Follow-Up to Gilat: How Much of Peru's Profit Really Reaches Shareholders
Peru supplied almost all of Gilat's operating profit in 2025, but the path from that segment profit to shareholder value runs through $83.7 million of guarantees, arbitration proceeds that are still not fully collected, and a 4 to 9 year contractual tail. That makes Peru's 2025 profit better than 2024, but still not fully free or readily accessible.
What This Follow-Up Actually Isolates
The main article argued that Peru was Gilat's highest-quality profit engine in 2025. This follow-up isolates one narrower question: how much of that profit can actually turn into value that is accessible to shareholders, rather than staying trapped as a strong segment result on paper.
The first number supports the bullish read. In 2025, Peru generated $69.9 million of revenue, roughly 15% of group sales, but $29.0 million of gross profit, almost 22% of group gross profit, and $23.4 million of operating income, effectively the group's entire operating profit even after certain corporate overhead allocations. The problem is that the path from the segment to shareholders runs through layers that are not purely operational at all: very large performance guarantees, arbitration awards and claims that have not yet fully turned into cash, an unresolved dispute over service costs that the company continues to carry, and a 4 to 9 year contractual tail.
That is the real issue. Peru clearly created operating value in 2025. But operating value and value that is actually accessible to shareholders are not the same thing.
What Actually Improved In Profit Quality
The good news is real, and it matters. Peru's 2025 profit looks better than 2024 even after stripping out part of the legal income. Segment revenue rose 33.5% to $69.9 million, gross profit jumped 132.9% to $29.0 million, and gross margin moved up to 42% from 24%. Operating income also rose 84.5% to $23.4 million.
But the important decomposition sits one layer below that headline. Peru recorded $3.3 million of other operating income in 2025, versus $9.3 million in 2024. In practical terms, about 72.9% of Peru's reported operating income in 2024 came from that line, while the share fell to about 14.3% in 2025. That does not make 2025 a completely clean year, but it does mean the latest improvement leaned much more on operating execution and much less on arbitration-driven income.
The second support comes from Gilat's own explanation for the margin improvement. The company says Peru improved because of PRONATEL expansion projects and because it recognized service revenue after a variable consideration constraint was resolved. Separately, Gilat discloses $10.9 million of companywide revenue recognized in 2025 from performance obligations satisfied in prior periods after that constraint was lifted. The filing does not break out how much of that amount belongs specifically to Peru, so it would be wrong to assign the entire figure to the segment. Still, the direction is clear: part of Peru's 2025 profit is genuine operating profit, but part of it also reflects delayed recognition of revenue that had been held back earlier.
Where The Value Gets Stuck
The first blockage is the guarantee structure. At the end of 2025, Gilat had $87.6 million of outstanding financial guarantees, of which $83.7 million were tied to Peru. That is almost 96% of the company's total guarantees, and it is also larger than Peru's full-year 2025 revenue. To support those guarantees, the company pledged assets, including a floating charge and fixed pledges over certain assets. On top of that, the credit and guarantee agreements impose limits on debt, liens, mergers and acquisitions, asset sales, and also on dividends and distributions. In plain terms, even if Peru generates strong profit, a large part of that business still sits inside a banking and legal wrapper that does not automatically translate into free cash for shareholders.
The second blockage is that Gilat is still funding part of the service before it gets paid for it. In the 2015 PRONATEL projects, Gilat Networks Peru completed the construction phase, but PRONATEL has still not formally accepted the network, and the company kept operating and maintaining it at its own cost. In April 2025, Gilat won awards of about $9.6 million plus procedural costs and legal interest, but PRONATEL filed annulment requests and Gilat began collection proceedings. That already says something important: between reported profit and cash in hand, there is still a legal collection stage. It is not the same money.
The third blockage is that the issue does not end with that award. PRONATEL continues to dispute responsibility for the ongoing operation and maintenance costs, so in November 2025 Gilat opened a second arbitration covering services provided since January 1, 2025, with current claims of about $9.0 million. In other words, part of Peru's profit sits on activity the company continues to perform while the government customer continues to dispute who should pay for it.
| Layer | Amount | Why it limits accessibility |
|---|---|---|
| Guarantees tied to Peru | $83.7 million | Supported by pledges and contractual restrictions, including on dividends and distributions |
| April 2025 arbitration award | $9.6 million | There is an award, but also annulment requests and collection proceedings |
| Second arbitration opened in November 2025 | $9.0 million | This is not just old cash recovery, but an open dispute over current service |
| Recognition tail on PRONATEL projects | 4 to 9 years | Value is spread over a long execution period, not a quick path to distribution |
The Contract Tail Is Long, And That Is Part Of The Cost
This is the point that is easy to miss if the reader stops at 2025 profit. Gilat says the remaining revenues from the PRONATEL projects are expected to be generated over an additional 4 to 9 years. Separately, the company reports $431.5 million of remaining performance obligations at the group level, with 83% expected to be recognized within the next 3 years and the remainder over 4 to 9 years. The filing does not disclose Peru's exact share of that $431.5 million, so it would be wrong to assign the full number to the segment. But the practical conclusion is still clear: Peru is not a fast, easy-to-distribute profit stream. It is a long-duration engine built on extended contracts, heavy guarantees, and execution that stretches across years.
That also explains why Peru's profit and shareholder-accessible value move at different speeds. At the segment level, the profitability is strong. At the consolidated level, operating cash flow still fell in 2025 to $20.7 million from $31.7 million. The company itself says the change was affected, among other things, by higher arbitration funds collected in 2024, plus working-capital pressure and interest payments around the SBS acquisition in 2025. That does not mean Peru's profit is not real. It does mean shareholders ultimately receive consolidated cash, not isolated segment profit.
Bottom Line
This follow-up does not overturn the Peru thesis. It sharpens it. Peru was Gilat's strongest profit engine in 2025, and unlike 2024 a much larger share of that profit looks operational rather than legal. That is the strong side of the story.
But the other side matters just as much. For that profit to become value that is truly accessible to shareholders, three things still need to happen: guarantees need to come down, the service-cost dispute needs to move from arbitration into actual collection or settlement, and Peru's contribution needs to pass through consolidated cash flow without getting stuck in pledges, collection delays, and a long contractual tail. Until that happens, Peru creates a lot of value inside Gilat, but less free and fast value outside Peru than the segment profit alone suggests.
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