KVH Industries Reports Second Quarter 2019 Results


MIDDLETOWN, R.I., Aug. 02, 2019 (GLOBE NEWSWIRE) -- KVH Industries, Inc. (Nasdaq: KVHI) reported financial results for the quarter ended June 30, 2019 today. The company will hold a conference call to discuss these results at 9:00 a.m. ET today, which can be accessed at investors.kvh.com. Following the call, a replay of the webcast will be available through the company’s website. As previously announced, the company sold its maritime training business, Videotel, to Oakley Capital in the second quarter for a base purchase price of $89.4 million resulting in a gain of $54.5 million before tax. The company has classified the results of Videotel as a discontinued operation. Consequently, the discussion of our results for all periods presented in this release relates to our continuing operations and, unless otherwise noted, excludes the results of Videotel. We have also updated our guidance for future periods to exclude Videotel as our prior guidance included expected contributions from this business.

Second Quarter 2019 Highlights

  • For the second quarter of 2019, total revenue, including Videotel, amounted to $41.0 million, net income amounted to $47.2 million and EPS was $2.70. This includes a gain on the sale of Videotel of $54.5 million before tax.
  • Total revenue from continuing operations increased in the second quarter of 2019 to $39.2 million from $38.6 million in the second quarter of 2018, driven primarily by an increase in mini-VSAT Broadband airtime revenue, partially offset by a decrease in TACNAV product revenue.
  • AgilePlans, our Connectivity as a Service Program for the commercial maritime sector, amounted to 69% of total commercial maritime VSAT shipments, and 56% of the total VSAT product shipments for the quarter. For AgilePlans sales, we recognize revenue over time rather than immediately upon shipment.
  • Overall, total VSAT product shipments were up 11% vs. the comparable quarter of the prior year, a new record.
  • AgilePlans now represents 21% of subscribers and revenues were up over 200% compared to the second quarter of 2018.
  • Our mini-VSAT Broadband airtime revenue, which includes AgilePlans, grew $1.8 million or 10%, compared to the second quarter of 2018, driven by a 13% increase in subscribers.
  • Fiber optic gyro sales were essentially flat compared to the second quarter of 2018 and below our expectations.
  • We recorded an inventory reserve of $2.1 million relating to legacy TracPhone V-IP products as we have decided to stop promoting sales of these products and instead focus our efforts on migrating customers to our HTS network and products.
  • Net loss from continuing operations in the second quarter of 2019 was $3.5 million, or $0.20 per share, compared to a net loss of $2.4 million, or $0.14 per share in the second quarter of 2018.
  • Non-GAAP net loss from continuing operations in the second quarter of 2019 was $1.8 million, or $0.10 per share, compared to $1.2 million, or $0.07 per share in the second quarter of 2018.
  • Non-GAAP adjusted EBITDA from continuing operations in the second quarter of 2019 was a loss of $1.0 million, compared to a gain of $0.2 million in the second quarter of 2018.

Commenting on the quarter, Martin Kits van Heyningen, KVH’s chief executive officer, said, “Growth in our core business remained strong in the second quarter. Airtime revenue grew 10% quarter over quarter. VSAT shipments also grew 11%, a new quarterly record. AgilePlans remained a robust revenue driver for us, representing more than 50% of our VSAT shipments for the quarter and almost 70% of our commercial maritime shipments. In addition, our subscriber count continued to increase, growing almost 13%. We were also pleased to see our airtime gross margins growing significantly, coming in at just under 35% for the quarter. We expect this margin improvement to continue through the end of the year. In our inertial navigation segment, development of our photonic chip-based gyros and inertial systems is on track, and field testing of our TACNAV 3D systems by the U.S. Army is still underway.

“As we announced in May, we successfully completed the sale of our Videotel business during this quarter. This transaction generated approximately $90 million in cash for us, enabling us to repay substantially our outstanding debt and leaving more than $65 million in cash on our balance sheet. While we are still making plans for the best use of this liquidity, the Videotel proceeds allows us to accelerate investments in our key long-term growth initiatives - our photonic chip technology; our new Internet of Things platform called KVH Watch, which we announced in Q2; and promotion and expansion of our AgilePlans program through demand generation programs with our key service providers. At this time, we expect to invest between $2.0 million and $3.0 million in these initiatives in the remainder of this year. The impact of our overall plans have been reflected in our updated guidance for the year.”

As noted above, the company’s Videotel business, which had previously been included in the mobile connectivity segment, has been classified as a discontinued operation and therefore is excluded from the segment information below. This classification is different than the basis on which guidance had been provided previously.

The company operates in two segments, mobile connectivity and inertial navigation. In the second quarter of 2019, net sales for the mobile connectivity segment increased $2.0 million, or 7%, as compared to the second quarter of 2018. Mobile connectivity sales increased primarily due to a $1.8 million increase in our mini-VSAT Broadband airtime revenue, which resulted in part from a 13% increase in subscribers, a $0.5 million increase associated with an engineering services contract and a $0.2 million increase in marine product revenue, partially offset by a $0.4 million decrease in content service revenue. In the second quarter of 2019, net sales for our inertial navigation segment decreased $1.4 million, or 14%, compared to the second quarter of 2018. This decrease was primarily due to a $1.3 million decrease in TACNAV.

Financial Highlights - From Continuing Operations (in millions, except per share data)

Quarter Ended
June 30,
Six Months Ended
June 30,
Third QuarterFull Year
GAAP EPS$(0.24)$(0.13)$(1.00)$(0.71)
Non-GAAP EPS$(0.14)$(0.05)$(0.53)$(0.31)
Non-GAAP adjusted EBITDA$(1.0)$1.0$(4.5)$0.5

Other Recent Announcements

  • KVH appoints Ken Loke as Vice President for Asia-Pacific Region.
  • KVH introduced “KVH Watch”, our new Internet of Things (IoT) Connectivity as a Service program for maritime applications utilizing our global VSAT communications.
  • KVH announced that KONGSBERG is its first major partner for KVH Watch, IoT Connectivity as a Service. KVH Watch will provide connectivity for Vessel Insight, a new maritime data infrastructure solution from KONGSBERG’s Kognifai digital ecosystem.

Please review the corresponding press releases for more details regarding these developments.

Conference Call Details

KVH Industries will host a conference call today at 9:00 a.m. ET through the company’s website. The conference call can be accessed at investors.kvh.com and listeners are welcome to submit questions pertaining to the earnings release and conference call to ir@kvh.com. The audio archive will be available on the company website within three hours of the completion of the call.

Non-GAAP Financial Measures

This release provides non-GAAP financial information, which may include constant-currency revenue, non-GAAP net income (loss), non-GAAP diluted EPS, and non-GAAP adjusted EBITDA, as a supplement to our condensed consolidated financial statements, which are prepared in accordance with generally accepted accounting principles (GAAP). Management uses these non-GAAP financial measures internally in analyzing financial results to assess operational performance. Constant-currency revenue is calculated on the basis of local currency results, using foreign currency exchange rates applicable to the earlier comparative period, and management believes that presenting information on a constant-currency basis helps management and investors to isolate the impact of changes in those rates from other factors. The presentation of this financial information is not intended to be considered in isolation or as a substitute for the financial information prepared in accordance with GAAP. The non-GAAP financial measures used in this press release adjust for specified items that can be highly variable or difficult to predict. Management generally uses these non-GAAP financial measures to facilitate financial and operational decision-making, including evaluation of our historical operating results, comparison to competitors’ operating results, and determination of management incentive compensation. These non-GAAP financial measures reflect an additional way of viewing aspects of our operations that, when viewed with GAAP results and the reconciliations to corresponding GAAP financial measures, may provide a more complete understanding of factors and trends affecting our business.

Some limitations of non-GAAP net income (loss), non-GAAP diluted EPS, and non-GAAP adjusted EBITDA, include the following:

  • Non-GAAP net income (loss) and diluted EPS exclude amortization of intangibles, stock-based compensation expense, employee termination and other non-recurring costs, transaction-related legal fees, non-recurring inventory reserve and other non-recurring costs, foreign exchange transaction gains and losses, the tax effect of the foregoing and certain discrete tax charges, including changes in our valuation allowance and other tax adjustments.
  • Non-GAAP adjusted EBITDA represents net income (loss) before interest income, interest expense, income taxes, depreciation, amortization, stock-based compensation, employee termination and other non-recurring costs, transaction-related legal fees, foreign exchange transaction gains and losses, non-recurring inventory reserve and other non-recurring costs.

Other companies, including companies in KVH’s industry, may calculate these non-GAAP financial measures differently or not at all, which will reduce their usefulness as a comparative measure.

Future Non-GAAP Adjustments

Future GAAP diluted EPS may be affected by changes in ongoing assumptions and judgments, and may also be affected by non-recurring, unusual or unanticipated charges, expenses or gains, which are excluded in the calculation of our non-GAAP diluted EPS guidance as described in this press release.

Because non-GAAP financial measures exclude the effect of items that will increase or decrease our reported results of operations, management strongly encourages investors to review our consolidated financial statements and publicly filed reports in their entirety. Reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures are included in the tables accompanying this release.

About KVH Industries, Inc.

KVH Industries, Inc. (Nasdaq: KVHI), is a global leader in mobile connectivity and inertial navigation systems, innovating to enable a mobile world. The market leader in maritime VSAT, KVH designs, manufactures, and provides connectivity and content services globally. KVH is also a premier manufacturer of high-performance sensors and integrated inertial systems for defense and commercial applications. Founded in 1982, the company is based in Middletown, RI, with research, development, and manufacturing operations in Middletown, RI, and Tinley Park, IL, and more than a dozen offices around the globe.

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