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To: nissan who wrote (6915)8/2/2017 12:23:17 PM
From: WalterP  Respond to of 7024
KVH Industries Reports Second Quarter 2017 Results

MIDDLETOWN, RI, August 2, 2017
— KVH Industries, Inc., (Nasdaq: KVHI) reported financial results for the quarter ended June 30, 2017 today. The company will hold a conference call to discuss these results at 10:30a.m. ET today, which can be accessed at Following the call, a replay of the webcast will be available through the company’s website.

Second Quarter 2017 Highlights

• Revenue for the second quarter of 2017 was $40.5 million, a decrease of 12%, from $46.0 million in the second quarter of 2016. On a constant currency basis, revenue decreased 10%.

• In the second quarter of 2017, mini-VSAT Broadband Airtime revenue grew $1.0 million, or 6%, compared to the second quarter of 2016. Likewise, the number of airtime subscribers also increased 6% for this period. Usage-based airtime plans grew to 60% for all airtime plans, helping increase airtime gross margin to a record 39%.

• AgilePlans, our new Connectivity as a Service Program, for the commercial maritime sector, launched successfully in the quarter, representing 20% of all mini-VSAT Broadband shipments. The revenue recognized from AgilePlans was not significant due to the time between shipments and activation.

• Strong inertial measurement unit (IMU) sales drove fiber optic gyro (FOG) product revenue higher by 11% and contracted engineering service revenue almost doubled in the second quarter of 2017 compared to the second quarter of 2016.

• Net loss in the second quarter of 2017 was $2.0 million, or $0.12 per share, compared to net loss of $0.8 million, or $0.05 per share, in the second quarter of 2016.

• Non-GAAP net income in the second quarter of 2017 was $0.5 million, or $0.03 per share, compared to $1.2 million, or $0.08 per share in the second quarter of 2016.

• Non-GAAP adjusted EBITDA in the second quarter of 2017 was $2.1 million compared to $3.5 million in the second quarter of 2016.

Commenting on the quarter, Martin Kits van Heyningen, KVH’s Chief Executive Officer, said, “We continue to be pleased with the growth in our Airtime service revenues and margins. We recorded another quarter of solid airtime and subscriber growth, and achieved record airtime gross margins of 39%. In addition, we launched our new subscription-based Connectivity as a Service Program, AgilePlans, this quarter and the feedback we have received so far continues to be very positive. AgilePlans represented over 38% of TracPhone V7-IP and V11-IP maritime shipments in the second quarter.”

The company operates in two segments, mobile connectivity and inertial navigation. Net sales for the mobile connectivity segment in the second quarter of 2017 decreased $2.8 million, or 8%, as compared to the second quarter of 2016 due to lower mini-VSAT Broadband product sales due in part to the fact that, under our AgilePlans program, we do not recognize revenue from products delivered to customers, and lower content and training revenues driven primarily by the weakness in the British Pound, partially offset by higher airtime revenues. Net sales for our inertial navigation segment in the second quarter of 2017 decreased $2.7 million, or 30%, compared to the second quarter of 2016, driven by a $3.5 million decrease in TACNAV sales, due to a large order that occurred in the second quarter of 2016. This decrease was partially offset by an increase in FOG product sales and contracted engineering services.

Full PDF of the quarterly report at:

To: nissan who wrote (6915)8/2/2017 3:05:19 PM
From: awecr2  Read Replies (2) | Respond to of 7024
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.


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