Sergey Glinyanov

Sergey Glinyanov of Freedom Brokers asked for more details on Gilat's positive defense guidance, specifically regarding new Earth observation solution contracts, their margin profile, and expectations for defense order acceleration in Q1 compared to Q4.

Answer

CEO Adi Sfadia clarified that the relatively small year-over-year revenue growth in defense was due to U.S. administration shutdowns causing order delays, which will shift revenue to 2026. He noted over 35% year-over-year growth in defense orders received. Earth observation contracts typically have a margin profile similar to Gilat's average, between 30-40%.

Sergey Glinyanov inquired about the details and margin profile of Gilat's new Earth observation contracts and whether the company expects defense order acceleration in Q1 2026 compared to Q4 2025.

Answer

CEO Adi Sfadia clarified that while defense revenue growth was modest in 2025 due to U.S. administration shutdown delays, order bookings grew over 35% year-over-year. He stated that Earth observation contracts typically have a margin profile similar to Gilat's average, ranging between 30-40%.

Sergey Glinyanov of Freedom Broker asked for the primary reasons behind the operating margin improvement, excluding the effects of Stellar Blue, and inquired about the backlog volume and average duration for the commercial and defense segments.

Answer

CFO Gil Benyamini explained that beyond the impact of Stellar Blue, the margin improvement was driven by better gross margins in the Peru segment and a favorable overall revenue mix. Regarding the backlog, Mr. Benyamini stated that specific volumes are not disclosed but noted the company typically has visibility of at least 50% for the upcoming year, providing a foundation for future growth.

Sergey Glinyanov questioned the current and projected monthly production rates for the Sidewinder terminal, the expected revenue mix between retrofit and line-fit markets, and whether expanding Sidewinder's applications would cannibalize the ESR-2030 product.

Answer

CEO Adi Sfadia stated the goal is to reach a production rate of 100 units per month by late Q2 or early Q3, pending resolution of a component bottleneck. He projected 2025 revenue would be 100% retrofit, moving to a 50/50 split by H2 2026. He clarified that the multi-orbit Sidewinder and LEO-only ESR-2030 serve different market needs and are not in direct competition.

Sergey Glinyanov inquired about the 2025 revenue guidance for the recently acquired Stellar Blu, its integration into the new organizational structure, and the reasons for the projected decrease in the 2025 EBITDA margin.

Answer

CFO Gil Benyamini confirmed the Stellar Blu revenue guidance of $120 million to $150 million is still relevant and included in the overall company guidance. CEO Adi Sfadia clarified that Stellar Blu will be managed within the Gilat Commercial division, not as a separate reportable segment. Sfadia explained the lower 2025 EBITDA margin guidance is due to Stellar Blu's initially lower gross profit during its production ramp-up and planned increases in R&D and sales investments for the Gilat Defense division, with margin improvement expected from 2026 onwards.

Sergey Glinyanov asked if the better-than-expected gross margin was solely due to sales mix and if substantial changes are anticipated next year. He also inquired about the expected revenue trajectory for the next four quarters, future capital expenditures after the Exton facility expansion, and whether the Employee Retention Tax Credit was a one-time benefit.

Answer

CFO Jeff DiGiovanni explained that gross margin volatility is influenced by product mix and transitions, especially with government programs, noting that the full-year margin was in the mid-40s, with Q4 2025 benefiting from resolving a $2 million margin issue related to F-16 revenue. He stated that the company does not provide forward-looking quarterly guidance but is focused on the $250 million revenue target. He confirmed that the Exton facility expansion is complete, and no major shifts in capital expenditures are expected in 2026. Jeff DiGiovanni also confirmed that the Employee Retention Tax Credit was a one-time benefit recognized in Q4 2025.

Sergey Glinyanov asked about the dynamics of Ituran's revenue, specifically whether the increase in ARPU was due to product/service mix or more fundamental factors. He also sought expectations for IturanMob's revenue in North America for the upcoming year.

Answer

Eli Kamer (CFO) clarified that the ARPU increase was primarily attributable to a favorable FX effect in Q3 2025. Eyal Sheratzky (CEO) stated that Ituran does not provide specific revenue guidance but is committed to maximizing IturanMob's revenue in North America next year.

Sergey Glinyanov inquired about the dynamics of Ituran's revenue, specifically asking if the increasing ARPU was due to product/service mix or more fundamental factors. He also asked for revenue expectations for Ituran Mob in North America for the upcoming year.

Answer

CFO Eli Kamer clarified that the increase in ARPU was primarily due to the favorable FX effect in Q3. CEO Eyal Sheratzky stated that the company does not provide specific revenue guidance but is committed to increasing revenues for Ituran Mob in North America next year.

Sergey Glinyanov of Freedom Broker asked about the new Stellantis agreement's structure, the primary driver for the significant Q1 subscriber growth, the substantial increase in product gross margin, rising operating expenses relative to revenue, the cause of increased CapEx, and the potential for Usage-Based Insurance (UBI) in Latin America.

Answer

Co-CEO Eyal Sheratzky explained the Stellantis deal is currently service-based for cars with existing technology, with an initial bulk transfer of subscribers causing the Q1 jump; he noted future quarters will see more normalized growth. Executive VP & CFO Eli Kamer addressed financials, stating improved product gross margin stems from cost savings and product mix volatility, while R&D costs remain stable relative to revenue. Kamer also clarified that Q1 CapEx was higher than average but is expected to decrease. Regarding UBI, Sheratzky stated that key LatAm markets like Brazil and Mexico are not yet embracing the model, though Ituran continues to advocate for it.

Sergey Glinyanov inquired about the impact of product mix on gross margin, the primary drivers for the 2025 subscriber growth forecast, the status of the previous $100 million EBITDA target, and any plans to increase subscription fees.

Answer

Executive Eli Kamer attributed the gross margin pressure to the natural volatility of the product mix sold across different regions. Executive Eyal Sheratzky detailed the 2025 growth drivers, including high car theft rates and UBI adoption in Israel, expansion of motorcycle and financing solutions in Brazil, and expected new OEM contracts. Sheratzky also explained that the $100 million EBITDA target is no longer meaningful due to significant currency volatility, shifting focus to subscriber growth guidance. He added that while pricing is always under review, no new decisions on fee increases have been made.

Sergey Glinyanov from Sova Capital inquired about the reasons for the decline in service segment revenue, the drivers behind improved operating margins, and the potential revenue impact of the new agreement with Nissan in Chile.

Answer

Executive Eli Kamer clarified that the service revenue decline was solely due to adverse currency exchange effects, noting that revenues grew in local currency terms. He attributed the higher operating margin to the inherent operating leverage in Ituran's business model. Executive Eyal Sheratzky added that the Nissan Chile contract is a long-term agreement expected to add tens of thousands of subscribers, encompassing both hardware and services with future renewal opportunities.

Sergey Glinyanov asked about the current book-to-bill ratio, the time to convert backlog to revenue, revenue growth expectations for thermal solutions, progress towards the 15% EBITDA margin target, the long-term revenue structure outlook, and plans for new landing gear authorizations.

Answer

CEO Igal Zamir confirmed the book-to-bill ratio is above 1. He detailed that backlog conversion varies: OEM is covered by POs for 12-18 months within longer contracts, while MRO contracts typically span 3-5 years. Zamir expressed confidence in continued growth for thermal solutions and reiterated the internal goal of exceeding 15% EBITDA, noting profitability is a key focus. While all segments are expected to grow, he highlighted APUs as the strongest growth engine. He also clarified that new landing gear authorizations are not on the immediate roadmap.

Sergey Glinyanov asked about the expected proportion of non-reimbursable maintenance revenue in 2025 and the trends driving it. He also questioned how the company would manage margins and pass on costs if monetary policy remains tight.

Answer

CFO Scott Flaherty stated that the increase in short-term, non-reimbursable maintenance reserves is driven by portfolio growth and an increase in engines on short-term leases, a trend he expects to continue. President Austin Willis added that Willis has historically been able to reprice its portfolio to adapt to rising interest rates, citing the successful 2023 ABS issuance as an example.