SI
SI
discoversearch

   Technology StocksKVH Industries, Inc.


Previous 10 Next 10 
To: david james who started this subject7/18/2002 12:44:31 PM
From: dvdw©
   of 6936
 
Conference Call Replay # FYI!

Available after 1:30 PM EST on 7-18-02
Number to call is 1 888- 203-1112 Replay code # 669362

Live Call failed due to some broadcast glitch, replay will catch everyone up.

Share RecommendKeepReplyMark as Last ReadRead Replies (1)


To: dvdw© who wrote (1328)7/18/2002 7:52:09 PM
From: robert b furman
   of 6936
 
Thanks - I needed that- wondered what happened.

I even reloaded Realtime - boring.

Thanks again

Bob

Share RecommendKeepReplyMark as Last ReadRead Replies (1)


To: robert b furman who wrote (1329)7/19/2002 9:41:58 AM
From: cmg
   of 6936
 
Whats everyones take on the demotion of the vp of finance. and He stayed on?.......cmg

Share RecommendKeepReplyMark as Last ReadRead Replies (1)


To: david james who started this subject7/22/2002 7:53:01 AM
From: Roy F
   of 6936
 
KVH and ABB Power Technology Products Division Develop New Optical Current Sensor

Proposed Sensors Measure Current More Accurately While Offering Significant Environmental Benefits

MIDDLETOWN, R.I., July 22 /PRNewswire-FirstCall/ -- KVH Industries (Nasdaq: KVHI - News) announced today that it has signed a Product Development Agreement with the ABB High Voltage Business Area to cooperate in the development of a new fiber optic current sensor. The agreement follows a series of joint research projects during which the companies explored the feasibility of using fiber optics to measure current in high-voltage power lines.

The new fiber optic sensors allow more accurate energy metering and wider bandwidth and improved safety over conventional technologies. Josef A. Durr, who has worldwide responsibility for ABB's High Voltage Business Area, noted two additional benefits that especially comply with ABB's research and development strategy: "The new technology decreases the number of variances and thus helps reduce delivery times. It also provides a more environmentally friendly solution."

"Free trade and competition between electricity providers place extra requirements on flexibility, automation, and metering in power networks," commented KVH president and chief executive officer Martin Kits van Heyningen. "ABB is the world leader in the power transmission and distribution field, and we're delighted to be working with them on this innovative application."

Currently, the conventional instrument transformers used to measure currents and voltages in high-voltage grids are oil- or gas-filled systems that provide analog outputs. The new fiber optic current sensor is expected to be significantly smaller and more accurate than existing devices, and it will provide instantaneous digital measurement of the current. Furthermore, the transmission of the sensor signal by means of optical fibers provides an inherent insulation against high voltages.

KVH Industries, Inc., designs and manufactures products that enable mobile communication, defense navigation, and direction sensing through the use of its proprietary mobile satellite antenna and fiber optic technologies. The company is developing next-generation systems with greater precision, durability, and versatility for communications, navigation, and industrial applications. An ISO 9001-registered company, KVH has headquarters in Middletown, Rhode Island, with a fully operational optical fiber and component manufacturing facility in Tinley Park, Illinois, and a European sales, marketing, and support office in Hoersholm, Denmark.

ABB (www.abb.com) is a global power and automation technology group that enables utility and industry customers to improve performance while lowering environmental impact. ABB has 152,000 employees in more than 100 countries.

Except for historical facts, the statements in this press release are forward-looking statements that involve risks and uncertainties. For example, the statements regarding the company's product development goals are forward- looking statements. Forward-looking statements are merely our current predictions of future events. The statements are inherently uncertain, and actual results realized by the company could differ materially from the statements made herein. Important factors that might cause such differences include: failure to develop and market fiber optic products; lack of reliable vendors, service providers and outside products; unforeseen changes in competing technologies and products; and poor or delayed research and development results. Additional factors that could affect future events are discussed in the company's 2001 Form 10-K filed with the Securities and Exchange Commission on March 20, 2002. Copies are available through the company's Investor Relations department and web site, www.kvh.com. We assume no obligation to update our forward-looking statements to reflect new information and developments.


KVH Industries Contact:
Chris Watson, Communications Coordinator
401-847-3327
cwatson@kvh.com

Investor Relations Contact:
Phil Davidson or Jolinda Taylor
FD Morgen-Walke
617-747-3600

Financial Media Contact:
Ron Heckmann
FD Morgen-Walke
415-296-7383

SOURCE: KVH Industries, Inc.

Share RecommendKeepReplyMark as Last ReadRead Replies (1)


To: cmg who wrote (1330)7/22/2002 7:58:29 AM
From: Sector Investor
   of 6936
 
Current Sensor! Finally!

KVH and ABB Power Technology Products Division Develop New Optical Current Sensor

Proposed Sensors Measure Current More Accurately While Offering Significant Environmental Benefits

MIDDLETOWN, R.I., July 22, 2002 /PRNewswire-FirstCall from COMTEX/ -- KVH Industries (Nasdaq: KVHI chart, msgs) announced today that it has signed a Product Development Agreement with the ABB High Voltage Business Area to cooperate in the development of a new fiber optic current sensor. The agreement follows a series of joint research projects during which the companies explored the feasibility of using fiber optics to measure current in high-voltage power lines.

The new fiber optic sensors allow more accurate energy metering and wider bandwidth and improved safety over conventional technologies. Josef A. Durr, who has worldwide responsibility for ABB's High Voltage Business Area, noted two additional benefits that especially comply with ABB's research and development strategy: "The new technology decreases the number of variances and thus helps reduce delivery times. It also provides a more environmentally friendly solution."

"Free trade and competition between electricity providers place extra requirements on flexibility, automation, and metering in power networks," commented KVH president and chief executive officer Martin Kits van Heyningen. "ABB is the world leader in the power transmission and distribution field, and we're delighted to be working with them on this innovative application."

Currently, the conventional instrument transformers used to measure currents and voltages in high-voltage grids are oil- or gas-filled systems that provide analog outputs. The new fiber optic current sensor is expected to be significantly smaller and more accurate than existing devices, and it will provide instantaneous digital measurement of the current. Furthermore, the transmission of the sensor signal by means of optical fibers provides an inherent insulation against high voltages.

KVH Industries, Inc., designs and manufactures products that enable mobile communication, defense navigation, and direction sensing through the use of its proprietary mobile satellite antenna and fiber optic technologies. The company is developing next-generation systems with greater precision, durability, and versatility for communications, navigation, and industrial applications. An ISO 9001-registered company, KVH has headquarters in Middletown, Rhode Island, with a fully operational optical fiber and component manufacturing facility in Tinley Park, Illinois, and a European sales, marketing, and support office in Hoersholm, Denmark.

ABB (www.abb.com) is a global power and automation technology group that enables utility and industry customers to improve performance while lowering environmental impact. ABB has 152,000 employees in more than 100 countries.

Except for historical facts, the statements in this press release are forward-looking statements that involve risks and uncertainties. For example, the statements regarding the company's product development goals are forward- looking statements. Forward-looking statements are merely our current predictions of future events. The statements are inherently uncertain, and actual results realized by the company could differ materially from the statements made herein. Important factors that might cause such differences include: failure to develop and market fiber optic products; lack of reliable vendors, service providers and outside products; unforeseen changes in competing technologies and products; and poor or delayed research and development results. Additional factors that could affect future events are discussed in the company's 2001 Form 10-K filed with the Securities and Exchange Commission on March 20, 2002. Copies are available through the company's Investor Relations department and web site, www.kvh.com. We assume no obligation to update our forward-looking statements to reflect new information and developments.

KVH Industries Contact:
Chris Watson, Communications Coordinator
401-847-3327
cwatson@kvh.com

Investor Relations Contact:
Phil Davidson or Jolinda Taylor
FD Morgen-Walke
617-747-3600

Financial Media Contact:
Ron Heckmann
FD Morgen-Walke
415-296-7383

tbutton.prnewswire.com

Source: KVH Industries, Inc.

Contact:

Chris Watson, Communications Coordinator of KVH Industries, +1-401-847-3327, or cwatson@kvh.com; or investors, Phil Davidson or Jolinda Taylor, +1-617-747-3600, or media, Ron Heckmann, +1-415-296-7383, both of FD Morgen-Walke
URL: abb.com

Share RecommendKeepReplyMark as Last ReadRead Replies (1)


To: Sector Investor who wrote (1332)7/22/2002 8:47:28 AM
From: Roy F
   of 6936
 
"...Product Development Agreement with the ABB High Voltage Business Area to cooperate in the development of a new fiber optic current sensor. The agreement follows a series of joint research projects during which the companies explored the feasibility of using fiber optics to measure current in high-voltage power lines." <smip>

Share RecommendKeepReplyMark as Last Read


To: Roy F who wrote (1331)7/22/2002 1:19:51 PM
From: robert b furman
   of 6936
 
Hi Roy,

This is great.

I CAN'T BELIEVE IT

Been waiting so long I just didn't think it would happen.

Wonder when sales start being generated.

Lets get that growing market share of a 500 million annual market.


YYYEEEEEEHHHAAAWWWWW !!!!!


Bob

P.S. I love the environmental twist - very professional to include in that market/sector.

Share RecommendKeepReplyMark as Last ReadRead Replies (1)


To: robert b furman who wrote (1334)7/22/2002 2:51:33 PM
From: Sector Investor
   of 6936
 
Robert,

A LOT of discussion is going on over on Yahoo! today. I hope people here remember to check the Yahoo! thread, as it is the main discussion thread for KVHI.

Share RecommendKeepReplyMark as Last ReadRead Replies (1)


To: Sector Investor who wrote (1335)7/23/2002 10:20:12 AM
From: Sector Investor
   of 6936
 
Here is part one of the full Q2 2002 Conference Call transcript. I proofed it for accuracy and it seems to be correct, although some words were unclear and some callers names and firms are best guesses. This is my own effort and is posted on a best effort basis, but it is no substitute for listening to the actual CC.

KVH Industries

Q2 2002 Earnings Conference Call

Dick Forsyth, VP of Finance

Standard forward-looking statements disclaimer.

Martin Kits van Heyningen, CEO

We have a lot to talk about today, including some new product announcements as well as some positive financial news. As you can see from our earnings announcement this morning we have enjoyed tremendous growth so far this year and we have a number of exciting new initiatives running in parallel.

In order to keep our operations running smoothly, and to prepare ourselves for even more growth in the future, we have made several management changes in addition to those over the last year, including two in the second quarter, bringing on a VP of Engineering, Dr. Kalyan Ganesan in May, and as you have seen in today's release, Pat Spratt has joined KVH as our new Chief Financial Officer Pat has an outstanding track record in the technology industry, and his leadership in Finance, Investor Relations and Business Planning will enhance the expertise of our entire team.

I'm very happy that Dick Forsyth will continue to be a member of KVH's executive management in the position of VP of Finance, where he can continue to focus on the successful management of the company's resources, and we've now got a very strong team together.

We're delighted to have Pat with us today. Pat, welcome aboard

01:09 B.O.

Pat Spratt:

Thank you very much Martin. Today I will keep my comments especially brief. Being new to KVH, I am now at the initial stage of a steep learning curve. And given that, my ability to add value to your understanding of the financial results is somewhat limited. So, for this conference call, I have asked Dick Forsyth to handle the review of our financials, as he has capably done for so many years. In the short time that I have known Dick, I have already grown to appreciate his valuable contributions to KVH, and I am very pleased that we will be working together.

I do have a couple of additional comments that I would like to make. First, I was attracted to KVH because it has a wealth of outstanding potential, and a wealth of strength as well. But the most impressive factor for me is the passion - for customer satisfaction, for using leadership in technology to develop the best product, and the passion for always striving to improve, in every dimension of the business. KVH provides an environment in which everyone is challenged to contribute and to grow. Having this kind of passion is fundamental to long-term success - in product and service offerings, as well as in financial performance.

And that leads to my second comment. My immediate priorities are squarely focused on our financial performance. We WILL adjust our cost structure to yield profits in the near term, and sustain profitable growth in the longer term. We will also improve asset utilization to strengthen cash flow, and provide for additional tactical and strategic investment flexibility. And I intend to provide the finance management, leadership and support, that will drive the company to achieve best in class performance over the longer term. I am very excited to have this opportunity to contribute to the growth of KVH, and I am equally committed to rewarding your confidence in us, as represented by your investment in the company. Thank you. At this point I will turn it back to Martin, and to Dick. Martin?

03:24 B.O.

Martin Kits van Heyningen, CEO

Thanks Pat. Now, let's get started.

KVH had another excellent quarter with record revenues of $12.6 million, which is a 61% increase over the second quarter of 2001, and a 31% increase from the first quarter of this year. We reduced our operating loss by 66% from last year's second quarter, and we are on track to return to profitability during the second half of this year. Our revenue growth was driven by a 51% increase in our satellite communications sales, a 7% increase in our Fiber Optic sales, and an almost 5-fold increase in our military sales over the same period last year. During the quarter we increased gross margins by 600 basis points over the second quarter of 2001, and we also continued to invest in research and development for our new products. R&D expenditures in the quarter rose slightly in actual dollars, but decreased as a percentage of sales to 19% from 24% in the first quarter of this year.

Now looking ahead to the third quarter and the year as a whole, KVH is well positioned to achieve its goals of solid revenue growth and a return to profitability.

I'd like to go through an overview of each of our markets, beginning with our Satellite Communications Group.

Sales of our satellite systems in N. America were up 74% from the same period last year and our overall satellite communication sales totaled $7.9 million, which is a 51% increase over the last year's quarter. The ongoing recovery of the domestic land mobile market place has been the primary driver in the continued growth of our satellite communications revenue, more than offsetting a small decline in our European Marine sales for the satellite segment.

Now our land mobile sales achieved a significant milestone this quarter, when three major OEM RV and coach manufacturers, Fleetwood, Featherlite and Rexhall, all selected our TracVision satellite TV systems, as either standard or optional equipment on their 2003 model year vehicles. Now to earn this business, we specifically designed and launched two new TracVision antennas, specifically designed for OEM integration and easy factory installations. The rapid development and production of these two new designs allowed up to ship the first units in June. Together, these OEM customers represent the potential sales of several thousand additional units over the next 12 months. The growing demand for KVH's satellite communication systems as standard or optional equipment solidifies our position as the number one manufacturer of satellite solutions for the land mobile industry. Now we anticipate sales of RVs in general to continue to be strong, and we expect to continue to gain momentum with our products targeting this market and expect additional major customer wins in the near future.

Now, unlike the land mobile market, we believe that the overall Marine market will remain relatively flat for new boat sales for the time being, which is depending on the pace of the general economic recovery. However, the sales from our new products and services are helping to compensate for the moderate sales of existing products in the Marine marketplace.

Our new Marine TracNet Internet system rollout was extremely successful, and the product is selling very well. In addition, we also saw positive results in the distribution of our Inmarsat satellite communication equipment, our new TracPhone F77 from Thane & Thrane, so TracNet and our expanded family of Inmarsat products represent more than just hardware sales. To support each of these product lines, KVH is now actively selling and supporting airtime services for mobile DirecPC and Inmarsat, creating a new, recurring revenue stream for the company. As an Inmarsat service provider, we now offer airtime service subscriptions to all of our new and existing TracPhone customers, as well as non-KVH Inmarsat users.

We invested significant resources in Q2, to get this up and running, which is now complete, and now our satellite services group is already beginning to realize new subscription driven revenues.

We also continue to make good progress in the development of our new low profile satellite TV and Internet antenna for the automotive market. During the second quarter we increased our R&D spending to increase the probability that we meet our development schedule as well as our performance and manufacturing cost target, we are pushing hard in this breakthrough technology and we remain on track to introduce the product this year.

While our Fiber optic group made significant technical progress during the second quarter, we are working hard to establish this business in the market place as a consistent revenue generator. With approximately $900,000 in sales for the quarter, they were up 7% over the same period last year, but this is less growth than we were expecting. Now despite the slower than expected shipments in the fiber optic area during Q2, we booked several major gyro orders for military antenna stabilization and missile training simulators which should be delivered starting in Q3.

Now during last quarter's conference call, I mentioned that we were focusing on guided munitions as a key new opportunity for our fiber optic gyros. I am pleased to report that we are now working with L-3 Communications on a funded project to develop a low cost IMU unit using our new DSP based fiber optic gyros. This is for use in smart bomb guidance systems. These smart munitions guidance and drone navigation are two applications that are receiving lots of attention and funding from the military, and we are optimistic that our new FOG based guidance package will allow KVH to participate in this large, critical and growing defense area.

In the photonics arena, our program to develop Active Fiber technology and a new class of high-speed in-fiber optical components remains on track. However, due to a slowdown within the Telecommunications industry, we reduced our R&D expenditures on Active Fiber by about 10% from the first to second quarter this year, and directed additional resources to our Mobile Broadband effort. Now despite this short-term uncertainty within the industry, we have a high degree of confidence in our Active Fiber approach, and in the eventual need for this technology in the market place. We are proceeding with the development efforts, while pacing the rate of investment in the technology to match the rate of recovery in the Optical Telecom networking industry, and the arrival of the 40-gigabit networks.

Now going into this year, we set a goal to double our defense related revenues for the year. During the second quarter, our Defense related sales rose almost 500% to $2.7 million, up from only $461,000 during the same period in 2001. Year to date our defense related sales total $4.9 million, which is more than a 200% increase from last year. We continue to book new and follow-on military business, and we are pursuing a number of significant opportunities.

As I have indicated in previous calls, we are expecting to win a number of large orders from the US military for our TacNav vehicle navigation products, and our confidence remains VERY high that we will book these orders in the second half of this year, so that our growth in defense will continue.

I'm very proud to report that our TacNav systems are playing a major role in our military's counter terrorism efforts abroad, aboard vehicles currently operating in Afghanistan and elsewhere. We have recently learned that our TavNav systems aboard Canadian light armored vehicles participating \in Operation Anaconda performed flawlessly during direct combat with enemy forces. Now, position guided munitions, uh, smart bombs, generally require the type of precise far target location capabilities, which is a key capability of TacNav, so not only are we developing a guidance package for the munitions itself, we are providing the Nav system for the vehicles that provide the target locations.

Our TacNav FOG system, which incorporates our Fiber Optic gyros, was also used in the Afghanistan theater. As you may recall, KVH was awarded a $4 million contract with the US military last November for TacNav FOG navigation systems. Now these systems were installed aboard the recently unveiled ground Prophet vehicle, which is an advanced signal intelligence and autonic warfare system.

Our product provides the precision bearing and position data, which allows the system to intercept and track enemy communication signals. And based on the system's performance to date and it's value to the military, we expect this program to be accelerated, which could result in substantial follow-on orders for our TacNav FOG nav systems in the near future.

So as you can see, KVH is well positioned to improve upon first half sales growth of our TacNav military systems and our fiber optic gyro products into the military. In the first half of 2002, the sales increases for the business developed, and in most cases booked, were prior to the tragic events of 9-11. So, our continuing field successes, the growing recognition of the value of TacNav, and the release of additional funding for defense, should all benefit KVH, starting in the second half of this year.

Looking ahead, KVH is in a very strong position as we enter the third quarter. We are on pace for record yearly revenues, and we are seeing growth across the board. New products and services are expanding our customer and revenue base, and we continue to pursue significant opportunities in all of our target markets. Even so, we are working hard to improved our financial performance, and our near term objectives are to return to profitability in the second half, and to post 30%-40% revenue growth over last year.

Now I would like to turn the call over to Dick to take you through the numbers. Dick?

Dick Forsyth, VP Finance.

Thanks, Martin. Let's begin with the top line.

Second quarter sales increased 61% from last year, to $12.6 million as a result of strong communication and defense sales.

Q2 Communication sales increased to $7.9 million, a 51% increase from last year's sales of $5.2 million. Year to date communications shipments rose to $13.8 million, a 41% increase over the prior year. Communication sales growth resulted from wider distribution through national distributors, and increasing orders from RV manufacturers.

Q2 defense revenues grew to $2.7 million, a 5-fold increase from the prior year. While year to date defense shipments were $4.9 million, more than double last year's volume. Foreign defense sales accounted for the strong first half performance, while domestic defense orders have been slow to close, reflecting delays in the defense administrative funding process, which makes it difficult to forecast the timing of orders. Continued slowness in the defense funding process could delay an order that is currently shipped to forecast in the 3rd quarter, potentially having an adverse affect on expected third quarter performance. However we do anticipate that we will ship the order no later than the fourth quarter.

Defense backlog rose to roughly $4.3 million at the end of the second quarter, with $1.7 million scheduled to ship in the current quarter.

Fiber Optic sales increased to $900,000, up 7% for the quarter, but down on a year to date basis. FOG sales will increase this quarter, as we begin to ship from existing backlogs.

Looking ahead, we anticipate continued strong revenue growth throughout the remainder of the year, as we benefit from positive trends in all sales categories.

Q2 Gross profit as a percentage of net sales increased to 42%, up from last year's 36% of sales, while year to date gross profit was 43% of sales, up from 37% in 2001. The year to date gross profit improvement resulted from a favorable mix of higher margin defense shipments, reductions in direct product costs, and a 4-point reduction in our manufacturing overhead rate. Improved methods, increased manufacturing volumes, and stronger cost management all contributed to reduce year to date manufacturing overhead to 13% of sales. Looking ahead, we anticipate Gross Profit will continue to improve sequentially over the new two quarters, as we make more efficient use of our manufacturing facilities, and continue to reduce product costs.

Q2 R&D expense increased to $2.4 million, an 8% increase from last year's spending of $2.3 million. R&D spending included significant PhotonicFiber and low profile [antenna] research costs, which are forecast to slow in the second half as we complete the product development stage, and begin the transition to sustaining engineering. R&D expense is forecast to decrease for the remainder of the year, as project spending begins to decline, and increased customer funded engineering begins to offset internal spending.

Q2 S&M expense increased by $800,00 to $2.8 million, up 40% from last year, while year to date spending rose to $5.1 million, a 21% increase from the prior year. The majority of the spending increase resulted from variable sales commissions, which increased $600,000 in response to 61% quarterly sales growth. Outside sales commissions were unusually high in the quarter, due to a non-recurring $350,000 commission related to a large defense shipment. We expect marketing and sales expense will decrease as a percentage of sales over the next two quarters, as commission expense normalizes.

Q2 G&A expense increased $170,000 to $800,000, a 27% increase from last year's spending, while year to date spending rose by $250,000 to $1.5 million, a 20% increase over the prior year. Spending growth was due to non-recurring recruiting fees and professional services. Administrative expenses should remain relatively flat for the remainder of the year

Consistent with our accounting treatment for the prior year, we fully reserved the tax benefit associated with the quarterly and year to date operating losses. Reserving the income tax benefit increased the quarterly net loss by roughly $300,000 and the net loss per share by 3 cents, while year to date net loss increased by roughly $800,000, or 7 cents per share. Although this accounting treatment increased our net loss, I would like to point out that we have not lost the positive tax savings associated with the current tax benefit. As soon as we are profitable, we will net the reserved income tax benefit directly against income tax expense, increasing earnings in that period.

Positive quarterly asset management resulted in DSO of 42 days, down from 49 days at year end, while Inventory turns increased to 5.7, up from 5 turns at year end, despite a buildup of defense related inventory, which was staged in anticipation of orders forecast to ship this quarter.

Cash closed at $6.5 million, down $2.6 [million] from the first quarter's cash balance of $9.1 million. The operating components of the decrease were a cash operating loss of $400,000, increased receivables of $700,000, Accounts Payable and customer deposit decreases totaling $1.2 million, combined with capital expenditures of roughly $300,000.

Cash flow from operations is forecast to improve significantly for the remainder of the year, in response to improved operating results, turning positive this quarter, and continuing positive for the remainder of the year. However, positive cash flow from operations will be offset by second half capital expenditures, resulting in an estimated decrease in our current cash balance of roughly $500,000 by year-end. Based upon our current operating forecast, our cash balances and bank line of credit are sufficient to fully fund planned operating and capital requirements going forward.

In closing, we're very encouraged by our current sales outlook, we look forward to continued growth and our return to profitability.

Now we'd like to take our Questions. Operator, please open the call.

Share RecommendKeepReplyMark as Last ReadRead Replies (1)


To: Sector Investor who wrote (1336)7/23/2002 10:23:25 AM
From: Sector Investor
   of 6936
 
Part 2:

Q&A

Pierre Maccagno, Needham & Co.

Q. Good morning. What is your depreciation for the quarter?
A. A little better than $400,000. That includes depreciation and amortization of our intangibles.

Q. OK. I notice here that the cash is down $2.5 million, down to $6.5 million.
A. Right.

Q. Do you envision that you might have to raise some capital in the near term, or what is your vision here?
A. No. When we look at even our worst-case cash flow, we are cash flow positive at the operating line, so that we will be seeing cash provided by operations for the next two quarters. Now that's going to be offset by some Capital expenditures, so, when we net the Capital expenditures out of that positive result, by year-end we will be down by approximately one half million dollars. Obviously that's a range and this is an estimate, but we feel pretty comfortable with that number, and, contingent upon any other kind of acquisition or expansion, that we don't see happening right now, I think we have plenty of cash.

Q. So your total cash flow for the quarter was positive?
A. No. Operating cash flow was negative.

Q. OK.
A. But that is going to turn around in the third quarter, and continue in the 4th quarter as well.

Q. So that's what you expect for cash flow for the next two quarters
A. Positive cash flow from operations, that's the line just before Capex, so from an operating point of view we will be cash positive this quarter, and next quarter as well.

Q. OK.
A. And we expect that to continue going forward.

Q. On a total cash basis, when do you expect it to be positive?
A. It could be as early as the 4th quarter.

Q. Fourth quarter? OK. In terms of the breakdown of revenues, you give the Defense revenue - normally the way I put it here in my model is TacNav revenues. Do you have the total for that?
A. Defense, excluding engineering was about 21% of total revenue.

Q. So, what would be the number for TacNav then?
A. That class of sales is referred to as TacNav, is that entire family of products that we sell to the military? It was roughly $2.6 million.

Q. The way you have it here is, TacNav includes Defense, true?
A. That's correct. Yeah, that category we refer to as Defense, so, when you heard me speak on the call and referred to Defense, that's what I'm really talking about. The TacNav products make up our suite of Defense products.

Q. And that came out to $2.6 million?
A. Yes. Rounded it's about $2.7, Martin is changing us a little bit.

Q. $2.7 million? OK. And the fiber, which includes uh, TacNav correct? Would be how much?
A. No. The fiber does not include TacNav. The Fiber Optic sales were approximately $900,000 last quarter.

Q. OK. In the past, the way that we would report these fiber revenues, they would include those shipments of TacNav products that would include, uh, the fiber products.
A. If I can clarify that, Pierre, what you are saying is correct, and what Martin is saying is correct as well. What we do is we isolate the optical circuit that becomes a part of a Tactical system, what we refer to as TacNav FOG, and THAT sale is included as a Fiber Optic sale, but the remainder of the system, which is probably 80% of the total sales value, is recorded as a Defense sale. For purposes of this discussion, I think we should keep it at a little bit higher level. The Fiber Optic gyro sales were approximately $900,000, and the military TacNav sales were approximately $2.7 million. And the majority of the balance was the satellite communications sales for the quarter.

Q.OK. What is your total backlog for the quarter?
A. Total backlog is about $7.4 million, and that is at the end of the quarter.
Q. OK. And do you have a breakdown for that? I mean, how much is military or defense?
A. I'll just give you some rough percentages, about 2/3 is Military, maybe 20% fiber optic OEM kinds of orders, and the remainder are these large OEM manufacturers that Martin referred to in his script, like

Q. For the satellite?
A. Fleetwoods … Yes. Normally the satellite communication products are shipped from inventory, so we don't build a backlog in those products. Those orders are delivered as they are received.

Q. OK. And how much in revenues are you expecting from the service?
A. We don't have a good handle on that yet, Pierre, because this is a brand new business for us, so we don't have any historical data. We are starting to get activations, uh, June was really the first month we recorded any revenue from it, and we are doing our first billing cycle. I would like to point out that this was one of the many things that we did in the second quarter, that we accomplished, you know a complete billing system, an online database for customer subscriptions - customers can now check their bills online and pay via credit card online. So we have a very nice system in place. We did that in Q2, and we incurred some expense to get that started, but we expect our service revenue business to be profitable, starting in Q3. So we should see a very rapid return on that investment, and we don't anticipate incurring any additional startup expenses in Q3 So that's behind us now.

Q. Ok. And in terms of some guidance, can you give us some color for next quarter, I mean, do you see satellite growing? How is the fiber and how is the Defense - you know the different breakdowns of totals. How do you see those developing for next quarter?
A. Well I think we've given the top line guidance that we are comfortable with, which is 30%-40% growth. I think that you can see from the trajectory that we are on that we are heading rapidly towards crossing the line into profitability, and when that happens, whether that is in Q3 or Q4, I think really depends on what's going on in the economy, consumer spending and all that. But, it's very clear that things are developing, really, exactly as we had forecast early in the year. We are really pleased with the progress we are making, and, in terms of overall guidance, you know in this economy, that's about as much guidance as we feel comfortable in giving, in terms of general top line revenue growth. We expect to see a rebound in our Fiber Optic sales, significantly, based on the backlogs, the military sales should continue to grow, and the satellite communications has grown every single quarter for the last five years, so we are expecting continued solid growth in that area.

Q. OK. And finally, your Low profile antenna, when are you expecting that to reach the markets?
A. We don't expect revenue from that product this year, but we do expect to introduce it this year. It's not currently baked into the 30%-40% revenue growth that we are talking about. I think that as we get closer to product launch, we will probably say less about it, just so we can - you know, because it becomes a competitive situation now as opposed to a long range R&D project. We are now in the final stages of engineering development

Q. How are your conversations with auto manufacturers, I mean, how do you expect to introduce this product?
A. Well, our strategy on that is unchanged. We continue to anticipate that the early adopters will be high-end audio, video, after market stores. Simultaneously, we are planning on doing continued demonstrations for the car makers, as well as the tier one suppliers, eventually moving into the mass merchandisers in the after market, so I think that this product will take a fairly well charted course from automotive after market premium product to dealer add-on to eventually an OEM standard product. That's a progression that will take time. In order to bring revenue to KVH as fast as possible we are starting in the after market.

Q. Any comments from the car OEMs? What are they saying about this product?
A. Well, it's early on. It's a product that I think, you know, we've received extremely positive feedback. It's a product that everybody wants, and I think the general consensus is they would really like to see the product, because they find it difficult to believe that this can actually be done. So, I think it's up to us to show them.

Q. OK. And the fiber optic modulator - I guess you're pushing that out further?
A. What we're doing is we don't want to compromise profitability and rush a product to market, for a market that has been slow in developing. The whole 40-gigabit optical networking market has been delayed, and we want to make sure that our pace of development matches the pace of market development. We have so many things on our plate right now, it's really just a question of balancing our resources and reaching profitability at the same time. So, we are continuing to fully staff that project. We're not talking about any reduction in headcount. Everything is proceeding, we're just trying to, perhaps, slow some of the outside funding work that we are doing with universities and things like that, to bring the costs back in line with our planned spending.

Q. Are you still planning to introduce a 10-gigabit product or no?
A. Well the product we are developing is the 40, and that's still what we are working on.

Q. OK. And, OK I think that's about it. Thank you very much.
A. Thank you Pierre.

13:05 Q&A
Richard Cabot, Amertech Capital

Q. Good morning. I have a couple of questions. The first question that I have is could you elaborate and give us a little bit of an update on what's going on with the Current Sensor?
A. We are making very good progress in that area. As I said in previous calls I don't want to talk about it until we have it, because it's taken longer. But I expect that we'll have an announcement in that area very shortly.

Q. OK. The second question I have is on the service business with the Inmarsat satellites. Could you elaborate a little bit of what your financial model is, in terms of what number of subscriptions will bring you to break even, and what kind of margins this business should have for you?
A. Well the way we structured it is, it's designed to be a very, very low overhead operation, so that we expect to be above break-even almost immediately. In other words, what we are doing is that we are buying and reselling as we build subscribers, so in effect, we are not committed to buying either transponder space in the case of the Internet product, and we are not committed to buying millions of minutes in the Inmarsat side, so we are really, basically buying and reselling as we incur the expenses. So, the advantage is that we should really be profitable almost from day one, which is Q3, as we sign up subscribers and sell the service.

Q. OK. So you really don't have a risk in this business, that if you don't reach a certain level you have to make penalty payments or anything like that?
A. That's exactly right. Yes. So the way that all the agreements are structured, we're simply buying and reselling.

Q. OK. And on the announcement with L-3, could you give a little color - I know you don't want to obviously compromise defense secrets, but could you give me some idea, is this going to be on the joint venture with L-3 to bid on contracts? Are you going to be an OEM supplier?
A. Right. Our goal is to become an OEM supplier of the Fiber Optic Gyro, which is the largest value added component in the IMU in the guidance package. There currently isn't a fiber optic gyro product that meets the cost, size, weight, performance objectives on the market, so we are working with L-3 on about a million dollar funded project to develop such a product. And it would be mated with their technology, and they would be selling the final product. So, it's somewhat similar to other arrangements we have with OEMs, where we provide a critical component, but they provide the actual systems sale.

Q. Do they already have contracts with the Defense department in the smart bombs area?
A. You would have to speak with them. I'm not at liberty to say what their particular contract status is. It would be inappropriate for me.

Q. OK. That's really all for me today

Share RecommendKeepReplyMark as Last ReadRead Replies (1)
Previous 10 Next 10 

Copyright © 1995-2017 Knight Sac Media. All rights reserved.Stock quotes are delayed at least 15 minutes - See Terms of Use.