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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. Q2 2021 Earnings Conference Call. Today's conference is being recorded. And at this time, I would like to turn the conference over to Mr. Roger Kuebel, please go ahead, sir.

Roger Kuebel

operator. you, Thank and KVH everyone, in for us joining earnings Good second 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

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

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

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

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

are will encourage to measures non-GAAP The the discuss these which of other heading our to those XX-K, filings, XXXX in measures, file our find Form as our in we you'll comparable release X, to specifically cautionary certain GAAP these measures filed SEC and you reconciliations this definitions XX-Q, on as in review Investor March sometime We well Information the of afternoon. our section the Risk and filings expect from Factors SEC Form under available press website. statements made was non-GAAP directly also We financial which Company's measures. of

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

Martin Kits van Heyningen

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

partners cycle We many of EBITDA year. pleased second to the year-over-year I and in initiatives. our but our smaller up That's within is and last product to XXXX. well $X.X QX both time, was Working dynamic tough us We've in our most was industry. these a team inertial growth. technological new Together, AgilePlans, our and a the of processes of strength adjusted product record outstanding strong VSAT Watch, results with shareholders KVH our quarter ways, four contributes We're nominees revitalizing to to the experience airtime is success growth Doing compared their inertial to to in so of last them and realize differently. our a of Cielo QX XX% a And the line. We're example, savings some along aided sequentially different for launch strategic in portfolio. manufacturing market of groundbreaking at and long-term finally, increases established commercial Connectivity for all results a We've better, new boost navigation good that solution I'm compared to these product quarter as report solid offer our all four contributing the now and navigation first existing the AgilePlans these At be revenues while product us these million. of innovative tremendous by sales. given new a even over made the double-digit its as Non-GAAP in priorities the reliability, assembling for Cathy industry. who growth, shipments, its subscriber life newest Martine. the progress disruptive vessels. QX to technology foundation expanding members $XX.X to we're from supporting IoT have with believe efforts our Total for performance within with as solution, excited of IoT breakeven maritime same still you services in a Service one integrating days, the our is of applications of for was, achieved quarters, is this a product commercial our thanks foundation was new last on Each establishing million our in validates service like building The chip technology business and million momentum in cost across will results, that maritime model much convincingly. base future new Hernandez the launched QX, year. so our products. QX new to $XX.X for base were our ago. customer a in a stage early Company. Board, revenue years regional successful Thank follow an line enables photonic

our airtime detail. a growth $XX.X is achieved XX% market, our quarter QX to at revenue with second last In compared look core in let's we up consecutive markets million, which our year. increase connectivity Now of from to mobile double-digit more of --

year, record In with quarterly subscriber the same base year-over-year VSAT active addition, X% At time, grew increased our TracPhone from XX% marking our consecutive third shipments we our shipments. last quarter. sequentially and quarter same by XX% the last period versus unit

In fact, we than more XXX as units QX. by more XXX more XX% record than we QX's systems in shattered than of shipped

a AgilePlans set network. service our VSAT installations We system new global in record for expansive also to monthly June, thanks

resulted of and of our the excellent a future the new airtime Our new on revenue network. subscriber units added subscriber shipped airtime units at leading revenue new are indicators quarter and key the higher performance growth the The in vast subscriber base shipped during next quarter. indicators. future for Every majority represent start

value increased and of actually Our despite our shipments, backlog within QX. record growth the heading subscription-based we compounding VSAT business, product into our illustrate results

and the that's Within adding revenue to the than new AgilePlans additional prior XX% fleets. sector, commercial maritime due versus grew year, more

XX RIX over of base. we months. XX% now active to AgilePlans vessels adding next mini-VSAT AgilePlans XX total And represents approximately anticipates broadband a as system whole which For the our added Shipmanagement, subscriber example,

X% and COVID. for due our we forward cruise edition and post the sports Norway on linkHUB and is package content margin to crew. KVH V.Ships clear the and order XXX,XXX port the normalize our selected Nevertheless, growing systems our both industry to At books sector, movies return morale XX-foot million SATCOM Our & services boats the continued the services for leisure months. fleets of special is XX- trends, This NEWSlink to eventual the commercial as that as media Power Anglo-Eastern things in lagging leisure QX subscribed demand calls its to business business, demand from our call X.X time, disruption recovering we now TV purchased as bring parallel NEWSlink and market the The a still port continued pre-pandemic up reached same the for lines. commercial magazine year. Commercial last QX. our that filled reports for of booster XXXX. are newbuild is and That's marine. side total for port call highest within numbers, see amongst XX onboard. look of This In to commercial marine maritime its evidence the content the like last through is disruption versus Motoryacht

While size offers HTS shipping system, increased middle innovative XXX% SuperYacht quarter in and new leisure and TracPhone X met sales could cable We've antenna for and available installation and uses announced we design the in This coverage it a as VXX worldwide commercial antennas second, year. We that fast regional range. AgilePlans our March, is Times announced DC products products. It the our When commercial demand per for the over and disrupt believe single superyacht any together leisure download communications in VXX, the newest of QX. began XX-inch brokerage and corresponding faster end services. last VSAT the the as proven speeds easy for its of megabits TracPhone power with and antenna our with than the purchase same market. other at communications we

expectation. the records launch. successful product far, for first introduction months in VSAT history. so It the of and new And the shipments VXX lived our to three it's up of set number highest during most orders is that

line with the During QX, introduced U.S. for the our for of product also we Global. market. LTE launch the We the boats cellular LTE-X original TracPhone expanded

installation of We're a than we need XXX leisure also have satellite a seaboard moves to GPS from appeal boats a demand Med, for our Intelsat, collaboration U.S. service, part the high-gain for Leisure customers introductory superior and existing now network. smaller service improve modem, backup and away for streaming the popular both along equips operating plan and with or speeds worldwide, six of our is plan. inside -- plus XX position LTE boats. the expanding, Internet and in download Previously Caribbean increase as experience. megabits HTS Global competitive LTE Eastern It are second miles array, dome a airtime We're antenna strong in increasingly on our through per communications single with Wi-Fi, solely entire is services a communications KVH we available for more Elite month However, illustrate LTE-X in offshore. months also network. These air the really expanded the far and the our a global the as all QX. primary service the partner mariners $XX XX features cable among during yachts. Canada for unlimited array, of boats the only HTS enhanced our with doubling countries The and it's commercial commercial boaters, enjoying single access and the yachts while for as dual the

our legacy as of VSAT previously, X, discussed discontinuing As we've January XXXX. we'll network be

time, add improved on to move we we as for and January, migration operating two expect significant this our Starting a while January next correspondingly smooth in is that customers HTS result to installations. us legacy capacity to It's quarters, the declining, quarters network. transition commercial network. next HTS ramp so incentives migration we'll shed annual XXXX. this legacy legacy from accelerating network the effort incremental profitability. over back network two and same network. expenses million have focus are airtime This leisure revenue an efforts lose in don't will of migration the in we in network in margins in resulting we the subscribers the on more in very and $XX roughly In important legacy Our the lower advanced At for number the investment

our now IoT business. Looking at maritime

We solution the our with StratumFive partners multi-card early ecosystem partners. to and companies continue like add beta among actively to Watch providers IoT service service

digital platforms, first anticipate the from starting the dedicated the OEM out partners connectivity Watch. each quarters. can customers of their offer roll by coming also own announcing OEMs benefit of offered the These which are IoT We KVH their to in batch

geographies. Intervention inspections. as wide second a We're range an classification Watch on-demand seeing its of society. and After expect Expert for major our high-speed successful our concept the enabler Remote this for paid the covering as connectivity as trial trials with and for Expert a customers partners trials, of KVH Intervention Watch and functions Watch such of proved we use KVH these first orders a add vessels quarter, our growing remote cases direct successful additional new revenue partner in subscribers. have convert of new we later solution with and various to and During year completed Remote subscribers applications, we interest application This

-- of in component new this a year, foundational our half Watch second new Our of of component of functionality. be the core will launched trio foundational Watch completing

strong our quarter quarter on Moving compared business. the in sales Fiber optic $X.X last second XX% of a our the quarter for inertial increased second to navigation product gyro million inertial year. or products. XXXX It to was

PIC same million backlog sales the shipments time, Nearly of entering the of $XX foundation XXXX final a completing across for ship by large integrated in From is in year. second the expected of million perspective, validation reinforced We $X.X standard measurement sales that QX. slightly in units recently products. in TACNAV our TACNAV completed half the and QX technology P-series product with despite design our increased now our of is strategic photonic this the $XX testing QX introduced we order to QX. chip our inertial million over broadly integrated product in April versus of our At portfolio. future the Our within

time cycle and Illinois capacity. machine as newest Park, factory. its PIC unit than our resulting more as operational is in chip now production is Tinley gyro Our assembly twice more predecessor, This our fast than doubling doubling in photonic

As steps I leading to these cost from mentioned PIC that reductions we the earlier, are expected initial the technology.

and accelerometers these believe systems. markets as wide products now of new range photonic with for forward the applications that our unique a inertial development and chips benefits and of open our modular customers we're moving the base, new us. will We next-generation the offer With for new

optimistic technology a and of So to a background, foundation I the diverse direction. innovative of new up, unit results the opportunities. inertial turn products business double-digit I'd for look on on And growth wrap ongoing caused growth, With value. subscription record Roger? path we're product delivering detailed strong the a like long-term Roger markets, quarters shipments to last and by several now to we're VSAT the call our numbers. our right believe Despite built shareholder uncertainties of validate a COVID, we're more driving record that deliver back at in and growing to the growth the strategic pipeline nav that strong

Roger Kuebel

Martin. Thanks,

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

million, the XX% segment, quarter last our $X.X an percentage $XX.X $X.X consolidated points in million $X.X profit year. connectivity segment, increased navigation $X Within $XX the of this the due increase quarter sales. product product with X connectivity connectivity inertial sales XX%. of in product by mobile by from year-over-year up our inertial connectivity in our broadband increased primarily a million mobile quarter mobile revenue. was million from margin in million increased million Product due to margin or $X.X $X.X from compared navigation $X.X while second second of $XX.X while $X.X with revenue revenue increased gross gross increased product percentage by Our $X.X or increase By segment year. increase million to Revenue from point. TVRO or was quarter million a in XX% was million million margin by Revenue gross XX%, increase million increasing revenues sales mobile FOG from the Service quarter increased segment, the to XX%. was inertial XX.X%. even second increase to service was The million. last of million to quarter $X.X revenue an or mini-VSAT million, revenue year's less $XX.X our by last slightly revenue increased or our TACNAV second for X By airtime segment a for primarily XX%. lower XX% our $X.X This million navigation second of over than increase by

of been airtime Martin mentioned, XXXX. the million or loss navigation professional have $X.X and loss from last operations second of $XX.X inertial of would of $X.X was Operating million last the salary in noted, down approximately In I was impact compensation benefit in lower margin than $X.X related over more than was revenue service in As the related recorded and by year last segment, year million, gross quarter grew the the XX% changes cuts as margins expenses COVID XX%. $X.X to QX million. that revenue the our we for and these million year. governance expenses restored of level, from professional the matters. a up remaining revenue, income second the was the quarter quarter quarter relating But in of Without Board due half increase which more the primarily were million than mitigate made Of second million, higher operating operating fees year's. last resulted At majority $XX.X operating just increase, the of $X.X loss was to that were to to fees a downturn. our

profit million generated Our an operating of $X.X At $X.X million second time, for for last had quarter compared mobile operating year. and segment operating of connectivity quarter navigation profit inertial of last year an million the segment also our both profit year. the with an this same of the $X.X

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

gains excludes $X.X and foreign in intangibles, $X.XX with loss was valuation $X.XX a net loss the exchange last $X.XX On the net of of effects transaction compared was was changes year. per million such in with was loss compensation other amortization basis, Non-GAAP loss year. a which loss with quarter second same for share a for costs same period the our share to net non-GAAP after of tax million a non-GAAP those as stock-based losses, a share net loss second of EPS $X.X EPS per the our recorded for quarter adjustments, million $X.X quarter related loss of the compared share and allowance loss of a unusual in other compared $X.XX year. second net million $X.X EPS last nonoperating Our year. last compared nonrecurring and fees, and adjustments, per net per quarter last

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

morning. published please release to this For refer of a measures, our earlier complete earnings reconciliation non-GAAP the

million the operations of backlog by of used approximately million end services end approximately $XX.X remains $XX.X by financing Net million, compared months. million. cash cash products by were $XX operations total navigation is was $X.X last operating of during $X.X ending quarter and our inertial the was XX approximately million, over includes provided at of and the activities about of million second to delivered scheduled for last be positive delivered scheduled year-to-date million, for Backlog the flow and balance $XX.X $XX.X Cash was Our million products expenditures from June and Capital XXXX year. activities of was cash XXXX. in provided second be million to at during for is to million resulting the approximately which quarter alone. an the in $X.X $X.X FOG $XX.X which

shipments. For are of XXXX, the million growth $XX the million, revenue outlook the full With EBITDA driven to to adjusted the remainder for our respect maintaining year. we is $XX expect which of AgilePlans expenditures we year, be to capital majority the of and in our range by

second see to continued first expectations, was revenue we and very growth year of the strong our expect the in half half. and The exceeded

we half. in the compared This I this the back turn now of remarks, to prepared the call moderate to portion of and the of line to the factors, concludes to a EBITDA Simon? morning's expect operator call. first to for due open our half number the the over However, year Q&A will adjusted

Operator

[Operator the from Instructions] question phone James. We'll now move first Ric over to Prentiss Raymond which comes our from

Ric Prentiss

supply folks One, what are chain and seeing supply get lot any your at of are also about out A there? occurring? questions from talk COVID us variant a about reopenings we there chain. couple look you're to in in how we bit little Or questions. Delta as you of closings a the Can

Martin Kits van Heyningen

Sure.

challenging. extremely side, On was the supply chain QX

was product, shipments, very needed. So as new was to demand seemed material for had we it the and challenging get that in our ramp record production we VXX, is every which like a It the we able there everything day, job, to great do and that able we get to different But to to be team was needed crisis. out. It continues our challenge. ship a we a were

months, that I it's probably to the next going improve. think over six not

So have crisis. factor, of it but get, especially it's think parts But are ongoing showstoppers is that's as we an any I demand there a now, can't risk is we we know -- that increasing. right specific no where sort daily

and As is part be had of our X seen that, the recovery a media pushout be July any but We for going hotels question, business. initially business, cruise than new day sort closings, of would far as which terms we kind we is -- the in haven't of ships, anticipated. of second think, to I in that slower thought closings of the your Europe

Ric Prentiss

Should comments about half off in EBITDA for how the weigh what's this first of look of we And incentives new to on and good going on migration the the systems? as think the appreciate -- pacing -- people and legacy get Okay. I we EBITDA Obviously, magnitude as think the issue moved to them of about the installing really then? the onto growth. the And should second revenue adjusted at year. we half

Martin Kits van Heyningen

Yes.

a pretty it old, equipment, needs So so it's upgrade. new XX, requires to modem XX old, easy basically. some be of is the It Other equipment a years just replaced.

directly And like are some buying are the to VXX. new of moving some customers the those product AgilePlans,

well. purchases very good quarter unit had this we as So

of Agile. are combination So equipment the a migrations move subsidies and incentives, to

QX. be it will in accelerating in similar what think it be to I QX but saw and will QX, we So

those we So the migration results saw that's in some of -- just those we impact of costs QX the already -- reported.

Ric Prentiss

we show did statement? that And flow or the sales expect Or cost some it income in Okay. of of to of how product? up higher product like as should cost through

Martin Kits van Heyningen

I'll Roger Yes. answer that. let

Roger Kuebel

Yes.

terms see yes, to that I see think you're mentioned the that, incentives. going of you'll it like -- Martin in things

migrated other HTS have the in the end we everybody until of ArcLight paying just think would up network. we theory, already while needs be for ArcLight would it way one turned them lit the The year. stay about if to is thing, network to had the still on already, And we

we So have do that issue.

that's new of get network that second of ArcLight think to ArcLight. be everybody we're to in to the lower off I transition expect network everybody possible as but we many So and going sort costs HTS we of get here see not onto going -- with -- but as associated as margins we have -- the the see half sort still

Martin Kits van Heyningen

Right.

costs typically. in the So up hardware end those margins migration

the So they be migrations. you'll as without see strong would hardware not that the are margins as

Ric Prentiss

Right.

I in think seemed saw of this to we some it quarter, that us.

Martin Kits van Heyningen

yes. Yes,

Roger Kuebel

Yes.

Ric Prentiss

one Okay. 'XX look August is How sitting visibility into that you And for days away we're now 'XX? as of here last from me.

Martin Kits van Heyningen

and every more and of visibility more the gets as better quarter. business is recurring, our subscription-based Well,

grow. is on the HTS pretty and lower the good than the continuing of rate than them. business airtime lower churn AgilePlans' And to on network So about both churn we legacy the feel network, much is

good a feel The business we backlog that. we've about So huge FOG got now. and pretty is growing,

was million. $XX it mentioned, Roger As

good. tend on talk one the outside get as those only to in on visibility be backlog is the And of is of starting we so well. doesn't business to purely the FOG side not we're So that always the what's as of those about, is great the have good orders binary Probably TACNAV, visibility which is the which business military. part visibility

Roger Kuebel

People keeps as really And keep it's question nobody to because what what's out it's going And a happen hard to knows still exactly media, it to there to recover. kind pandemic. to the had predict Martin as happen, there's of being then with thinking also, mentioned, -- going when delayed. mark going that's

Operator

next from from to on move the Quilty phone over now Analytics. which We'll our question Quilty Chris comes

Chris Quilty

shipping, it's early it installs swaps? given or wins but of sort whether are or OpenPort those early you any started that new do have know I totally just indications on of VXX the competitive

Martin Kits van Heyningen

a So far, it new seems like market. it's

have people So had had previously before smaller, was legacy these is also upgrades old VX-IP is to -- who segment with that the of VSAT many powered, priced, what most had then there's people hoping install, the a are address or a some a underserved. new from new not who which -- a is of a there's DC market. it's how we so time, VSAT or on easier new we're to Because it's even opportunities, But exactly lot a lower are pleased market And an it network. for, so definitely were opportunity.

Chris Quilty

like has been And What some verticals? are lot recently the it of strength leisure a on you sounds side. your of other the in seeing

Martin Kits van Heyningen

of most in has strength been actually, commercial. No, the

in are the markets today. of sales XX% our commercial XX%, So

be growth continue the leisure, strong but is So the to market we driver. really in commercial

Chris Quilty

And VXXs, they are you. Got the leisure? commercial and going both

Martin Kits van Heyningen

the an added both. market, then going launched component. in we And leisure it first and They're a sale product we've as AgilePlans it initially, as

VX. need of replacement ships enterprise VX also server they part those So which features, and fisheries, for and international a We commercial applications. in those of and we're of markets fishing VXX CommBox the are functions see like more don't because the the that seeing as types the on other

Chris Quilty

Watch over to KVH the Understand. service. Shifting

you the growth about do months. to on six how where had feel -- service? that of announcements last Where are a seem have your You you for lot plan in are

Martin Kits van Heyningen

but of than call slower faster design we in going we terms of actual partners. what it's I wins going It's in and than subscribers, terms expected expected

to where is in, that get our ships. get -- of don't you So your until product bid, what this you revenue is win you you customers' business we've similar designed found FOG sort the but get

this of is So half the second subscriber customers and we're in what's part and their that's the growth that the of generating seeing as what products that, growth to market, our bring revenue year. a we're

Chris Quilty

Great.

on us are an can the you're FOGs, give It you where update of cost you terms sounds capacity. bringing Speaking of on like savings? in new

big you pickup over? go at no but margins the think as where transition current you least quarter, probably product that do line can So in here on

Martin Kits van Heyningen

I'll coming margins, to let Roger I'd but speak from. the where to like savings is cost just describe specific

benefits of doesn't of new So unique it the components big one fiber the require did. the this chip that old that photonic specialty or is gyros

the cost deep to savers for overhead of item. fiber big the and a is the is the part production to down facility, -- ability us shut significant fiber our So which production that one of

So overhead side. quarter, during of that chunk will a the on be the current drive and that's to big savings going happening

the entire cost savings overhead basis, we're actual So already savings the seeing the big on per will unit reduction but eliminating another from come of chunk by departments.

Roger Kuebel

see numbers, improvement point, a we yes, But after a margin margin definitely in the then gradual are expecting year-to-year, but Martin's and to definitely some in think I expect specific see see to some I we're to that. to nice expecting And bump give bump the next year. don't do improvement. we to want

Chris Quilty

any new Do to or opportunities? its designing some question, you -- have you're and final PIC that with a in because attribute also performance market seeing possibly products designing new customers related. And that engaged there's are size PIC you

Martin Kits van Heyningen

Yes.

which So in product, a we're getting who which we specific and that. drones are and smaller like enables customers smaller developing, things use missiles products smaller want like

So of we at launch products, this to those year. the expect end

Operator

at this questions [Operator further queued have time. We Instructions] no

Martin Kits van Heyningen

there are directly to we'll we'll if Operator, available call. speak to be questions, any after And no this interested parties up. wrap further

Roger Kuebel

joining. Appreciate everyone Thanks, everyone.

Operator

much you today's for participation. does this very your gentlemen, call. and Thank Ladies conclude

disconnect. may You now