OPERATING AND FINANCIAL REVIEW AND PROSPECTS

The following discussion and analysis of our financial condition as of June 30, 2026 and results of operations for the six months ended June 30, 2026 and June 30, 2025 should be read together with our condensed interim consolidated financial statements and related notes included elsewhere in this filing and our audited consolidated financial statements included in our Annual Report on Form 20-F for the year ended December 31, 2025 filed with the U.S. Securities and Exchange Commission ("SEC") on March 16, 2026 (the “2025 Form 20-F”). The following discussion contains forward-looking statements that reflect our current plans, estimates and beliefs and involve risks and uncertainties. Our actual results may differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to such differences include those discussed below and elsewhere in this filing and in our Annual Report on Form 20-F and other filings with the U.S. Securities and Exchange Commission.

Introduction

          We are a leading global provider of satellite-based broadband communications. We design and manufacture ground-based satellite communications equipment and provide comprehensive secure end-to-end solutions, end-to-end services for mission-critical operations, powered by our innovative technology. Our portfolio includes a satellite network platform, Very Small Aperture Terminals, or VSATs, amplifiers, high-speed modems, high-performance on-the-move antennas, and high efficiency, high power Solid State Power Amplifiers, or SSPAs, Block Upconverters, or BUCs, and Transceivers. Furthermore, following the recent acquisitions of Stellar Blu Solutions LLC (“SBS”) in January 2025 and DataPath, Inc. (“DPI”) in 2023, our portfolio also includes next-generation In-Flight Connectivity, or IFC, Satellite Communication, or SATCOM, terminal solutions and transportable and portable terminals for defense forces and field services. Our comprehensive solutions support multiple applications with a full portfolio of products to address key applications, including broadband internet access, cellular backhaul over satellite, enterprise, social inclusion solutions, IFC, maritime, trains, defense and public safety, all while meeting the most stringent service level requirements. We have a large installed base and currently have hundreds of active networks.

 

 

In these BOT and BOO projects, we build telecommunication infrastructure typically using fiber-optic and wireless technologies for broadband connectivity.

We have sales and support offices worldwide, two Network Operation Centers, or NOCs, and R&D centers in Israel, the U.S. and Europe. Our products are sold to communication service providers, satellite operators, Mobile Network Operators, or MNOs, and system integrators that use satellite communications to serve enterprise, social inclusion solutions, government and residential users. Our solutions and services are also sold to defense and homeland security organizations. In addition, we provide services directly to end-users in various market segments, including in certain countries in Latin America.

We operate in three operating segments as follows:

Acquisition of Satellite & Space Communications segment of Comtech Telecommunications

On June 14, 2026, we signed a definitive agreement to acquire the majority of the Satellite & Space Communications segment of Comtech Telecommunications Corporation (“Comtech”) on a cash-free, debt-free basis for the purchase price of $157.5 million in cash, subject to adjustments for normalized working capital. In connection with the signing of the agreement, we paid a $10 million advance payment, which will be credited against the purchase price upon closing. The closing of the transaction is subject to certain regulatory approvals, including clearance from the Committee on Foreign Investment in the United States (CFIUS), the U.S. Federal Trade Commission (FTC) and the Department of Justice (DOJ) under the Hart-Scott-Rodino Act (HSR), as well as other customary closing conditions. The transaction is expected to close by the end of 2026 subject to the satisfaction of the conditions above.

Conditions in Israel

Explanation of Key Income Statement Items

 

Revenues

We generate revenues mainly from the sale of products (including construction of networks), satellite-based communications networks services, and from providing connectivity, internet access, and telephony services. We sell our products and services to enterprises, government, and residential customers under large-scale contracts that utilize both our own networks, and other networks that we install, mainly based on BOT and BOO contracts. These large-scale contracts sometimes involve the installation of thousands of VSATs or construction of massive fiber-optic and wireless networks. Revenues from sales of products include mainly the sale of VSATs, hubs, low-profile antennas on-the-move/on-the-pause terminals, SSPAs and construction and installation of large-scale networks based on BOT and BOO contracts. Sale of services includes access to and communication via satellites (“space segment”), installation of equipment, telephone services, internet services, consulting, on-line network monitoring, network maintenance, field services, and repair services. We sell our products primarily through our direct sales force and indirectly through resellers or system integrators.

Costs and Operating Expenses

Cost of revenues primarily includes the cost of system design, equipment, inventory write-off costs, satellite capacity, salaries, and related costs, allocated overhead costs, depreciation and amortization, customer service, interconnection charges and third-party maintenance and installation.

Our research and development expenses, net of grants received, primarily consist of salaries and related costs, raw materials, subcontractor expenses, related depreciation costs and overhead allocated to research and development activities.

Our selling and marketing expenses consist primarily of salaries and related costs, commissions earned by sales and marketing personnel, commissions to agents, trade show expenses, promotional expenses and overhead costs allocated to selling and marketing activities, as well as depreciation expenses and travel costs.

Our general and administrative expenses consist primarily of salaries and related costs, allocated overhead costs, office supplies and administrative costs, credit losses, fees and expenses of our directors, depreciation, and professional service fees, including legal, insurance and audit fees, net of rental income.

Our other operating expenses, net, consist primarily of non-recurring income and expenses. For further details, see Note 14 in our unaudited condensed interim consolidated financial statements, which appear elsewhere in this filing.

Our operating results are significantly affected by, among other things, the timing of contract awards and the performance of agreements. As a result, our revenues and income may fluctuate substantially from quarter to quarter, and we believe that comparisons over longer periods of time may be more meaningful. The nature of certain of our expenses is mainly fixed or partially fixed, and any fluctuation in revenues will generate a significant variation in gross profit and net income.

Critical Accounting Policies and Estimates

Please refer to our discussion of critical accounting policies in our Annual Report on Form 20-F for the year ended December 31, 2025, for a discussion about those policies that we believe are the most important to the understanding of our financial condition and results of operations as such policies affect our more significant judgments and estimates used in the preparation of the financial information included in this interim report. Results for the six months ended June 30, 2026, are not necessarily indicative of results that may be expected for the year ending December 31, 2026, or future periods.

Six Months Ended June 30, 2026, Compared to Six Months Ended June 30, 2025

Revenues. Revenues for the six months ended June 30, 2026 and 2025 for our three operating segments were as follows:

Our total revenues for the six months ended June 30, 2026 and 2025 were $233.1 million and $197.0 million, respectively. The increase in the six months ended June 30, 2026 was attributable to an increase of $22.5 million in Commercial revenues, an increase of $4.9 million in Defense revenues and an increase of $8.7 million in Peru revenues.

The increase in our Commercial segment revenues in the six months ended June 30, 2026, compared to the six months ended June 30, 2025, was primarily attributable to increased revenues from large satellite operators in Asia, Europe, and the United States.

The increase in our Defense segment revenues in the six months ended June 30, 2026, compared to the six months ended June 30, 2025, was primarily driven by higher revenues from ministries of defense in EMEA, partially offset by lower revenues from the U.S. Department of War.

The increase in our Peru revenues in the six months ended June 30, 2026, compared to the six months ended June 30, 2025, was primarily attributable to expansion projects awarded under the Regional PRONATEL Projects, partially offset by revenues recognized in the prior-year period upon the resolution of a variable consideration constraint.

Gross profit. Gross profit and gross margin for the six months ended June 30, 2026 and 2025 for our three operating segments were as follows:

Our gross profit and gross margin are affected year-to-year by revenue volume, the mix of products sold, the mix of revenues between products and services, the regions in which we operate, the size of our transactions, and the timing of their consummation. Moreover, from time to time, we may have large-scale projects which can cause material fluctuations in our gross profit. We recognize revenue from the construction performance obligations related to the PRONATEL Regional Projects and other projects using the percentage-of-completion method, and as such, any changes to our estimated profits in these projects may cause material fluctuations in our gross profit and gross margin. As such, we are subject to significant year-to-year fluctuations in our gross profit.

Our gross profit margin increased to 32% in the six months ended June 30, 2026, from 31% in the comparable period of 2025.

The increase in the Commercial segment gross profit margin was primarily attributable to higher revenues and a favorable revenue mix, mainly related to sales to large satellite operators in Asia, Europe, and the United States. These increases were partially offset by a greater contribution of revenues from SBS, which typically carries lower gross margins than the Commercial segment average.

The decrease in the Defense segment gross profit margin was mainly attributable to a less favorable deal mix.

The decrease in the Peru segment gross profit margin was mainly attributable to the recognition of high-margin revenues in the prior-year period upon the resolution of a variable consideration constraint, as described above, partially offset by the contribution of higher revenues from the Regional PRONATEL expansion projects.

Operating expenses:

Research and development expenses, net, are incurred by our Commercial and Defense segments. Research and development expenses, net, decreased by approximately $0.2 million in the six months ended June 30, 2026, compared to the six months ended June 30, 2025.

Selling and marketing expenses increased by approximately $2.7 million in the six months ended June 30, 2026, compared to the six months ended June 30, 2025. The increase was mainly attributable to higher employee compensation costs, including increased sales incentive compensation associated with increased sales activity, as well as continued investments supporting the establishment and expansion of the Defense segment, mainly in the U.S.

General and administrative expenses increased by approximately $9.6 million in the six months ended June 30, 2026, compared to the six months ended June 30, 2025. The increase was mainly attributable to a one-time $7 million stock-based compensation expenses related to DPI’s acquisition’s earnout (see Note 15 to our condensed interim consolidated financial statements included elsewhere in this filing), as well as employee compensation costs.

Taxes on income. Taxes on income are dependent upon where our profits are generated, such as the location and taxation of our subsidiaries, as well as changes in deferred tax assets and liabilities and changes in valuation allowances attributable to changes in our profit estimates in different regions. In the six months ended June 30, 2026, we had a tax benefit of approximately $0.8 million compared to a tax benefit of approximately $3.1 million in the six months ended June 30, 2025. The change was primarily related to higher utilizations of carry forward losses in Israel.

Variability of Quarterly Operating Results

Our revenues and profitability may vary from quarter to quarter and in any given year, depending primarily on the sales mix of our family of products and the mix of the various components of the products, sale prices, and production costs, as well as on entering into new service contracts, the termination of existing service contracts, or different profitability levels between different service contracts. Sales of our products to a customer typically consist of numerous VSATs and related hub equipment, low-profile antennas, and SSPAs, BUCs, which carry varying sales prices and margins.

Annual and quarterly fluctuations in our results of operations may be caused by the timing and composition of orders by our customers and the timing of our ability to recognize revenues. Our future results may also be affected by a number of factors, including our ability to continue to develop, introduce and deliver new and enhanced products on a timely basis and expand into new product offerings at competitive prices, to integrate our recent acquisitions, to anticipate customer demands effectively, and to manage future inventory levels in line with anticipated demand. Our results may also be affected by currency exchange rate fluctuations and economic conditions in the geographical areas in which we operate. In addition, our revenues may vary significantly from quarter to quarter as a result of, among other factors, the timing of new product announcements and releases by our competitors and us. We cannot be certain that revenues, gross profit and net income (or loss) in any particular quarter will not vary from the preceding or comparable quarters. Our expense levels are based, in part, on expectations as to future revenues. If revenues are below expectations, operating results are likely to be adversely affected. In addition, a substantial portion of our expenses are fixed (e.g. lease payments) and adjusting expenses in the event revenues drop unexpectedly often takes considerable time. As a result, we believe that period-to-period comparisons of our results of operations are not necessarily meaningful and should not be relied upon as indications of future performance. Due to all of the foregoing factors, it is possible that in some future quarters our revenues or operating results will be below the expectations of public market analysts or investors. In such an event, the market price of our shares would likely be materially adversely affected.

Impact of Inflation and Currency Fluctuations

Liquidity and Capital Resources

 

Since our inception, our financing requirements have been met through cash from funds generated by private equity investments, public offerings, issuances of convertible subordinated notes, bank loans and credit facilities, operations, as well as funding from research and development grants. We have used available funds primarily for working capital, capital expenditures and strategic investments

On October 13, 2024, the Company, through its subsidiary Wavestream Inc., entered into a secured credit facility of up to $100 million with HSBC Bank USA, N.A. and Bank Hapoalim B.M., from which $60 million was drawn in January 2025. The outstanding balance under this facility was fully repaid on December 31, 2025.

In 2025, we completed two private placements of ordinary shares to Israeli institutional and accredited investors (as defined under the Securities Law), generating aggregate net proceeds of approximately $164 million. On September 16, 2025, we issued 7,058,820 ordinary shares at a purchase price of $9.35 per share, resulting in net proceeds of approximately $65.3 million. On December 30, 2025, we issued 8,888,889 ordinary shares at a purchase price of $11.25 per share, resulting in net proceeds of approximately $98.7 million. Both offerings were conducted exclusively in Israel in reliance on Regulation S under the U.S. Securities Act of 1933.

As of June 30, 2026 and December 31, 2025, we had cash, cash equivalents and restricted cash of $144.9 million and $169.0 million, respectively. We believe that our working capital is sufficient for our present requirements.

At times, we guarantee the performance of our work for some of our customers, primarily government entities. Guarantees are often required for our performance during the installation and operational periods of long-term rural telephony projects, such as in Latin America, and for the performance of other projects worldwide. The guarantees typically expire upon meeting certain operational milestones. In addition, from time to time, we provide corporate guarantees to guarantee the performance of our subsidiaries.

The guarantees described above are governed by, and where applicable secured under, our credit and guarantee arrangements, including those with HSBC and FIBI. Under the arrangements with HSBC and FIBI, we are required to observe certain conditions. Our credit and guarantee agreements also contain various restrictions and limitations that may impact us. These restrictions and limitations relate to incurrence of indebtedness, contingent obligations, negative pledges, liens, mergers and acquisitions, change of control, asset sales, dividends and distributions, redemption or repurchase of equity interests and certain debt payments. As of June 30, 2026, we were in compliance with such conditions. The agreements also stipulate a floating charge on our assets to secure the fulfilment of our obligations to FIBI and HSBC as well as other pledges, including a fixed pledge, on certain assets and property.

The following table summarizes our cash flows for the periods presented:

Our cash, cash equivalents and restricted cash decreased by $24.1 million during the six months ended June 30, 2026, primarily as a result of the following:

Operating activities. Cash used in operating activities was approximately $14.1 million in the six months ended June 30, 2026, compared to cash used in operating activities of approximately $1.5 million in the six months ended June 30, 2025. The change was primarily driven by increased investment in working capital, including in SBS, mainly due to increased net utilization of customer advances and higher inventory levels to support current and anticipated revenues.

Investing activities. Cash used in investing activities was approximately $12.1 million in the six months ended June 30, 2026, compared to cash used in investing activities of approximately $112.7 million in the six months ended June 30, 2025. The change was primarily attributable to the cash consideration paid for the acquisition of SBS during the six months ended June 30, 2025.

Financing activities. Cash provided by financing activities was approximately $46 thousand in the six months ended June 30, 2026, compared to cash provided by financing activities of approximately $58.2 million in the six months ended June 30, 2025. The change was primarily attributable to proceeds received from the credit facility obtained to finance the acquisition of SBS during the six months ended June 30, 2025.

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