I have now listened to the CC. I had to wait until I got home from work.|
Here are my Q1 2000 CC notes. Items in quotes refer to actual words used in the CC or annual report. While I was hoping for stronger military sales in Q1 (and a smaller loss), what I heard in the CC was VERY positive. I think we are starting a series of strong quarters with increasing revenue, return to profitability later this year, and escalating profits next year.
I was also impressed by their prototype system tested in the Argiculture market - add who knows how many tractors to the potential mobile market. I had not considered those!
Everyone is encouraged to listen to the CC themselves, do their own DD and contribute to these threads. You can E-mail your questions to firstname.lastname@example.org and they will answer.
LONG TERM BUSINESS MODEL
They stated that their Long Term Business model is "far stronger than at any time in the company's history".
That is quite an impressive statement. Stop for a moment and think about that, and keep it in mind as you read the rest of my CC notes. Couple this with some market items like low price, low float and continuing accumulation, and I think people can see the value here long term.
These grew 71% Q1-Q1 and an astounding 44% quarter to quarter. In Q1, due to declining military sales, this area was over 3/4s of the revenue. This area has grown 70% or more in each of the last three years, with now 13 consecutive quarters with dramatic year over year growth, and they see the trend continuing going forward.
Tracvision remains the "first choice of customers". New systems are being developed, including a new offering in Europe in Q2.
The backlog growth was very encouraging. This from the company's 1999 Annual report:
"The Company's backlog at December 31 was $0.7 million in 1999 and $3.0 Million in 1998. The Company expects to ship all it's backlog at December 31, 1999, during 2000. The Company's total backlog at December 31, 1999 included $0.1 million in military navigation system orders, $0.5 million in mobile satellite communication and $0.1 million in FOG product orders. "
Compare that to the $4.3 million backlog at the end of Q1, which the company indicated was split "almost equally", or about $1.45 million each across it's three lines. In addition they said TWICE, that additional military orders are IMMINENT.
PROFITABILITY GOING FOREWARD
The company indicated a rebound in military and FOG sales in Q2, which they expect will be continuing all year. They anticipate military revenue for 2000 will end up SIGNIFICANTLY ahead of 1999, where they had navigation revenues (from the Q4 statement) of $11.4 million.
They indicate a return to profitability in the second half, and there is an excellent chance that they will have full year profitability.
Looking ahead to 2001, they said they expect a strong year, with profitability to continue and increase "substantially". They also stated that in 2001 Communication revenues ALONE should be sufficient to sustain profitability, changing the status of the lumpy military sales from a make-or-break quarterly situation to one of "incremental profitability".
While GMs declined from 37% to 33% in Q1, due to having to absorb fixed costs while not operating at or near capacity for FOG and military products. When not affected by this in the future, they indicated that their "comfort level" for GMs would be 42%-45%.
R&D, S&M and ADMIN EXPENSES
They indicated that they are pushing for more customer funded R&D, and they anticipate that R&D expenses will decline, both in real numbers and as a percentage of sales.
They anticipate S&M to continue to rise in real terms, but drop as a percentage of revenue going forward.
Administrative expenses should remain flatish and will decline as a percentage of sales going forward.
They refused to comment other than to say that DATRON has responded by pulling some products off the market, which was "public knowledge".
They said they have products covering all segments of this market. With over one half million vehicles in this target market (with only 7,000 delivered at about $10K each), prospects for "DRAMATIC GROWTH in this sector are high". They are very confident in this area.
RE: ELECTRICAL CURRENT SENSORS
They are making progress here. While there is no long term contract in place yet, they delivered PART OF an "initial" order in Q1, and RECEIVED A NEW ORDER YESTERDAY for additional sensors and product customization. They are optimistic that the worldwide market for these sensors "could be extremely large". Responding to a question, they added that they intend to work with a major player, and they have some in mind, where they will be an OEM supplier.
They said their product was a new technology substantially replacing an older one. Their product is "smaller, safer (no electrical connections), faster (respond even to lightning strikes), lighter, cheaper and digital", with the digital capability allowing it to be integrated into computer controlled substations.
Even so, they said the power industry is conservative and moves slowly, but that they can work with it. They indicated that they anticipate that there will be competitors, but that KVH anticipates that it will be first to market with the product, and that they have some proprietary technology with multiple patents in several areas, including the fiber itself. They also indicated the market is "well defined" at close to $500 million per year.
PILOT PROJECT IN AGRICULTURE
Working in cooperation with a major agricultural equipment manufacturer, KVH "just delivered" a system that was an "integrated" flat panel display (no Lap Top or TV needed) with both TV and data displayed, while moving, from a vehicle with a single antenna. This system provides real time access to agricultural data, local weather, radar, commodities pricing, and entertainment, directly via satellite.
While this was just a prototype pilot (tested during the last weeks of Q1, with "excellent results"), and not their "key target" market, they think the market here is "surprisingly large". Two data providers, DBC and AdCav(sp?) have over 200,000 subscribers paying $100 per month for data feeds via satellite.