Welcome to the conference call announcing Gilat's acquisition of Comtech's Satellite and Space segment. All participants are at present in listen-only mode. Following the management formal presentation, instructions will be given for the question and answer session. As a reminder, this conference is being recorded June 15, 2026. I would now like to hand over the call to Mr. Sanjay Hurry of Alliance Advisors IR. Mr. Hurry, would you like to begin, please?
Thank you, Hilla, and good morning, everyone. Thank you for joining us today. With me on the call are Mr. Adi Sfadia, Gilat CEO, and Mr. Gilad Landsberg, President of Gilat Defense. Earlier this morning, Gilat issued a press release regarding its acquisition of Comtech's Satellite and Space segment. The release, along with the accompanying slide presentation, are both available on the investors section of the company website. Before we begin, I would like to remind everyone that some statements made during this conference call may contain forward-looking statements based on current expectations. Actual results could differ materially from those projected due to various risks and uncertainties.
The potential risks and uncertainties that could cause actual results to differ materially include uncertain global economic conditions, reductions in revenue from key customers, delays or reductions in U.S. and foreign military spending, acceptance of our new products on a global basis, and disruptions or delays in our supply of raw materials and components due to business conditions, global conflicts, weather, or other factors not under our control. Gilat cautions investors not to place undue reliance on forward-looking statements which reflect the company's analysis only 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 operating results, financial position, or performance are included in the company's filings with the Securities and Exchange Commission, as well as in the forward-looking statement section of the press release and investor presentation. In addition, please note that on today's call and in the press release that was issued this morning and its accompanying presentation, that management may 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 corresponding GAAP figures. With that, I would like to turn the call over now to Gilat CEO, Adi Sfadia. Please go ahead, Adi.
Thank you, Sanjay. Good day, everyone. I would like to thank you for joining our call today to discuss the acquisition of most of Comtech's Satellite and Space Communication segment announced earlier today. Today marks an important milestone for Gilat. This transaction accelerates our transformation into a global leader in mission critical defense, space, and satellite communications. By combining decades of technology leadership, strong customer relationship, and complementary capabilities, we are creating a stronger and more diversified company positioned for the next phase of growth. Before we begin, please note that some of our statements are forward-looking and subject to risks and uncertainties as outlined in our filings. On today's call, I will walk through the key highlights of the acquisition, the market opportunity, and how Comtech Satellite and Space Communications segment fits into our strategy.
I will then cover the financials and conclude with a summary before opening for questions. We believe the acquisition is a game-changing transaction that reshapes our position in the defense SatCom market. Capabilities ongoing market opportunities and bring together two proven SatCom leaders to shape a stronger future. The additive transaction elevates Gilat to a new tier, building it into an even stronger leading provider of advanced defense SatCom, mission-critical communication, and space solutions. At the core of this move is the doubling of our Gilat Defense business, significantly expanding our access to the U.S. Department of Defense and allied military programs. It also creates a company with over $700 million in projected revenues aligned with accelerating demand for secure defense and satellite communications.
Bringing these capabilities together improves our ability to support speed and scale for defense, government, and enterprise users. In addition, it significantly expands our U.S. presence, including engineering capabilities and manufacturing footprint. The addition of troposcatter beyond line of sight communication and space electronic portfolio extend our reach into adjacent markets with an estimated new addressable market of $500 million per year. Gilat's strengths in IFC, VSAT and modems, multi-orbit ESA, and SSPA are complemented by Comtech Satellite and Space Communications capabilities in defense waveforms, modems, and TWTA high-power amplifiers, strengthening our position in high-growth markets. Turning to the transaction details. Gilat will acquire most of Comtech Satellite and Space Communication segment business and assets for $157.5 million in cash funded from our existing resources, a strong balance sheet with approximately $170 million in net cash.
The combined company will have annual revenues of more than $700 million and annual adjusted EBITDA of $80 million. Beyond Standalone financial contribution, we see significant upside from the combination. The primary value driver is revenue growth, leveraging Gilat's global reach and Comtech's Satellite and Space Communication U.S. defense presence, while offering a broader combined portfolio. We also expect cost synergies and operational efficiencies across the combined company. The transaction is expected to be accretive to adjusted EBITDA upon closing. Closing is expected towards the end of 2026, subject to customary closing condition and some regulatory approvals. While Comtech has faced challenges in the last few years, the Satellite and Space Communications segment represent a highly attractive business with differentiated technology, strong customer relationship, and talented employees.
It generates $187.8 million in adjusted revenue and $14.9 million in adjusted EBITDA in Comtech's fiscal year 2025, ended July 31st, 2025, and $195.2 million in adjusted revenues and $16.8 million in adjusted EBITDA for the trailing 12 months ended January 31st, 2026. Comtech Satellite and Space Communications has a long track record supporting mission-critical communications, particularly with the U.S. Department of Defense. They have a strong relationship with Tier 1 government customers and are also the prime contractor on several key defense programs, a critical position in these environments. In addition, they have more than 100 security-cleared personnel. These strengths come from deep expertise, proprietary know-how, and U.S.-based manufacturing. It offers a broad portfolio across modems, high-power amplifiers, antennas, troposcatter communication, and space electronics.
We are retaining the existing leadership and the majority of the employees and will invest to grow the business. Looking at the portfolio and customer base provides additional perspective on the value being added. The business includes satellite modems, amplifiers, ground system, troposcatter, and space electronic. It serves customers across the U.S. and international military organizations, telecom, and satellite operators, and support markets such as aviation, maritime, energy, and space. In some areas, we already share customers, particularly in modems, but this expands the range of products we can offer. It also opens new verticals and markets where we previously had limited presence. This broadens our addressable market and allows us to deepen the relationship across both existing and new customers. Looking at the two businesses side by side highlights their complementary nature.
Comtech Satellite and Space Communications segment brings $195.2 million in revenues and $16.8 million in adjusted EBITDA. Its strengths are rooted in defense-focused technologies, including U.S. DoD waveforms, software-defined modems, high-power amplifiers, and troposcatter communications. Our strengths include strong IFC portfolio and customer base, advanced VSAT platforms, multi-orbit ESA technologies, and access to leading NGSO operators. We see opportunities to bring Gilat products into Comtech U.S. customer base, bring Comtech technologies through Gilat's global channels, and combine the engineering capabilities to pursue larger opportunities than either company could address alone. Comtech Satellite and Space Communications bring a strong defense profile with more than 70% of its revenues coming from defense programs, reflecting deep participation in long-term program-driven environments.
By combining this with Gilat existing business, we increase Gilat defense segment revenues from approximately 25% to around 40% of total Gilat revenue. This creates a materially expanded defense business with a larger customer base, greater participation in long cycle and program-driven revenues stream, supporting greater visibility and long-term program-driven growth. Looking at the combined portfolio, it spans multiple layers of satellite communications. In this chart, blue-green represents Gilat and purple represents Comtech Satellite Space Communications. For example, at the network level, it brings together VSAT platform with SDR and SCPC modems, combining Gilat's strengths in large commercial networks with Comtech Satellite and Space Communications digital waveform modem designed for military networks. In high-power amplifiers, it combines SSPA and TWTA technologies that supports different power and operational needs, allowing broader coverage across applications.
This enables participation in larger multi-domain programs across the communication defense market. Driving sustainable growth and expanded capabilities, today's announcement marks a significant step forward for Gilat. It expands our technology portfolio and significantly strengthens our U.S. presence, including engineering and manufacturing. It also expands access to an established customer base and long cycle defense and space programs. We expect strong growth opportunities through cross-selling scale and portfolio expansions. It supports continued investment in next-generation technologies and high-growth markets. We believe this transaction represents a defining step in Gilat's evolution. We are combining scale, technology, people, and customer relationship to build a stronger company positioned at the center of growing demand for secure, resilient communication across defense, space, and commercial markets. Thank you very much. I would like to take your questions.
Thank you. Ladies and gentlemen, at this time, we'll begin the question and answer session. If you have a question, please press star one. If you wish to cancel your request, please press star two. Your questions will be pulled in the order they are received. Please stand by while we pull for your question. The first question is fro m Louie DiPalma of William Blair. Please go ahead.
Sfadia and Gil, good afternoon, congrats on the deal.
Thank you.
Thank you.
Can you provide more details on the cross-selling opportunities with your existing DataPath subsidiary, and how is it complementary for the rest of your business?
Sure. As you know, we are trying for several years to penetrate to the Department of Defense and now Department of War and the U.S. Army. We are doing this very well with DataPath's product portfolio, less successful with the Gilat product portfolio. Comtech has complementary solutions with a focus on the defense modems that are very strong in the U.S. DOW and U.S. Army, and we believe that they will be able to bring Gilat's products and modems together with them into the DOW. There is a lot of synergies between the R&D divisions. There is a lot of complementary solutions, but also unique solutions of Comtech and Gilat that we are planning to integrate the technology together and bring Gilat solutions also to DOW.
On the other side, Gilat has a strong global presence where we would like to take Comtech products and cross-sell them in Israel and globally.
I'm under the impression that they have tactical modems with anti-jam technology. Will you be able to export that modem technology and sell it to your existing base of customers, or are there export restrictions?
Comtech has several different modems. Some of them are ITAR regulated. We'll need the relevant approval in order to sell them globally. We will work hand-in-hand with Comtech people and the regulator to make sure that we get the right certifications in order to sell them. This is the same process Comtech is doing today, but with significantly lesser global presence. By the way, our modems from Israeli perspective also has some kind of export regulation. We are working hand-in-hand with the Israeli regulator in order to sell our products globally.
Can you provide more detail on the differences between the modem product portfolios that both companies have?
I think that the main difference is that Comtech's solution is mainly SCPC-based. They also have their TDMA solution for very small networks, which is complementary to our TDMA large network solution, the SkyEdge IV. They have several U.S. Army dedicated waveforms, which we don't have access to today. I guess that Comtech modem business will sit under the proxy agreement, same as we have with DataPath today.
Great. One final one. If I recall, I believe right before COVID, Comtech tried to acquire Gilat or you. They reached an agreement. Can you provide an overview of the history in terms of working together between both companies and how it appears that the strategic rationale for a merger made sense six years ago? Can you discuss how the current timing is right for the merger to take place again?
Yeah, of course. I think it's an excellent question. We expected such a question because this is what everyone asked us when we announced the acquisition a few hours ago. Not a lot of people in Comtech stayed from back then, from 2020, when they signed an agreement to acquire Gilat. I was there. The prior process reflected a longstanding strategic alignment between the companies. The fact that it didn't proceed mainly relates to the fact of the COVID-19 pandemic, the outbreak, which resulted in significant decline in Comtech stock and their inability to raise the required financing. They decided to walk away from the deal and had to pay $70 million penalty, which we later distribute as dividend to Gilat shareholders.
I think that the strategic rationale between the companies were relevant then and even more stronger today. I think it reflects our strategy to expand into the U.S. defense market. There is a lot of overlapping, a lot of complementary solutions. We received together with the acquisition, several solutions that will bring us to adjacent market, like space electronics and troposcatter beyond line of sight communication, which we see a very nice potential for future growth. I think that the fact that most of Comtech management wasn't there back then, the relationship are very good, and we really waiting for the closing and the integration to start.
One final one. Thanks for that. Adi, can you discuss what is Comtech's exposure to low Earth orbit satellite networks, as those have obviously gained tremendously in popularity with the mega constellations? Do they have any exposure there?
They have some exposure with unclassified customer, where they bring some manufacturing and development capabilities to modern side and some technology for like Wavestream on the SSPA side. This is their main exposure. Of course, it's one of their main objective to penetrate to a large LEO constellation program. I think that together with Gilat, we'll have advanced technology and much larger opportunities to work with.
That's it. Thanks, Adi and Gil.
Thank you, Louie.
That's it for me.
The next question is from Ryan Koontz of Needham and Company . Please go ahead.
Hi, guys. Congrats on the deal. Maybe double-click on the customer angle here. Sounds like, obviously lots of defense exposure, but can you maybe help us understand the types of programs or groups within the DoD that Comtech brings you that you don't have today, and where you might have some customer overlap?
Yeah. I think that the main customer overlap is on the SES side, SES Space & Defense. I think this is the main overlap, and there are some smaller customers that we both approach today. I think that the main program that they are working, they are part of the EDM waveform with the DOW. They work with the large Tier 1 U.S. integrator like L3, and they have some unclassified, undisclosed, sorry, program with the DoD.
That's helpful. How about on the commercial side, Adi? What's that customer profile look like?
On the commercial side, since they're focused on the SCPC side, they are going mainly to trunking and large cell or backhaul sites. On the other hand, they acquired in 2020, I think around the time that they signed an agreement with Gilat back then, they acquire a company, and they have a product that they called Elevate, which is their main focus is mesh technology, TDMA for small networks mainly to utilities, energy, but also small defense organization globally.
That's helpful. Maybe one last one. Just any rough idea of the headcount you're going to pick up?
Again, sorry?
Headcount of the acquired.
Slightly below 500 people. All in all, we'll be around 700 employees.
1,700.
1,700. 1,700 employees. Around 800 in the U.S. The focus of Gilat is shifting to the U.S. We'll have close to 50% of our headcount will be based in the U.S.
That's great. That's all I got. Thank you.
Thank you, Ryan.
The next question is from Chris Quilty of Quilty Space. Please go ahead.
Thanks, gentlemen. Congratulations on the deal. Maybe an unfair question, but you're picking up some new product lines. I think you mentioned troposcatter and space electronics, but is there a particular product or perhaps a market or customer activity that has you most excited about the opportunity in terms of synergies?
I think, first of all, we are very excited from the overall opportunity. I think the rationale of combining the two companies is very obvious, and there are a lot of synergies between the companies. The main focus is to grow the business. Comtech suffered from several years of financial distress. They went through several rounds of reduction in force, and they haven't had the capacity to invest. We are there to grow the business. We are going to invest in sales and marketing and in R&D, and we want to grow the business. The main reason we did this deal is the order to get a significa nt leg in the DOW in satellite modems communication.
I think Comtech has a significant leg over there, and we really believe that we have a lot to contribute in terms of technology, in terms of ability to finance projects that Comtech couldn't do today. We are also excited to enter into a new adjacent market like the space electronics and the troposcatter.
Great. Gil, it's fair to assume they've probably under-invested in R&D and some other areas. What should we expect in terms of sort of the blended investment rate in R&D or perhaps in OpEx in general?
We expect that we'll have to do some investments probably within the first two years, mainly in R&D and in sales, in order to secure future growth and in order to integrate between the companies. We do not expect these amounts to be too high, but probably in the $ low tens within the next two years.
I would say that most of Comtech investment in R&D today is mainly on subsidized projects. It's mainly part of COGS, it's developing unique products or features to customers' demands, and less on a roadmap investment. We do intend to increase the roadmap investment. We think that there is a lot of opportunity. I think generally, it's fair to say that we'll keep the ratios that Gilat has today.
Very good. Obviously, you're picking up a lot of manufacturing capability, and they have some unique sites in Chandler and whatnot. Are there any opportunities to either add to or bring together some of the manufacturing? When you look at sourcing and supply chain issues, is that going to be a challenge, or are there opportunities there?
I think it's a combination of challenge and a big opportunity. Comtech took a decision to evaluate each and every product if to make or buy internally. They have a very progressed manufacturing facility in Arizona. Gilat, most of our equipment is manufactured in outsourcing beside the SSPAs. I think there is a lot of room for cooperation. We'll be able to produce a modem within the U.S., Gilat modems, which will give us some credits with the DoD that today with America First wants everything to be manufactured in the U.S. I think that there is a lot of synergy potential, we'll take it step by step and see what makes sense to do in-house and what makes sense to outsource.
Right. Back to Gil. You used most of your cash on the balance sheet for the acquisition. Any changes, credit facilities or whatnot you need to put in place to have a little more financial strength?
Yeah. As of the end of Q1, we had approximately $170 million of cash, net cash, almost zero debt. We're planning to use that and to have some cash reserves through reestablished lines of credit to support some midterm working capital needs that we might have.
Got you. Final question, since you already have a proxy in place, I wouldn't expect there is any huge CFIUS issues here, but what is the timeline on getting a response back?
We received CFIUS approval twice in the last three years, so we do expect a regular process here. Usually take three to six months, the CFIUS process. In the last two times, it was closer to six months, so this is what we expect today. Get the approval from the HSR, which should take a few months as well. We do believe that the closing will be towards the end of the year.
Very good. Thank you, gentlemen.
Thank you, Chris.
Thank you, Chris.
The next question is from Gunther Karger of Discovery Group. Please go ahead.
Yes. Good morning, and congratulations. One question. Which division of Gilat will this Comtech business be incorporated into?
The main division that will capture Comtech business will be the Gilat Defense division. There is a lot of similarity, sharing locations. We are acquiring not just a full segment. Rather, it's a group of companies and business units and operation within the Comte ch business. After we will pass CFIUS, we will need to decide together with the DCSA what goes into a proxy and what is not a proxy. I also see some of the businesses is also going to the commercial. For example, the enterprise modem that is developed and headquarter in Canada.
All right. Thank you. In other words, you'll eventually plan to have it incorporated into a new division, I think I heard you say, in Canada.
No, I said Comtech has activity in Canada. They Elevate small network VSAT platform. This is more of commercial in nature. The final organization will be decided before closing. This is something that's more similar to the commercial. The rest of the business is typical to the Gilat Defense. We do expect that Gilat Defense more than double its revenues right after the acquisition. In Gilat Defense, we see a lot of opportunity, even without Comtech. The business is doing very well. Very strong pipeline. We expect to have a very strong 2026 for Gilat Defense. Together with Comtech, they will become more than 40% of Gilat revenues.
Okay. Thank you very much, Adi, and congratulations.
Thank you, Gunther.
The next question is from Caleb Henry of Quilty Space. Please go ahead.
Thank you. I got two questions from me. First, on the defense opportunities, I know that's the main focus of the merger. Can you give any specifics or examples of the types of opportunities that Gilat sees Comtech bringing to the table there?
Yeah. I don't want to get into all the programs, but I think that the Iron Dome is one of the largest opportunities. Comtech is there. There is ability to significantly increase their offering and portfolio. I think this is one of the main examples that we can use. The EDM waveform that they are developing, once it will move to production, represent another big opportunity.
Okay, thanks. Last one was just on the investment in the business you mentioned, if there's any specifics on R&D that you can talk about that you're excited about, whether that's SATCOM, troposcatter, space electronics. As far as investing in sales and marketing, is that mainly something you foresee in the U.S., or is that more global or a mix?
On the R&D, as I said earlier, most of the development today is project driven, and less on the roadmap-driven. As part of integration, we'll decide on the joint company roadmap, and we'll recruit R&D personnel based on the decision on the roadmap. I expect to see an increase in the U.S. R&D headcount numbers. On the sales and marketing, again, it will be part of integration, but I expect to recruit both in the U.S. and globally.
Great. Thanks, guys.
Thank you.
There are no further questions at this time. Mr. Benyamini, would you like to make a concluding statement?
Yes. Thank you for joining our exciting call today on a short notice. We hope to see you or speak with you soon. Have a great week.
Thank you.
Thank you.
Thank you.
This concludes Gilat's conference call. Thank you for your participation. You may go ahead and disconnect.