and RFPs during the -- they said before the end of 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 to early next year. But at least from discussing with different part of the consortium, they are on track with their plans. We received some kind of a 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 constellation, 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 million that would reflect the extra charges to Stellar Blu?

No, the $7.6 million.

It's the $7.6 million, yes.

The $3.6 million of Stellar Blu is just to clarify that organically we made a significant progress in terms of profitability this quarter, but the guidance we gave to the market includes Stellar Blu as well. And I think this is the place to remind that Gilat, 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 quarters with our 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 very large backlog that we have. I think that we have close to 80% 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 will 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 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 Karger of Discovery Group. Please go ahead.

Yes. Thank you. Can you hear me all right?

Yes, Gunther.

Great. Thank you. Yes, I missed part of your comments on the effect of the tariffs. Could you kindly 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 US, especially for the products that we manufacture to the US DoD. So in general I think that overall at least as it seems like now 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.

Yes. Thank you very much, Adi.

Thank you, Gunther.

There are no further questions at this time. Mr. Benyamini, 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 Gilat's First Quarter 2025 Results Conference Call. Thank you for your participation. You may go ahead and disconnect.