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KVH Industries (KVHI)

Participants
Roger Kuebel CFO
Martin Kits van Heyningen CEO
Brent Bruun COO
Ric Prentiss Raymond James
Chris Quilty Quilty Analytics
Call transcript
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Operator

Good day, and welcome to the KVH Industries Inc. Q1 2021 Earnings Conference Call. Today's conference is being recorded. This time, I would like to turn the call over to Roger Kuebel. Please go ahead, sir.

Roger Kuebel

operator. you, Thank and KVH everyone, in for us joining earnings Good first thank quarter for morning. this Industries' we included results today release morning published you which the are

CEO, the on me Operating Bruun, Heyningen. the are Martin Joining company's van Kits call Officer, Chief Brent and

Before we quick couple a announcements. dive in, of

of First, and Relations Investor from copy release, is the if you'd like available it our team. earnings a on website our

available recording the If you'd on today's it our will listen website. like of be call, to to

free feel web, submit the via listening are you ir@kvh.com. to to If questions

Finally, subject of call undertake results We expressed will statements. these cause uncertainties that this those contain conference statements. any actual certain to that no statements obligation forward-looking to our and from these are differ to materially numerous update assumptions in revise may or

in measures our Form GAAP well XX-K statements of XXXX under of as you We other The relations in March find non-GAAP X. also the of directly definitions certain comparable risk on SEC investor our SEC measures reconciliations to company's heading as the We website. will to from our measures. discuss those made section are release, in measures and you'll press cautionary filed available factors encourage review filings, our non-GAAP financial these specifically filings the these

highlights Now turn to the Martin. walk you quarter, of I'll first to our through the call over

Martin Kits van Heyningen

us for Thanks, today. Roger. you Good joining everyone. morning, Thank

of inertial first flow as a increasing products compared and margin cost cash $X.X was of well. last we million Total in $X.X QX in the for strong containment, many positive in continued first Thanks the confidence to $XX.X airtime revenues to in during exceeded EBITDA from XXXX. of strongly sustained million million second high momentum of year, first quarter quarter quarter $XX.X XX% strong loss shipments half our built first increased were to nav Our beyond. quarter XXXX. of the reinforced million expectations we of margins, adjusted and XXXX our from Non-GAAP and the the operations

continue Completed to We second our a this We in also of an outstanding shipments. achieve made inertial on against technology, initiatives. photonic results consecutive and announcement positive progress IMUs. our for with chip make business areas the order product record VSAT progress quarter shipment of all-new our and TACNAV significant for strategic our recent line key our set

subscribers the X% now I'm of a on the year, our by of increase revenue go a markets. of primarily in last airtime to some ARPU. QX to almost into each in So, first going driven core and increased XX% details quarter increase X% compared

continue our have AgilePlans the subscription now for many equipment revenue but subscriber our the forgo recurring base. in, for upfront AgilePlans, cruise While continued demand AgilePlans and affected Connectivity years total four smaller were as our commercial growth ago, business XXXX. our shipments. of total shipments market, XX% first of maritime media amounted NEWSlink a vessels. commercial by the compared is strategy our include long-term to paying health to the revenues business. represents quarter indicator business. Remember revenue we've worldwide, of that XX% we market to operations of Service program the for and XX% for of The we now, strong growing the a be off VSAT of target up AgilePlans our revenues is launching as robust negatively VSAT ship a years AgilePlans AgilePlans expanded our significant quarter commercial this of XX% to This Since and VSAT shutdown

making XX% this more Many new response seen and system and are versatility. network these loyalty customer upgrades faster new Customers customers. a have network for very from speeds year we to to revenue enjoy greater was initiated of in migrate network. customers. this of demand from from the legacy original our customers During affordable up move new effort new global HTS of programs incentives expanded from has network HTS taking our targeted positive them quarter, to over airtime advantage HTS on HTS terminals. QX existing airtime Airtime migrations, as mix the also higher saw data, customers, of benefits the margins. year We this and due the We've

more is or So every line new migration our than bottom customer incrementally worth to subscribers. legacy the

network ethernet Measurement phone big provides streamlined VXX adapter the and that unit. routing, smaller as for called Units. built-in uninterrupted a well improved the component high designed into expect as is on million This stabilization, innovations quarter, include we further belowdecks VSAT-Hub, VXX. future TracPhone overall efficiency, easy the new network XX% It's for Right VXX's runs the ultra-compact revolutionary operating fast a joint the is profitability. this data signal of the power dome plan year. introduced of integrate to and to the in The and generation to Ku-Band X $XX annual as expenses belowdecks design grade shed should belowdecks several to benefit performance leisure A boats. co-ax and These Mbps/down It's This installation, thanks as connections, December VSAT cable. which terminals. of antenna the modem antenna quick using previous roughly tracking, size X delivers which plus single rotary the the retrofits We it commercial Wi-Fi, and of only our incorporate commercial with termination power, on deliver TracPhone Mbps/up. VoIP permits The of first the data data an And DC for speeds Inertial our calls. a the XXst is at for KVH dual unit, to boats. we end legacy in

West into XX% So the a where in March interests demand Beach introduced than late it's anticipated in VXX smaller. the and backlog high We of Boat since. International consumer Show, translated TracPhone stronger at Palm week orders the

significantly low We ultra-compact that migration Thanks as believe competitive the alternative airtime to we around its appealing slow, that of the for a fishing and VXX the tens around costs, terminals world. position catalyst old, an still world. fleet new the believe well. it's and will boats strengthen and expensive the VXX opportunities in to for expect are of thousands broadband We market installation easy to be work commercial offshore vessels our the deployed size,

So affordable. in summary, more it's DC to on voltage. lower smaller, data and easier power, a it's higher dramatically also Oh, It's has runs and lot install rates.

announcements KVH Moving Watch initiatives expand we partners our on of continue to QX new in the IoT coming during watch tech our our weeks. several ecosystem product, and in anticipate to solution connectivity

vessel firms, all beginning They're now actively and commercial providers, technical partners Watch include more. customers service promote informatics IoT solution companies to data Our developers, include and proposals KVH prospects. to existing and maritime new their analytics service in

the informed Service. solution watch needs work with by these partners, like that been reefer seeing partner opportunities partners as surveys trials solution Connectivity we've as our and KVH encouraged XXX by container IoT as for already the Watch new And fact, include on of well applications potential KVH represent a how proposals we're Watch for watch vessels, growing funnel remote more monitoring. we're In In and our that meets vessels. than

first our last XX% year. in military quarter by in gyro of OEM optic TACNAV QX sales product compared of Turning significantly product and to market, sales QX to XXXX. quarter inertial our about the first to of Fiber the also navigation XXXX compared increased increased

More The all high-performance accelerometers, as feature we integrated integration as launch, new and of line, higher accuracy IMU P-XXXX, Units, which ago, with two IMU importantly, we P-XXXX our P-series chips greater photonic Inertial Measurement three and latest in PIC the offer weeks to technology. photonic announced and sensitivity dynamic IMUs, patented an ranges. accelerometers completed P-XXXX our to transition addition and chip we our the product completed production new all-new well the

As in repeatability system. Using of magnitude, and order bias the flexible noise older designs, IMUs P-series the same enable unit IMU with integration performance are compact housing life. These result, interfaces a to outstanding our unit deliver increased proven and delivers better easy power offered the and product stability, using products. new communication and systems. the marks than an and forces, also benefits proven TACNAV a and assured first and accelerometers and pleased field navigation solution. new position P-XXXX, we've military offer own tactical the We're technology our the time US performance integrated timing navigation new It allied our with into our reliability we same NAV PIC to same XD, upgraded

P-series to this used to the I'm in is our market, we're reinvent While milestone bring initiative strategic a inertial the to latest merely thrilled longterm technology.

now components these production fiber planar optic accomplish reliability. expect gyros update initiative individual optical result fiber gyro standalone fiber an the inside We've three-year PIC the of chip invention We months, new design coming systems inside from PIC optic and increased simplify through strategic revolutionize that. our the integrated replaces to to optic our in that with to

shuttle offer Our This others. we The we to systems roadmap customers a products, we challenging generation include greater and that flexibility, PIC new of underway. new IMUs the air buses, and even construction, But trucks, most transportation, ROVs, The designed performance. developments, look applications, those to are applications autonomous mining. our expand new development future performance. versatility, agriculture, with and already drones, range modular incremental as already forward of that these next us will technology applications P-series new new also leverage technology that including industries work target our enables and positions will develop as land, is believe for military, sea,

for opportunity for we're with The of like While by inertial cars farther and opportunities shuttles, us, now. term systems applications the the now of right prevalent value long-term our excited can and autonomy largest is autonomous along platforms trucks, the driverless agriculture. construction, more that higher in short make use integration remains commercialization

with funnel have established industries. and We in players startups a those opportunities these of

we And continues positive time example, of leading developers plans QX we around that expected backlog. and applications. all VSAT than the results that our QX, we Summary, systems, the best autonomous agile solution an for these shipped growth momentum record in IMUs built and P-series a confident we're $XX robust had on better in entered truck the multiple million year recently QX, performing very an the for delivered with In and of record, entered In have to we evaluation. subscribers. with number airtime As which

consolidation have moving demand consumer on product While closer the to in we VXX of launched more exceeding network. an expectations our the margin exciting new in products We also and for global SATCOM customers single commercial and new pipeline. a our that's the higher

of to in industry number to deliver able shortages. units in April And securing of once be record done IoT we bookings backlog. a forward solution major strategy technology and our initiatives move initiatives. innovative in autonomous momentum our supports And directly Our carried QX inertial with this components enthusiastic that expect job a electronic with milestone partners. the again. and new good VSAT into We've watch record a despite record to continues we achieved And we've QX,

progress the value As the result, will over to deliver back shareholders and to like I'd our turn call we're to other a numbers. sustainable go confident some now that of long-term making we're Roger, the to And Roger. now stakeholders.

Roger Kuebel

Thanks Martin.

As earlier, recorded came first Martin mentioned revenue quarter first million in at compared XXXX. $XX.X our in the $XX.X million of to quarter

year. compared XX% in sales. quarter, million percentage quarter inertial of first this margin or was in compared increased quarter gross our increase product due $X.X million over revenue a due million increased sales was in X.X million broadband TACNAV $XX.X connectivity revenue an $XX.X first million Revenue the the in the airtime XX%. service Revenue margin related increased XX.X%. quarter, revenue grew XX%. profit quarter around with million first primarily quarter product mobile increase quarter By the from our $X.X revenue compared revenue navigation the was margin by quarter. million million This of gross even consolidated for and to increase Our product year million points or our in inertial our mini-VSAT segment segment $X.X sales a revenue. revenues segment the gross an million $XX.X X%. year's from million Product or $X.X of mini-VSAT first increasing or up mobile our the connectivity to first By quarter $X was first $X.X as a in percentage to to X%. or $X.X million $XX.X year. navigation segment $X.X first prior or for navigation connectivity last XX.X% revenue by Service of million mobile our $X.X year with increase segment And The in increased increase increased of million gross $X.X over FOG the increased about to XX% points. from by the XX% XX.X segment, our prior while mobile to increase was $X.X XX.X% prior year's X% inertial prior the by in of segment, million, increased the with year $XX.X Within from of connectivity primarily first segment, in Airtime million last margin was approximately product year.

in driven as service year. in were expenses $X.X prior $XX.X X% from primarily resulted all million in operations a restrictions subscribers, part our offset continued noted, US the service a engineering of this $X.X we year, $X.X operating inertial grows. to business, down the improvement prior XXXX. in customer, in operating in plans revenue, with associated from lower expenses, impacted At decreased recorded which navigation million, last was a line as significantly project as our of by loss to with the increase media $X.X airtime revenue plans of defense level, due margins completion the travel mini-VSAT expenses the has operating for has segment, which been first In quarter revenue major these compared agile $X a with in hold quarter the a increase million, resulted COVID-XX. by quarter result $XX.X million the in subscribers. a The this by income quarter on million partially contract compared decline the have changes primarily for million and was Martin As revenue XX% in revenue representing first of of million in airtime X% of by Operating a loss the now to agile

$X.X inertial Our mobile with million compared profit operating an an $X.X segment $X.X of compared connectivity navigation million million quarter, operating loss segment generated year. loss the our had of $X.X last an an of year, operating operating of loss with while last million for

year's loss $X.X was last million million. $X.X Our unallocated compared to

of the same was our million million which year. $X.X quarter, in non-GAAP costs, first a loss loss For recorded intangibles, of net compared amortization the with last basis, as $X.X On excludes a net quarter stock and effect and After evaluation other first loss our our with those adjustments. such loss advisory share with outside $X.X losses, was adjustments, allowance $X.X net compensation, same the transaction and $X.XX share non-recurring loss of exchange and tax first and $X.XX last a those foreign of legal changes quarter a loss based gains tax net in million the a net compared for a the last loss a we year. $X.XX a had net of year. of million was EPS of the last Non-GAAP a compared share for EPS share with loss quarter in period year. compared a a of $X.XX fees,

last negative was a EBITDA for adjusted first $X.X compared quarter year. $X.X positive the in million with a Our quarter of million the

used other the net expenditures cash cash resolving positive first year. million scheduled $X.X of approximately fog for million Capital $X.X, the backlog non-GAAP ending million and first operations the published morning. provided flows measures, a earlier to the in For during to our of in delivered that $XX.X products reconciliation of a please was approximately which year. to were approximately refer our approximately complete of release million quarter which this Backlog at was this March at is a was for million. an that million of and alone. Please the Total operations to published million includes was $X.X million $XX last end of the this $XX.X $X.X earnings refer of compared $XX.X earnings balance initial to morning. release earlier scheduled Net positive be by was is quarter navigation products delivered $XX.X be and end $XX.X cash of were services XXXX of million

agile capital the operator For this XXXX the to of expenditures in the the the morning's Operator? now of concludes of by which will plan is we'd million portion expect open range I shipments. remarks, call. prepared for majority to the be our over $XX million, and turn This line our $XX will call Q&A to driven

Operator

[Operator question a from James. Prentiss, Raymond Instructions] have Ric We

Ric Prentiss

first Roger, on learned job you sense welcome. months got what excited you a or nervous? of that's the Wanted the to in few you have get got

Roger Kuebel

Yes, impressed markets. by has great products. think I've great team We're the company really well the here. I in been

I think in finance on When think come great particularly buttoned I happy, doing is. think new is you're very the always team. everyone's I'm I everything as a you CFO, and job. the it really concerned, up

about a is And of the so industry. company. really we're prospects. I terrible think industry I tough a that. It's feel lot just learn, opportunity a not learning think got months in any make in there's And about we've great very Obviously situation not I'm lot I and it's that's an to there's time place but think sort I great terrible, of a a great still Two money. here, a to like where and good

I in really good got we've think we're good in we're products. good spaces, markets and

So extremely I those all positive. are think things

I think that that it and strategy right look move as our we challenge forward, have the various picking is our to of we on executing sort the opportunities pursue. ones

Ric Prentiss

guidance by early visibility the sitting think which activity, customer about means should says, it on third almost we quarter, early maintained, normal customer Cinco to assuming And kind How we of of here three done. that the de Okay. halfway with that XQs get Mayo, a Q? we're was more level back activity returns but

Martin Kits van Heyningen

think better it's I overall looking and better.

issued start but media, coming a the part like response that's cruise RPU's again significantly back demand down been in will business strongly. business it's of months since still that since originally, great pick up markets in that up, the rumor are QX. is our our for statement uptick only to new The seems that with are is we've it great VSAT then think our product so products, we our and couple I seen to

going track. we was everything thought I think happen generally is So to that on

So year. should like it shape good be the the looks half of for in we second

Ric Prentiss

got items, as to Makes industry items? far go thinking has ventures, Reg what private, deal ViaSat as sheet in joint other see some your M&A and balance did Friday. How last its M&A, Orbcomm interesting Net offer given you you sense. The or are the about JVs, an gone through close opportunities space,

Martin Kits van Heyningen

Yes.

a internally things we I lot. about mentioning you're think think that

we've share, I positive of with too sheet balance consolidating. gone competitors lot a been been is we or A strong have growing have acquired they think debt. industry market net out bankrupt that cash. primarily had and of revenues, business gone But or our very the we're growing much

very think we to evaluate I So we're VSAT built competitors, opportunities, in a our entire and was position strong XXX% growth. unlike continue but organic business our with

So single VSAT we a never subscriber. required

we So And we're share. pretty continuing are. good gain to we about where feel market

Ric Prentiss

bit And for to and shareholders final a did a are to a is, to Talk me are little and address those. take what see one I to of bit board activist you us little well. some can obviously us the points pressure announcement. what as about starting you -- Talk think some look refresh the do

Martin Kits van Heyningen

Yes.

I'd And a can strong our I'd take earnings announcing release put you to QX did making talk put out about as a backgrounds directors, if as get on seen today the in have press primarily progress out like details and we telecommunications. in the great to so look we're maritime, We there. proxy haven't Really fantastic So X everyone new the you we've preliminary it, that. well encourage that. also at

Operator

Quilty, Analytics. comes Quilty question next Our Chris from

Chris Quilty

of cost Wanted last $XX I cost migration. network to of and $X a you million. in and $X now on up quarter to million, follow thought had made mentioned terms you saying savings you're that million point

correct? that is all, of First

Martin Kits van Heyningen

Yes.

clarify So let me that.

we'll million, around customers the So every let's half those of, on the be order of be HCS to that the single costs moves we'll in over adding call capacity shedding one network total it $XX HCS, that. if

the if closer course stayed of savings, bandwidth, But no the everything million saving. we're adding So adding we're the million were to additional net independent actual $X probably previously $X mentioned quo, would of than million that's but status subscribers, as subscribers, migration. to there if a I be $X

is come So with XX, dark January $XX million December million what and X, those and I go going a the is, costs talking that to $XX that's difference. X, about network was savings come

Chris Quilty

we down the QX of little Got of then a you. bit should they to onto margins, year bump so and and go network? in a add like capacity kind continue expect big as in you next

Martin Kits van Heyningen

go No, don't I to down. the expect margins

then network think don't any next we they I go be quarter. costs And as will increases every margins the go up in up step should grow. subscribers function and incremental anticipate and year it'll

margins into in So we that and should line. bottom see the should a next nice bump year translate

Chris Quilty

And of what longer trending quarter? towards again, from this level term it? XX% still XX% was the sort

Martin Kits van Heyningen

additional go fixed still good pricing are, internal but a probably of We us. that know, Yes. of costs you metric margin per we And that margins use. us higher a Yes. our in as add terms use XX%. to is is that think terms reason also in That's costs share. won't healthy, We'll subscriber the than that sustainable the see subscribers, market maintaining for we whatever the we in marketplace, for as gain for competitive the XX% down

Chris Quilty

new Understand see as were sticking overall I substantially more product to that a of lines? the pic. product TACNAV product of you many product the the margin But guess the certainly lines the sales. was the across with in with margins margins we and Should look of with mix shift generally sustained and benefit across and most up theme, lift

Martin Kits van Heyningen

of answer that What Roger margin fiber-optic we part let the utilization in well SATCOM in in facility, factory is is and I'll calculation. factory facility. fixed have our detail, macro we're demand, a level big as but both seeing as overhead Well, increased and our at costs, our

get we continue So, going airtime component the is that to keep affordable that to want so go product to down. revenue. the is, fixed Offsetting that we

at $X,XXX, It's And a go we you whatever. tail. very you up RPU around nice have that than a these model. that standalone lower our as are So for units subscriber is the would The typically, having those a years. for out because $X,XXX, sell business ended XX long know, to product generally, very we margins products five

them on increase hardware margins, focus said do having to don't we expect but we as that, generally. much So,

Roger Kuebel

this honestly, it say Yes. be yet. to more around And will make the comments I started and, any call into on would just that. have, we I've digging next me for say, But really can issue I hopefully premature by it

Chris Quilty

I mentioned fact I lift couple signing of last haven't, up that it understand. The quarter, to usage was years, And attribute mean, at type RPU. it just you up mentioned patterns of typically the RPU. plans is individuals in are that the service for you would least that a you or this for?

Martin Kits van Heyningen

Well, we've seen a big increase in usage.

So, two, that's in we more some new be intentionally to as number go have Number designed attractive that one. you are plans. rate plans up

a points legacy entry entry than points. HCS Our are exiting, higher little ArcLight bit the old network

helps. think I So that

down or bit. as a too little to XX was it's us. six as I for get been on that, I around that you sure the over is price last healthy year that is, year. from X% and years in very, a number aren't importance wouldn't opposed for mentioned, but does competitors going watching So RPU, increase the And to things. point it going we've probably very up metric a put down, Because bounce as much make RPUs which going pressure

happy a bit. little stable So, it's increasing actually we're and really that

Roger Kuebel

it the number centimeter. a bounce VXX, customer around to And as an spoke our RPU have XX that a hope your and of has XX a see than with product, does overall which typically, Which Martin lower we the about. RPU success, on made impact some And somewhat that more bit. to of number centimeter is an as he reference the And Martin average. said, also may see just average in new success lot we

Martin Kits van Heyningen

drive Right. up. airtime That's it'll absolutely right, revenues even total though

Roger Kuebel

dollars margin total And Yes. up.

Martin Kits van Heyningen

Right.

Roger Kuebel

Yes. Right.

Sorry.

Chris Quilty

Great.

network. shift Ku-band global coming HTS years. the the capacity, satellites add Just and the new network? somewhat HTS network online of constraints A limited Any Ka-Band is plans concerns mini-VSAT as to next capacity type around you future capacity. handful a question in any on from a to There several over

Martin Kits van Heyningen

we Well, have to plans today. Ka do network don't any

our network like as XX. also well the we you V for a C-band that use As network Ku-band as product, dual know, mode we have the

a today, to where Ku-band We have like want television available Ka-band UHCX There we lot sell who But for we've the a are products, our are satellite us. capacity of people of got to capacity. market. lot

So, good our that be position I in hurdle. a think to major today. we're spot we'd becomes love the Frankly, in pretty where

Chris Quilty

Great. And final how's up shaping this question, year? pipeline, it TACNAV, large orders,

Martin Kits van Heyningen

It's, I'd say, okay.

is think already We this XX% annual Still book have our year. of and backlog, good. I have about, ship some which to forecast in

we're we expected be, So, not done. I to but think about where we're

Chris Quilty

Any major other on activity program with foreign or the DOD track? customers

Martin Kits van Heyningen

There's programs that that budget lot or on. counting we're our annual of have a no Yes. we're single that we There's program different forecast in pursuing.

smaller So get Obviously, push it's really top. us the way of would a mix ones there. large us any program over would

Operator

this further We no questions at have in the queue time.

Martin Kits van Heyningen

follow directly thanks some Okay. other call Well, up analysts with listening. of after the we'll this and everyone for

Operator

Thank you, ladies and gentlemen. This concludes today's teleconference.

You may now disconnect.