I've been spending some time reviewing information in the|
last several SEC quarterly and annual reports looking at the
expense components, especially R&D and Sales and Marketing
to gleen where these are going in the future. Both of these
items were higher in 1998 and 1999, which combined with
mailitary sales, led to the string of losses.
The R&D of course is what is allowing the new products (and
thus new revenus streams) to become available. Looking this
over, and recognizing that they are just scratching the
surface on sensor based products and markets, I think R&D
will remain high for some time to come.
Sales and Marketing may decrease a bit from Q4 through, as I
think they may have had some one time expenses due to new
There are hints the military orders are bouncing back,
especially in the Q4 report which said:
"Navigation sales decreased 18% in 1999 to $11.4 million
from $14.0 million in 1998 due to slow sales during the
first half of the year and some delays during the second
half of the year in finalizing certain military contracts
that had been awarded. "
Communications revenues have been consistently increasing,
and the Marathon Coach and Delfin contracts have not been
felt yet. As such, I am looking for revenue around 7 million
This information is from the 1999 annual report.
Research and Development
The Company's research and development efforts are based
on its core sensor technologies and focused on developing
new products that will have broad application across
existing and anticipated strategic markets while improving
performance and reducing manufacturing costs for
products in the market. A substantial portion of the
Company's research and development expenditure is devoted
to basic research for core technology development projects.
The Company's research and development activities fall into
two categories: internally funded research and development
and customer-funded research and development. The Company
has financed virtually all of the cost of developing the
Company's marine navigation and satellite communications
products. Prior to 1999, development of the Company's core
sensor technologies was subsidized to a large extent by
grants under the United States government's SBIR program.
Much of the funding used to develop KVH's products for the
military navigation market, in which a significant
engineering effort to develop enhanced features requested
by the customer is frequently involved, also has been
derived from government sources. However, in 1999 the
Company internally funded a large percentage of its military
and FOG research. Customer-funded research and development
is included in cost of sales.
The Company's total expenditures for research and
development during 1999, 1998 and 1997 were as follows:
<C> <C> <C>
Year ended December 31,
1999 1998 1997
Internally funded R&D $ 4,199 3,991 3,175
Customer funded R&D $ 648 936 630
-------- -------- --------
Total R&D $ 4,847 4,927 3,805
======== ======== ========
As of December 31, 1999, the Company employed 170 full-time
employees. The increase in total employees from 154 at
December 31, 1998, resulted primarily from a need to
strengthen research and development, customer support
and marketing activities related to new products.
KVH utilizes the services of temporary or contract
personnel within all functional areas to assist on
From the 1998 (not the latest) Annual report
Several new TACNAV orders that contributed modest
revenues in 1998 have potential for more significant
sales going forward. The United States Army extended its
TACNAV use by installing systems in National Guard
vehicles, the first deployment that expanded upon the
initial contracted applications. TACNAV systems also were
selected in 1998 as a key component for testing in the
U.S. Army's Task Force XXI Battle Command Brigade and Below
(FBCB2) program. FBCB2 is the digital battlefield effort
that the Army has underway to provide battlefield
commanders with comprehensive, real-time digital
information, electronic coordination and situational
awareness through an integrated tactical computer system.
Also in 1998, the United States Marine Corps selected
TACNAV Light systems for a rebuild of AAV-7's.