RK and thread:|
Here's a synopsis of the CC from my notes. Thanks to Alice Andrews of KVH for the tape... hopefully any misinterpretations, omissions or inaccuracies will be brought to my attention.
Restructuring - with new COO, should reduce expenses up to 20% by the end of 98. Steps include central administration, 15% reduction in workforce, etc.
New products - intensifying high-bandwidth area for land and marine vehicles,and military land navigation where demand is escalating and margins are high. Selling sensors used in these products to OEM for use in navigation, robotics and optical stablization products.
FOG projects in the sensor products group include those designed for automatic vehicle location, precision farming and train control. Working with major railroad to incorporate FOG systems into locomotive tracking systems. Also, working with a tractor manufacturer testing a FOG system for use in location and automatic steering control for farm productivity enhancements.
These opportunities with Fortune 500 companies are now the focus of choice rather than the urban transit opportunities identified by the Andrew Corp. prior to the acquisition of their FOG Group. KVH is confident these opportunities will lead to higher margins and faster revenue growth over the next few years.
Re-iterated the possible 10X increase in TACNAV sales to military and government in the next few years. Currently $11m in purchases.
Coming soon, fiber optic gyro enhanced TACNAV system developed with government funded grants. TFOG Navigator will provide pointing and targeting accuracy that is significantly greater than the basic TACNAV system. Also, solves the problem of TPS jamming, which has been identified by the military as a growing problem and a serious threat to the armed forces.
Travision sales up nearly 5X 2Q97 and 75% over 1Q98. Expanded to Tracvision 45 for Europe.
Other FOG applications include dramatically improving the accuracy of stablized satellite antenna system.FOG combined with tracvision control system in a government funded project for high data rate transmission in a next generation KA band communication system. Pioneering mobile applications for high bandwidth satellite systems for mobile users will stimulate demand for KVH technology.
Tracphone 25 sales up 465% Q/Q... up 21% overall.
Moved FOG unit to new facility. Expands capacity. Important due to desire to incorporate FOGs into many KVH products. Down time was minimal, however, decrease in revenue and increase in costs in Q2 due to move.
Restructuring plan design to accomplish 3 things: Reduce near term losses, restore long term growth and profitability and establish KVH as a world-class competitor in its industry.
Stronger management team. Growth in main focus. Based on analysis of KVH's core strengths vs marketing opportunities, KVH is pursuing a number of product opportunities: Television land mobile applications, tactical navigation enhancements, precision farming and positive train control. Expense control is key to delevoping products to take advantage of the opportunities available, allowing the necessary R&D investment.
CFO - total rev up 12% over 2Q97, up 56% over 1Q98. Navigation rev up 19% over 97, 65% over 1Q. Communications sector - rev up to $2.2m from $2.1m., noteable because 2Q97 included a one time non-recurring OEM sale of $1.3m, while 2Q98 was solely based on direct recurring sales. Fifth consecutive quarterly increase in direct sales of communication products. Communication rev up 42% over 1Q98.
Tracvision sales up 5X yr/yr, 75% over 1Q98.
Mini-M tracphone sales +20% over 1Q98. Began to book multi-unit orders from large shipping fleets.
FOG-based products to ship in 6-9 months. Spending will be reduced in areas that will not place new product development or growth at risk. Heavy armor TRACNAV applications are most important. Company now more strongly than ever positioned to take advantage of the opportunities that lie ahead.
Q & A:
Blain Carrol, LG Cowan:
Railroad venture - problems keeping raillines open and avoiding congestion. Positive train contol. KVH's system works as well as $60K system from another company. High volume potential in dealing with Fortune 500 companies.
Precision farming - factory automation, efficiency enhancements for large corporate-run farms. Could be a robotic application in the future, currently a cruise-control type steering aid to avoid overlap in applications like spraying fertilizer or insecticide when dealing with field that may be a mile in length.
Q: Aren't GE and Harris developing a competing product? MKVH indicated the mentioned company was a customer rather than a competitor. Would not comment further.
Headcount reductions are complete. Payroll benefit is immediate. CFO indicated savings could be in the 20% range for rest of 98 and could improve beyond that.
Tracvision accounts for 50% of communication revenues, almost all US. Foreign products just now ramping up. Phone revenue is 40$ export.
Q about Intimate Satellites - MKVH talked about open TV, something being developed by Sun and Thompson. Allows internet and digital satellite transmission simultaneously with standard TV dish and stetop box. Allow you to receive broadcast internet as well as applications transmitted via satellite. Applets run on a TV or a computer. This technology will enable a lot the things KVH has been working on..