Ladies and gentlemen, thank you for standing by. Welcome to Gilat's third quarter 2026 results conference call. All participants are at present in listen-only mode. Following management's formal presentation, instructions will be given for the question-and-answer session. For operator assistance during the conference, please press star zero. As a reminder, this conference is being recorded November 10, 2026. By now, you should have all received the company's press release. If you have not received it, please view it in the news section of the company's website, www.gilat.com. 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, Hila. Good morning, everyone. With us on today's call are Mr. Adi Sfadia, Gilat's CEO, and Mr. Gil Benyamini, Gilat's Chief Financial Officer. Before turning the call over to management, I would like to remind everyone that some statements made during this conference call contain forward-looking statements based on current expectations. Actual results could differ materially from those projected as a result of various risks and uncertainties. The potential risks and uncertainties that could cause actual results to differ materially include uncertain global economic conditions, reductions in revenues 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.
The company cautions investors to not 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 financial results is included in the company's filings with the Securities and Exchange Commission, including the latest quarterly report. In addition, on today's call, management will 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, and good day, everyone. Thank you for joining us today to discuss Gilat third quarter 2026 results. Overall revenues for the third quarter was $116.2 million compared with $117.7 million in the same quarter last year. Adjusted EBITDA reached $17.6 million, up from $15.6 million in the third quarter of 2025, a 13% increase year-over-year. For the first nine months of 2026, revenue reached $349.4 million and adjusted EBITDA reached $48.1 million. Importantly, despite the softer revenue environment, we delivered double-digit growth in adjusted EBITDA and expanded our adjusted EBITDA margin to approximately 15%. This reflects our focus on profitability, a favorable revenue mix, and a benefit of our ongoing cost reduction and efficiency initiatives.
Our defense business continued to demonstrate strong momentum with revenues growing 53% year-over-year, reinforcing the strategic direction we have been pursuing over the past several years. In parallel, our commercial business is facing some challenges. Our commercial segment revenues declined to $69.8 million compared with $73 million in the same quarter last year, mainly due to lower amplifiers delivery to certain LEO customers that were deferred to later periods. Our updated revenue outlook reflects evolving market dynamics and timing consideration across traditional commercial segments. In the GEO market, continued expansion by LEO constellation providers is shaping the competitive environment for our customers. At the same time, longer decision-making process for large satellite projects and the timing of GEO and LEO satellite launches, including launch availability constraints, are affecting the pace of satellite deployments and rollouts.
As a result, some anticipated orders and revenues are now expected to materialize in 2027 and beyond. In IFC, we are engaged in ongoing negotiation with key customers on commercial terms and conditions aimed at improving our business economics. Coupled with changing customer delivery and installation schedules, new orders are delayed and revenues are shifted into 2027 despite our significant order backlog. In Peru, an agreement originally expected to be signed at the first half of 2026 was signed at the end of the third quarter, shifting the associated revenues into 2027. In contrast, our defense business continues to gain momentum and to deliver strong revenue growth, exceeding our expectations. In light of these dynamics, we are updating our full-year guidance. We now expect revenues in the range of $455 million-$475 million.
The impact on adjusted EBITDA is much more modest, thanks to cost-saving initiatives we have implemented and a favorable revenue mix. As such, we are narrowing our adjusted EBITDA guidance to between $61 million-$63 million. A few years ago, we anticipated the changes now occurring in the commercial market. We have been aggressively preparing by shifting our focus and investment to defense, beginning with the acquisition of DataPath in 2023. We are building on this strategy with pending acquisition of Comtech Satellite and Space business, which we expect will significantly expand our defense business, strengthen our position in the U.S. market, and broaden our technology portfolio. We expect Comtech to add more than $180 million in revenues and more than $18 million in adjusted EBITDA.
The closing of the transaction is still subject to remaining U.S. regulatory approvals and other customary closing conditions, which we expect to receive before the end of the year, with closing targeted right after. Now, on to the business review. I will start with the defense. During the third quarter, Gilat Defense strengthened its market position, driven by increasing demand for multi-band, mobile, rapidly deployable SATCOM solutions that give users resilience and greater flexibility in scaling the relocating network assets to achieve operational continuity on the battlefield. Specifically, Gilat DataPath received an award of more than $32 million for multi-band DKET systems supporting U.S. defense network resilience. We are also advancing our DKET multi-orbit capabilities to give defense customers greater operational flexibility. Gilat DataPath is advancing DKET certification for its transportable gateway systems for operation over both the U.S. Department of War WGS network and SES's Empire Sovereign Network.
This builds on existing technology and creates an additional growth opportunity for Gilat Defense. We also announced additional orders of more than $8 million from the U.S. Department of War for field services and SATCOM solution upgrades. During the quarter, we achieved an important technology milestone by successfully demonstrating an AI-based capability that detects and cancels interference on satellite links. This innovation supports reliable communication in increasingly complex satellite environments and reflects our ongoing investment in advanced technologies. Overall, our defense business continues to build momentum. These awards deepen our relationship with the U.S. Department of War and reinforce our position as a trusted provider of advanced SATCOM solutions for complex operational environments. Turning to commercial, our performance reflects both competitive pressure in traditional markets such as enterprise and cellular backhauls, and delays in customer programs as discussed earlier.
During the quarter, we received more than $10 million in additional SkyEdge IV orders from a leading satellite operator. During the third quarter, we delivered more than 150 Sidewinder ESA terminals. In parallel, we have entered into ongoing negotiation with key customers to secure more favorable economic terms for Gilat, and we expect this delay to delay some orders and revenues to 2027 and beyond. At the same time, our customers continue to add new airlines to their backlog, and we expect additional orders in line with their installation needs in 2027 and beyond. Longer term, we are also making good progress certifying our multi-orbit Sidewinder ESA terminal as a line-fit solution with Boeing and Airbus. This program is expected to expand our margins and strengthen the profitability of the Sidewinder business over time, with delivery of the first unit expected before year-end.
We are also investing in our integrated solutions and digital inclusion offering, which integrates connectivity, complementary technologies, and platforms to deliver end-to-end essential digital inclusion programs. We are advancing in several large opportunities, and we are very optimistic about the potential this represents for Gilat. Lastly, we also see opportunities developing with several large HTS and VHTS satellites expected to launch in late 2027 and onwards. Our Peru business continued to build on its extensive experience deploying, upgrading, and operating large-scale integrated solutions and telecommunication networks throughout the country. During the quarter, we announced two significant projects. First, we signed a $28 million contract with Pronatel to upgrade the broadband network in the Ica region. Ica represents the fifth regional broadband network upgrade awarded to Gilat since 2025. We also signed a $14 million agreement for a digital inclusion project.
The project will extend broadband access to schools, healthcare facilities, and other public institutions in underserved communities, improving access to essential services. The experience provides a strong foundation for pursuing additional opportunities in Peru and elsewhere in the region as governments invest in connectivity and digital development. During the quarter, we announced a private placement of $100 million in five-year convertible notes. The financing gives us additional flexibility to pursue organic and inorganic opportunities, particularly in defense and space, while funding the technologies and capabilities needed to support our ambitions in these markets. Gilat is navigating changes in the commercial satellite market while transforming its business mix and focus, expanding its defense operations, and placing greater emphasis on growth and profitability. In closing, the third quarter reflects both opportunities and challenges in our evolving market.
Competitive pressure, longer decision-making process, and GEO and LEO launch delays, customer delivery changes, and ongoing commercial negotiation have shifted revenue timing and have affected our revenue outlook. We are actively addressing these challenges while making clear progress on our long-term strategy. Our defense business is growing with a 53% increase year-over-year in revenues. Our profitability continues to improve, and we are investing in technologies and capabilities that we believe will support our future growth. The Comtech acquisition represents a major step in our transformation, adding meaningful scale to the business and further strengthening our position in the U.S. defense and space markets.
At the same time, we remain focused on capturing opportunities in next-generation ground infrastructure, IFC, new HTS, VHTS, and NGSO satellite constellations, and integrated connectivity solutions. We recognize the importance of delivering on our commitments and providing greater visibility as this initiative progresses. Our priority remains clear: to build a stronger, more diversified, and more profitable Gilat positioned for sustainable long-term growth. With that, I will hand the call over to Gil Benyamini, our CFO. Gil, please go ahead.
Thank you, Adi. Good morning and good afternoon to everyone. I would like to remind that our financial results are presented both on a GAAP and non-GAAP basis. I will now walk through our financial highlights for the third quarter of 2026. Our third-quarter results demonstrate the continued transformation of our business mix. Strong growth in defense, higher gross margins, and disciplined cost management drove 13% increase in adjusted EBITDA and approximately 2% of margin expansion, despite slightly lower revenue. In terms of our financial results, revenue for the third quarter were $116.2 million, representing 1% decrease compared with $117.7 million in Q3 2025. The revenues for the commercial segment in Q3 2026 were $69.7 million compared with $73 million in the same quarter last year. 4% decline year-over-year was primarily driven by lower amplifier deliveries to certain customers that were deferred to later periods.
Revenues for the defense segment in the third quarter of 2026 were $36.9 million, 53% higher than $24.1 million in the same quarter last year, primarily driven by transportable product deliveries at Gilat DataPath. Q3 2026 revenues for the Peru segment were $9.6 million, 54% lower than $20.6 million in Q3 2025. The decrease mainly reflects lower construction revenues from the upgrade projects, as well as hardware-related delivery revenues recognized in the same quarter last year. Our GAAP gross margin in Q3 2026 was 35% compared with 30% in the same quarter last year. The increase compared to Q3 2025 is mainly attributed to a more favorable deal mix in the defense segment, as well as improved profitability in Peru. GAAP operating expenses in Q3 2026 were $32.9 million compared with $27.2 million in Q3 2025.
The increase was primarily attributable to changes in the U.S. dollar versus Israeli shekel exchange rate, Comtech Satellite and Space transaction-related expenses, and a provision for bad debt due to two customers entering into Chapter 11 in the U.S. As a result, GAAP operating income was $7.9 million compared to $7.5 million in Q3 2025. GAAP net income in Q3 2026 was $8.7 million, or a diluted income per share of $0.11, compared with GAAP net income of $8.1 million, or diluted income per share of $0.14 in Q3 2025. The increase in net income was primarily driven by the higher operating income, while diluted income per share declined due to the higher share count, mainly related to equity raises that we did. Turning to non-GAAP results. Our non-GAAP gross margin in Q3 2026 was 36% compared with 32% in Q3 2025.
The increase is primarily attributable to the defense and Peru segments. Non-GAAP operating expenses for the quarter were $27 million compared with $24.7 million in Q3 2025. The increase mainly reflects the impact of the U.S. dollar versus the Israeli shekel and approximately $1.3 million of bad debt expenses, partially offset by lower R&D expenses, which decreased mainly due to higher R&D grants and NRE expenses related to revenue-generating projects reclassified to cost of revenues. Non-GAAP operating income in Q3 2026 was $14.6 million, 14% higher than the $12.8 million in Q3 2025. Non-GAAP net income in Q3 2026 was $14.3 million, or a diluted income per share of $0.18, compared with a non-GAAP net income of $11.8 million, or income per share of $0.19 in Q3 2025.
Adjusted EBITDA reached $17.6 million, 13% higher than Q3 2025, despite lower revenues, reflecting a favorable business mix and our cost efficiency initiatives. Adjusted EBITDA margin expanded to approximately 15% compared with approximately 13% in Q3 2025. For the first nine months of 2026, adjusted EBITDA was $48.1 million, 37% higher than the same period last year, on revenue growth of 11%. Moving to the balance sheet and cash flow. During the quarter, we generated approximately $4.3 million in operating cash, mainly reflecting significant collections from customers in the commercial and defense segments, partially offset by working capital buildup related to revenue recognized in defense, with collection expected in subsequent periods. During the quarter, we also completed the issuance of $100 million five-year convertible notes, with net proceeds of approximately $99 million.
We ended the quarter with strong liquidity position of $260 million, comprised of cash equivalents, and short-term deposits. Net of the convertible notes and short-term loan, our net cash position was $158 million, compared with $157 million at the end of the second quarter this year. DSO were 111 days, excluding Peru construction activity, and remained within our expected range. Our shareholder equity as of September 30, 2026, totaled $555 million, compared with $545 million on June 30, 2026. Looking ahead, based on our third quarter results, backlog, and current visibility, we are updating our full year 2026 guidance. Revenues are now expected to be between $455 million and $475 million, representing 3% growth year-over-year at the midpoint, compared with our previous range of $500 million-$520 million.
The update mainly reflects lower order intake expected in Q4, resulting from delays in GEO and LEO launches, rescheduled IFC deliveries, and timing of Peru agreements, which shifted revenues into 2027 and future periods. We are narrowing our adjusted EBITDA guidance to between $61 million and $63 million, representing 17% growth at the midpoint. The impact on adjusted EBITDA is considerably more limited than our revenues, supported by favorable deal mix and the cost-saving initiatives we have implemented. This outlook continues to absorb the impact of the unfavorable movements in Israeli shekel versus the US dollar on our operating expenses. The updated outlook does not include any contributions from pending Comtech Satellite & Space acquisitions. That concludes my financial review. We would now like to open the call for questions. Operator, please go ahead.
Thank you. Ladies and gentlemen, at this time, we will 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. Please stand by while we poll for your questions. The first question is from Ryan Koontz of Needham & Company. Please go ahead.
Good morning. I want to ask about the commercial pushouts here, maybe starting with IFC. Is this related to new versions that are lower cost rolling out, or you are trying to secure some pricing adjustments, or can you give me some context of what is driving the pushouts from your IFC customers?
Sure. Hi, Ryan. Generally speaking, we see some installation delays that shifted some of the deliveries to 2027. In parallel, as we said in the last several meetings, the profitability on the retrofit units are limited and close to break-even. We would like to ensure that we will make profits on the retrofit as well. Line-fit will be profitable units, but we would like to make sure that we will make profits on the retrofit as well. So we are working in two fronts. One is a cost reduction initiative that takes much longer time than originally anticipated, and in parallel, we started negotiation with customers to have better economics on the unit price.
Yeah, that makes sense. Was there something that changed over the last few quarters, or this is just continued kind of weak economics here that you anticipated would get better over time?
We anticipated that costing will get better over time, and it takes much longer time than expected. We had a tight delivery schedule with our customers that we wanted to make sure that they won't lose business, so we fought hard to deliver what they need on time. In parallel, recently we started negotiation on the new contract terms, which we expect to delay some orders and will push some of the deliveries into 2027 onwards.
Got it. The Q3 deliveries, were those close to what you expected in terms of volume?
Q3 deliveries are exactly as we expected at the beginning of the quarter and based on our plan. The miss on the commercial this quarter was mainly related to a large LEO project that we are delivering SSPA, and because of the constellation rollout delays due to launch availability, the customer wants to push some of the deliveries onwards. We do have the units in inventory and backlog, and it's just a matter of time.
Got it. Great. The overall kind of upside in gross margin the quarter here was a nice step-up. It sounds like it is from defense mix mainly, or what would you explain the nice step-up in gross margin in September?
Hi, Ryan. It is Gil.
Hi, Gil.
This would be a mix. Majority comes from the defense section. As the defense is growing, and we saw a very nice growth of 53% in the defense segment. We enjoy economy of scale. That was part of the upscaling the gross margin. The second part comes from more profitable products that were delivered this quarter, mainly DataPath's transportable product. It's a mix of both. And on top of that, we also gained a higher gross margin in the Peru division compared to last year and last quarters.
Helpful. And maybe on the defense side there, I know you had announced some collaboration with some optical transport space-to-ground technologies. Any update there you can provide on those new collaborations and products?
This is an initiative that we are working for on almost two years. We had a proof of concept. We have units that are delivering what we aim to, and now we are engaged with customers for selling transaction. It will take time, but it's something that we believe can drive DataPath and Gilat Defense future growth.
Great. That is nice to hear. Then maybe on the Chapter 11 customer write-off, what was the timeline here? I know the customer filed during the third quarter. Were these for recent shipments, or was this debt that has been around for a while?
It is debt that has been a while, not for a while. It is relatively recent, but once the customer files for Chapter 11, we need to estimate what are the chances of collection, and we took a decision to write it off.
Got it. Okay. Thanks, all. Appreciate the questions.
Thank you. Thank you, Ryan.
The next question is from Louis DiPalma of William Blair. Please go ahead.
Adi and Gil, good afternoon. You referenced the intensifying competitive pressure. For what end markets are you witnessing the biggest impact from the competitive pressure? Is it mostly specific to enterprise, or are you also starting to see it on the aviation side, and is that the reason for some of the delays that took place? Because it seems that on the solid-state power amplifier delays was more of a timing issue and not a competitive issue.
Yeah. We feel the pressure on almost on all commercial sub-segments, especially on the enterprise and cellular backhaul. Over there, we feel a lot of pressure, and because there is significant delays in GEO satellite launches, there is relatively no new networks that are up for grab. That delay orders. There are still several satellites that are expected to be launched in the second half of 2027 and 2028, so we do expect to see nice orders probably at the beginning of 2027 onwards. We do see also, especially our customers see also competition on the aero side, but we know that our customers continue to win deals. Their backlog is increased, and we do expect some large orders in the next few quarters. It's really tied to their installation schedule and the ongoing negotiation about better economics for Gilat in this sense. Now-
Great. Yeah.
As we see today, also the aero is mainly a timing issue. We have significant backlog of units that we can deliver, and our customer has a much more backlog than orders that they gave us. The Sidewinder terminal is their go-to market on the Ku side, and we believe we will get those orders. It is just a matter of reaching the right economic terms.
Great. Is everything on track for the Comtech deal to close by the end of the year? Assuming that deal closes, what is the pro forma mix in terms of end markets for defense versus commercial versus Peru?
Okay. Yes, first of all, the Comtech deal is on track. We received the HSR blessing. Process of getting CFIUS approval. We expect to get it before the end of the year, and closing will be right after. As for the mix, Gil will give you some greater data, but generally speaking, Comtech is going to add around $180 million of revenues. I would say 70%-80% is defense-oriented.
In terms of percentage, about 10% will be Peru, and the rest, 90%, each of the commercial and defense should be between 40% and 50%, depending on the final classification of all end markets.
Great. Thanks, Adi and Gil.
Thank you, Louis.
The next question is from Sergey Glinyanov of Freedom Broker. Please go ahead.
Hi. Thank you for taking my question. I have a couple of them. What do you think about midterm election results and whether it may impact in defense business? If yes, what products are under the risk, to your opinion?
The midterm effect, it's a big question. First of all, it's really early period. We don't really know what will happen, but we remain very confident in the outlook of the U.S. defense business. Political changes can influence budget priorities and timing, but the need for resilience, secure mission-critical communication continues to increase. The acquisition of Comtech Satellite and Space Communication business will strengthen our position in the U.S., and it will increase our product portfolio, and we'll be in direct touch with the relevant Department of Defense entities. Together with Gilat existing capabilities, we believe it will continue to grow both on U.S. and globally. I think it's really early to say, but it's not changing our plans to invest in the U.S.
The budgets in the U.S. are huge. It represents 70%-80% of the overall satellite communication equipment market globally. At the end, the overall U.S. budget will stay very big, and it depends on priorities within the budget. We believe that today everyone understands that satellite gives you the resilience the battlefield needs.
I would like to add that it looks like most of the effect of the midterm should be affecting the reconciliation budgets and not the core budgets, and our products are mainly targeted and acquired by the core budget. As Adi said, we continue with our plans and hope that we'll see much higher revenues.
Thank you. Appreciate your answer. Also, now more and more airlines are choosing Starlink as their primary IFC solution, which is causing a lot of concerns about how demand will be affected across different providers and suppliers. How do you assess this kind of risk?
First of all, it is true that Starlink is gaining market share, but as I said, our customers are also getting new deals and increasing their backlog. I think that the addition of line-fit for the Sidewinder increased the attractiveness of our customers. It is not a market that the winner take it all. I think that we are providing a unique terminal that allowed resiliency between LEO and GEO. There is no such antenna available today in the market. We are the alternative for Our customers are the alternative for Starlink. If you do not want to choose Starlink and you want GEO, LEO resiliency, you need to go with, at the end, with Gilat equipment. As I said, our customer has significant backlog, and we do expect large orders in 2027.
Okay, thanks. Last question relates to, is there any update on your Airbus line-fit?
Yeah. We are progressing with both Boeing and Airbus line-fit. We expect Boeing certification to end before the end of the year, and Airbus right after. We expect to deliver first unit to Boeing before the end of the year, and Airbus will follow.
Okay, thanks. That's all for me.
Thank you. Thank you, Sergey.
Appreciate your answer.
The next question is from Chris Quilty of Quilty Space. Please go ahead.
Thanks, gentlemen. Just want to start off with maybe a macro question on the antenna market, specifically the IFC antenna market, and lots of changes there. What are you seeing in terms of technology trends, whether it is single orbit or multi-orbit, either frequency bands, Ku or Ka, or a move from the sort of large LEO providers to some of the smaller constellations? Are there opportunities in the LEO market where a lot of them typically just bring the antenna with them?
What we see today in the market is, today there is a Ka and Ku, and you have the GEO-LEO play or the Starlink only LEO play. If you want the GEO-LEO, you need to go with the Sidewinder terminal. What we see in the future, based on discussion with players in the market, is that the multi-orbit probably will stay. If it will be GEO-LEO or MEO-LEO, it is still under discussion. Definitely, terminals that will be able to connect both to Ku and to Ka on a LEO side will have better chances to succeed, and this is something that the direction that we are working on. We have started the initial development of such antenna. This is what we see in the market today. I believe that the Sidewinder still has few hundreds, if not more than 1,000 units to be sold in the next three years.
Got it. Switching gears, I mean, on the GEO satellite order side and launch situation, I haven't read the Airbus or Thales press releases, but did they announce further delays on the satellite delivery, or is it looking more like launch delays?
I think it's mainly connected to launch delays. You saw SpaceX announcement on Falcon 9. I think that Amazon is delaying a bit. Telesat is delaying a bit. I think that the bottleneck right now is on the launch availability.
Gotcha. Gil, I guess either a question or a request. I mean, as the Comtech acquisition closes, if you can provide sort of the pro forma numbers therefore, that'd be helpful as we do out the modeling for 2027 and 2028.
Sure.
Yes, sure. We will provide all the required data to the investors, and we're also anticipating to provide pro forma and Comtech acquired business on a solo basis as well. We'll do it after.
Got you. Do you also intend at that time to provide update forecast both for the business and for 2027?
Yeah. We'll do it together with Gilat guidance at the beginning of February 2027.
Okay, great. Thanks, gentlemen.
Thank you, Chris.
If there are any additional questions, please press star one. If you wish to cancel your request, please press star two. Please stand by while we poll for more questions. The next question is from Gunther Karger of Discovery Group. Please go ahead.
Yes. Thank you for taking the call. I know that the expectation of closing the Comtech acquisition is by the end of the year. Is there anything that is specifically holding it up, or is it basically on track?
It is basically on track. Besides some customary closing condition, we are waiting for CFIUS approval. We already received CFIUS approval in 2023 for DataPath and in 2025 for Stellar Blu, so we do not see a problem with that. It is just a process that we believe will conclude before the end of the year.
Thank you. Specifically, with regard to the government area, the CFIUS, is there any hold up there, or is that basically also on track?
It is basically on track.
Thank you, and good luck.
Thank you.
There are no further questions at this time. Mr. Benyamini, would you like to make a concluding statement?
I want to thank you all for joining us to the call and for your time and attention. We look forward to speaking with you again next quarter. Thank you very much, and have a great day.
Thank you. This concludes Gilat's third quarter 2026 results conference call. Thank you for your participation. You may go ahead and disconnect.