Gilat Satellite Networks Ltd. (GILT) Cash Flow Statement

The OCF/NI ratio has fallen to -0.28 in 2026Q2 and -2.33 in 2026Q1, a stark reversal from the positive conversion seen in late 2024. This disconnect implies that the strong revenue growth is being absorbed by working capital needs and potentially aggressive revenue recognition, a concern given the company's reliance on milestone-based government projects. Investors should monitor whether this is a temporary timing issue related to the Peruvian project or a structural deterioration in cash collection.

The trajectory shows a concerning pattern where periods of positive FCF (e.g., 2025Q3's 21.5% margin) are followed by deep negatives, suggesting lumpy cash inflows tied to project milestones. This volatility makes the business difficult to value on a cash flow basis and raises questions about the sustainability of the current growth pace without external financing. The negative FCF trend directly contradicts the strong top-line growth narrative.

The persistent negative WC changes, particularly the -$31.6M in 2025Q4 and -$26.8M in 2026Q1, suggest either a substantial build-up in inventory and receivables or delays in collecting payments from large-scale projects. This pattern is consistent with the accounting nuances of percentage-of-completion contracts in emerging markets, where revenue is recognized ahead of cash collection. The working capital dynamics are masking the underlying operational cash generation and represent the single largest risk to near-term liquidity.

Management's conservative balance sheet has allowed for this strategic pivot into U.S. defense markets without resorting to debt. However, the acquisition spend, combined with the working capital drain, has significantly reduced the cash buffer. The lack of dividends or buybacks indicates a focus on inorganic growth, but the return on this deployed capital is not yet visible in the financials, warranting close monitoring of integration and profitability in the new segment.