|So CaaS appears to be doing as expected and will be a major contributor to growth going forward. At the same time, for the third year in a row, we are seeing the pattern of projecting out an end of year uptick from TacNav. As history has proven, it is always a disappointing result. This should be a broader concern in the short run and I was surprised by the limited scope of questioning around this on the CC. Maybe everyone is just tired of the disappointment, considers TacNav dead and has modeled as such. Also, MKVH poured cold water on the autonomous vehicle category in two ways. First, he emphasized the risks associated with this being R&D. The second point is that he is now suggesting one high precision sensor over an IMU/INS approach. These two points, in addition to nothing to add, after saying they would every quarter, suggests to me he's already preparing us for a pivot away. Just a gut feel based on previous behavior. Otherwise, this quarter and guidance were what I expected. It's too early to see beneficial results from CaaS but we shouldn't be surprised by other areas because they haven't introduced anything of significance, from a hardware pov, for years. He is starting to provide a little more color on HTS so, clearly they were waiting on some satellite launches. I continue to believe speed is the most important component toward a sustained re acceleration of sales. To the best of my knowledge, there wasn't a weather related event on the east coast. I haven't even heard of other companies saying this. It's not rocket science. It's the 5 year old hardware that is about to be obsolete that is hindering leisure sales. Why would anyone in the leisure category spend $10k to $50k on hardware that could be obsolete in 6 months? It might not be obsolete but most would rather have certainty. KVH has played the discounting game for so long that no one believes the discounts are temporary, anymore.|
One thing of note, consolidated vsat/mobilecast service revenues were positive for the first time in 6 quarters. This is exclusive of engineering services that were negative.
In a nut shell, If you wonder why sales growth is going to be so great going forward in 2018, it's because all hardware sales are contracting significantly now. KVH is becoming a CaaS based company. We need to be focusing on this growth and nothing else, until proven otherwise. In my analysis, 4th quarter should be the first of many double digit growth quarters, when focusing just on VSAT service revenues. The overall consolidated service revenue number will lag the pure vsat service number, however.