Release Date: August 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Gilat Satellite Networks Ltd (GILT, Financial) reported a 13% year-over-year revenue growth, driven primarily by the acquisition of DataPath.
- The company increased its adjusted EBITDA by 10% year-over-year, exceeding $10 million.
- The acquisition of Stellar Blu Solutions is expected to add between $120 million to $150 million in revenues in 2025 and be accretive to non-GAAP results.
- Gilat's SkyEdge IV platform continues to lead the market, supporting multiple orbits and applications, including mobility, cellular backhaul, and defense.
- The company has a strong pipeline and expects materialization of important deals over the coming months, particularly in the defense and in-flight connectivity markets.
Negative Points
- GAAP gross margin for Q2 2024 decreased to 34.7% from 37.8% in the same quarter last year, mainly due to lower margins from DataPath.
- GAAP operating income for the quarter was $2.8 million, down from $5.4 million in the same quarter last year.
- GAAP net income in the second quarter was $1.3 million, a significant drop from $4.3 million in the same quarter last year.
- The organic growth for the quarter was negative 4%, although it was positive 4% on a six-month basis.
- The company used $3.5 million in operating activities during the second quarter, indicating a cash outflow due to changes in working capital.
Q & A Highlights
Q: Can you update us on the cross-selling opportunities with DataPath?
A: We are progressing well with cross-selling DataPath equipment. We are starting to have dialogues with DoD agencies and promoting DataPath's equipment worldwide. We are optimistic and see more potential than initially expected. The first collaboration resulted in a $12 million order, and we have a developing pipeline. (Adi Sfadia, CEO)
Q: How should we think about the gross margin outlook for the infrastructure business post-approval of the Amazonas region?
A: The construction phase typically has a lower gross margin than the service or operational phase. We expect to finish the construction by the end of this year, which will push up the gross margin of this segment next year. (Adi Sfadia, CEO)
Q: How do you see the LEO market developing over the next 18 months from Gilat's perspective?
A: We see significant opportunities in the LEO segment, including SSPA, networks, modems, and antennas. We are finalists in OneWeb Gen2 and expect decisions soon. The LEO market is driving a lot of IFC business, especially in electronically steerable antennas, which is a key motivation for the Stellar Blu acquisition. (Adi Sfadia, CEO)
Q: What are the key milestones and challenges for ramping up Stellar Blu's production capacity?
A: The main challenges are execution and ramping up production. Stellar Blu has already delivered the first units and passed certifications. We are confident and have upgraded our initial forecast for next year. We don't see specific supply chain issues; it's more about ramping up new product introductions. (Adi Sfadia, CEO)
Q: Can you provide a breakdown of DataPath's contributions and organic growth this quarter?
A: Most of the growth came from DataPath. Organic growth was negative 4% for the quarter but positive 4% for the six-month period. We prefer to analyze Gilat on a longer period due to timing of specific deliveries. (Gil Benyamini, CFO)
Q: What are the overall trends in your order pipeline this year relative to expectations?
A: We see strong momentum in the IFC market tied to Intelsat and SES initiatives and headwinds in the defense sector. Overall, we are on track with our expectations and have not changed our guidance. (Adi Sfadia, CEO)
Q: Has the cellular backhaul market slowed down, and do you see any large opportunities?
A: The cellular backhaul market was slower last quarter, but we don't think it's a trend. We see a nice pipeline and expect significant growth driven by 5G opportunities. (Adi Sfadia, CEO)
Q: What is the future of Gilat's ESA solutions for business aviation?
A: Our ESA solutions are called the ESA family. We see a lot of players entering the market, but each service provider usually has its own unique terminal. The business aviation market has a lot of potential, and there is room for several players to grow. (Adi Sfadia, CEO)
Q: What are the international exposure and sales channels for DataPath's defense market?
A: Historically, about 10% of DataPath's business was international. With Gilat's presence in various countries, we believe we can accelerate penetration and increase business. We see potential to double DataPath's revenues both in the US and internationally. (Adi Sfadia, CEO)
Q: Is there an opportunity for Gilat in operational communications between air traffic control centers and aircraft?
A: Our terminals serve passengers and can serve the crew, but they are not built for secure communication between traffic control and the crew. However, we will explore adjacent markets and future growth opportunities. (Adi Sfadia, CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
