Q1 2024 Summary
Published Jan 14, 2025, 4:08 PM UTC- Strong growth in the defense sector, driven by the DataPath acquisition, with defense revenues expected to exceed $60 million in 2024. The integration is on track, with several large orders received, and the defense market, especially in the U.S., is anticipated to be a significant growth engine for Gilat.
- Positive outlook from the proposed merger of Intelsat and SES, as Gilat is a strategic partner to both operators. The merger is expected to have a positive effect on Gilat, creating new growth opportunities by focusing on delivering to a combined customer with increased roadmap requirements.
- Expansion into the business aviation market, with Gilat expecting a shift from commercial aviation to business aviation that will drive additional growth. The company secured new orders, including a project with Satcom Direct to develop electronically steered antennas for business and government aviation, expected to contribute to revenues in 2025.
- Competition from Starlink is increasing in key markets, which may pose challenges to Gilat's growth. Gilat's CEO acknowledged that Starlink is gaining traction: "...we see more and more Starlink getting traction in this market."
- Potential integration challenges with the DataPath acquisition could impact revenue growth and margins. The CEO mentioned they decided to be conservative with DataPath revenue projections due to possible hiccups: "We decided to be a bit conservative because it's the first year of integration. And sometimes you have hiccups at the beginning."
- Delays in realizing revenue from new products like electronically steered antennas (ESA) may impact near-term growth. The CEO stated that ESA products will not contribute to revenues until 2025: "We expect that Satcom Direct will contribute to 2025 revenues. Right now, we are in a development phase."
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Intelsat and SES Merger Impact
Q: How will the Intelsat and SES merger affect Gilat?
A: Both Intelsat and SES are strategic partners, with our equipment deeply integrated with both operators. We believe the merger, once approved, will have a positive effect on Gilat, allowing us to focus on one customer with roadmap requirements rather than two. In the short term, both will continue their plans, and we expect this to present an opportunity for future growth. -
OneWeb and Project Kuiper Contracts
Q: What's the timeline for potential contracts with new constellations?
A: For OneWeb's Gen2 constellation, Gilat is one of two shortlisted vendors for the ground segment, and we expect more insight by midyear, with an award possibly announced before the end of the second quarter, though such tenders may be delayed. Project Kuiper plans to start service in 2026, so they will need to equip hubs and gateways towards 2025. We're working with several NGSO players, including supporting one large LEO constellation. We expect significant orders towards the end of the year, with large deployments in 2025 and 2026. -
Defense Revenue and DataPath Guidance
Q: How are DataPath and defense revenues shaping up?
A: We've received several large orders through DataPath and expect its revenues to be around $45 million this year. Overall defense revenues, including satellite networks and integrated solutions, should be above $60 million. We're on track to achieve our guidelines and expect significant growth in years to come, especially by strengthening our U.S. defense presence. -
IFC Market Growth and ESA Development
Q: What's the outlook for the IFC market and ESA products?
A: We see a lot of traction in the IFC market, with several new orders and programs. We're progressing with electronically steerable antenna (ESA) development, having received an award from Satcom Direct. ESA is a growing segment, and we expect it to significantly boost our growth in the next few years. We're also developing ESAs for business and government aviation, which will support OneWeb's constellation and contribute to revenues in 2025. -
Impact of Starlink on U.S. Market
Q: Is Starlink affecting Gilat's U.S. business?
A: Our exposure to the U.S. market is too small to be significantly impacted by Starlink. We're newcomers to this segment, mainly serving SES cruise lines. Regardless, we expect our business to grow as it's currently very small and in initial phases. We do see Starlink gaining traction in this market. -
Cellular Backhaul and 5G Developments
Q: Any new developments in satellite backhaul?
A: We continue to lead the market in cellular backhaul, seeing many opportunities in 4G and starting to see traction in 5G. We recently demonstrated more than 1 gigabit per second to the modem and over 500 megabits per second to the handset. Our equipment is ready, and while we have initial sales, we expect 5G revenues to ramp up within two years. -
Operating Expenses Run Rate
Q: Is $25 million quarterly OpEx a good run rate?
A: This quarter's operating expenses are representative and include a full year of the DataPath acquisition. Some expenses may be volatile due to factors like purchase price allocation and share-based compensation, but overall, this quarter reflects our ongoing expenses. -
European Defense Market and Acquisitions
Q: Are there opportunities in Europe's defense market and potential acquisitions?
A: We see a lot of traction around satellite communication in Europe, especially in defense. While it's too early to quantify, we believe long-term growth in defense will happen there. We're reviewing acquisition opportunities, some in Europe, but there's nothing to announce currently. -
Hiring Plans
Q: How are the hiring plans progressing?
A: In 2023, we recruited more than 150 people. We continue to recruit worldwide based on immediate needs. Once we secure large awards, this will require additional significant headcount increases. -
High-Speed Trains Market Status
Q: Any updates on high-speed trains?
A: We're delivering to two high-speed train terminals, but currently there's not a lot of traction in this market segment. Our electronically steerable antenna will fit these applications, and we're monitoring the market.