[Management View]
Gilat Satellite Networks Ltd. reported a strong start to 2025 with $92 million in revenue, a 21% YoY increase. The company highlighted the integration of Stellar Blue, which contributed $25 million to revenue but incurred a $3.6 million adjusted EBITDA loss. Management reaffirmed their 2025 revenue guidance of $415 million to $455 million and adjusted EBITDA of $47 million to $53 million. Key strategic priorities include expanding the Gilat Defense division and advancing the Boeing OEM qualification for the Sidewinder product.

[Outlook]
Gilat expects to achieve a 10% adjusted EBITDA margin run rate for Stellar Blue in the second half of 2025. The company anticipates significant growth in defense and commercial segments, driven by increased defense budgets and the adoption of next-generation connectivity solutions. The Boeing OEM qualification for Sidewinder is expected within two to three quarters, enabling line-fit installations by early 2026.

[Financial Performance]
- Total Revenue: $92 million, up 21% YoY
- Commercial Segment Revenue: $64.2 million, up 56% YoY
- Defense Segment Revenue: $23 million, up 34% YoY
- Peru Segment Revenue: $4.8 million, down from $17.7 million YoY
- GAAP Gross Margin: 30.9%, down from 36.9% YoY
- Adjusted EBITDA: $7.6 million, down from $9.3 million YoY
- GAAP Net Loss: $6 million, compared to $5 million income YoY

[Q&A Highlights]
Question 1: Is your defense business expected to benefit from increased European defense spending?
Answer: Yes, we are seeing traction from Europe's increased defense budget. While nothing has materialized yet, we expect decent business from Europe in the midterm.

Question 2: What milestones need to be achieved for the Boeing line fit program before implementation?
Answer: Adaptations to the terminal are required, and we are in the certification process. We expect qualification within the next two to three quarters, after which customers can order it.

Question 3: How should we think of revenue linearity in Peru over the next few quarters?
Answer: Peru's revenue run rate is expected to be $4.55 billion. This quarter was low due to project delays, but we expect renewals in Q2 or early Q3. Recurring revenue includes hardware deliveries expected in Q3.

Question 4: Do you have sufficient go-to-market resources for Stellar Blue, and what is the nature of sales relationships?
Answer: We have made good progress with Stellar Blue. We are addressing supply chain issues and expect better margins. We have enough resources and a strong backlog. Sales efforts involve proving our technology to IFC service providers, who then compete in the market.

Question 5: What is the differentiation of the next-generation product from Stellar Blue?
Answer: The next-generation product is an adaptation of the existing Sidewinder ESA for military, defense, ISR, and VVIP aircraft. We expect orders by the end of the year or early next year.

Question 6: What are the current and anticipated monthly production rates for Sidewinder?
Answer: We expect to reach 100 units per month by late Q2 or early Q3. Currently, we are close to this capability but are addressing a supply chain issue with one component.

Question 7: What is the expected revenue structure between primary and secondary aviation markets?
Answer: In 2025, 100% of revenues will come from retrofit. By mid to late 2026, we expect a fifty-fifty split between line fit and retrofit, with line fit becoming slightly more significant in the long term.

Question 8: Will expanding Sidewinder's application harm the original ESA 2030 product?
Answer: No, the ESA 2030 is a LEO-only antenna, while Sidewinder is a multi-orbit LEO antenna for larger aircraft. Both products will coexist and serve different market segments.

Question 9: What is the status of the Boeing certification process for Stellar Blue?
Answer: The Boeing deal was signed before the acquisition and is not part of the earn-out. Certification is expected within two to three quarters, enabling line-fit installations at Boeing premises.

Question 10: How does the lower EBITDA from Stellar Blue affect the earn-out?
Answer: The first earn-out is not on track due to production and cost issues, but we are working to meet the targets. The second earn-out depends on new unit orders, and we are on track based on current forecasts.

Question 11: Are additional Sidewinder orders expected based on customer wins?
Answer: Yes, we expect orders from Intelsat and Panasonic based on their business wins with airlines.

Question 12: What is the impact of tariffs on Gilat's business?
Answer: The impact is minimal due to proactive adjustments in raw material sourcing and shifting production to low-tariff countries and the U.S.

[Sentiment Analysis]
Analysts were generally positive, focusing on the integration of Stellar Blue and the growth in the defense segment. Management maintained a confident tone, emphasizing strategic initiatives and addressing concerns about production and certification processes.

[Quarterly Comparison]
| Metric | Q1 2025 | Q1 2024 |
|-------------------------|---------------|---------------|
| Total Revenue | $92 million | $70.1 million |
| Commercial Revenue | $64.2 million | $41.2 million |
| Defense Revenue | $23 million | $17.2 million |
| Peru Revenue | $4.8 million | $17.7 million |
| GAAP Gross Margin | 30.9% | 36.9% |
| Adjusted EBITDA | $7.6 million | $9.3 million |
| GAAP Net Income (Loss) | ($6 million) | $5 million |

[Risks and Concerns]
- Delays in project renewals and expansions in Peru
- Supply chain issues affecting production rates
- Certification and qualification processes for new products
- Global economic uncertainty and shifting trade policies

[Final Takeaway]
Gilat Satellite Networks Ltd. demonstrated strong revenue growth in Q1 2025, driven by the integration of Stellar Blue and increased defense spending. While facing challenges in Peru and supply chain issues, the company remains confident in achieving its 2025 guidance. The successful certification of the Sidewinder product and strategic investments in defense and commercial segments are expected to drive future growth. Investors should monitor the progress of project renewals in Peru and the resolution of supply chain challenges to ensure continued momentum.