KVH Industries, Inc., (Nasdaq: KVHI), reported financial results
for the quarter ended June 30, 2023 today. The company will
hold a conference call to discuss these results at 9:00 a.m. ET
today, which can be accessed at investors.kvh.com. Following the
call, a replay of the webcast will be available through the
company’s website.
Second Quarter
2023 Highlights
- Total revenues from continuing
operations in the second quarter of 2023 were $34.2 million, down
1% from $34.6 million in the second quarter of 2022.
- Our VSAT airtime revenue increased
$1.1 million, to $26.9 million, or 4%, in the second
quarter of 2023 compared to the second quarter of 2022.
- Net income from continuing
operations in the second quarter of 2023 was $0.9 million, or
$0.05 per share, compared to net loss from continuing operations of
$0.2 million, or $0.01 per share, in the second quarter of
2022.
- Non-GAAP adjusted EBITDA from
continuing operations was $4.2 million in the second quarter
of 2023, compared to $3.2 million in the second quarter of
2022.
Commenting on the company’s second quarter
results, Brent C. Bruun, KVH Chief Executive Officer, said, “Our
increased strategic focus on service revenue opportunities
continued to generate growth in the second quarter as our airtime
service revenue was up in comparison to the same period last year,
while our subscriber base increased to more than 7,140. We also
established a robust pipeline for our new OpenNet program, which
brings non-KVH antennas onto our global VSAT network and opens a
new service revenue stream that is not reliant on hardware sales or
shipments. Our new contract extension with Intelsat solidifies the
backbone of our KVH ONE hybrid network for the next three years,
enabling us to integrate enterprise-grade VSAT along with LEO, 5G,
and Wi-Fi services as part of our multi-orbit, multi-channel
connectivity solution.
“However, we continue to experience competitive
headwinds driven by new LEO services, a transition to streaming
content rather than satellite TV in the leisure market, and a
corresponding reduction in satellite TV and leisure VSAT terminal
sales. As a result, our quarterly revenue declined 1% versus the
second quarter last year. In light of the changing market and
competitive environments, we are tempering our guidance for the
full year. We now anticipate revenue of $133 million to $139
million, with continued growth in both service revenues and
subscribers and adjusted EBITDA from $12 million to $15
million.”
Financial Highlights – From
Continuing Operations (in millions, except per share
data)
|
|
Three Months Ended |
|
Six Months Ended |
|
|
June 30, |
|
June 30, |
|
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
GAAP
Results |
|
|
|
|
|
|
|
|
Revenue |
|
$ |
34.2 |
|
|
$ |
34.6 |
|
|
$ |
67.9 |
|
|
$ |
67.7 |
|
Income (loss) from
operations |
|
$ |
0.3 |
|
|
$ |
(1.0 |
) |
|
$ |
(0.2 |
) |
|
$ |
(5.3 |
) |
Net income / (loss) |
|
$ |
0.9 |
|
|
$ |
(0.2 |
) |
|
$ |
0.9 |
|
|
$ |
(4.5 |
) |
Net income / (loss) per
share |
|
$ |
0.05 |
|
|
$ |
(0.01 |
) |
|
$ |
0.05 |
|
|
$ |
(0.24 |
) |
|
|
|
|
|
|
|
|
|
Non-GAAP Adjusted
EBITDA |
|
$ |
4.2 |
|
|
$ |
3.2 |
|
|
$ |
7.5 |
|
|
$ |
5.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing Operations excludes prior year
amounts associated with the divested Inertial Navigation segment.
Inertial Navigation is treated as Discontinued Operations. For more
information regarding our non-GAAP adjusted EBITDA, see the tables
at the end of this release.
Second Quarter
Financial Summary
Revenue was $34.2 million for the second
quarter of 2023, a decrease of 1% compared to $34.6 million in
the second quarter of 2022.
Product revenues for the second quarter of 2023
were $5.4 million, a decrease of 18%. The decrease in product
sales was primarily due to a $1.8 million decrease in TracVision
product sales partially offset by increases in VSAT antenna and
other product sales.
Service revenues for the second quarter of 2023
were $28.7 million, an increase of $0.8 million. The
increase in service sales was primarily due to a $1.1 million
increase in our VSAT service sales. This was partially offset by a
$0.2 million decrease in our content service sales, which was
primarily driven by the sale of a subsidiary in April 2022.
Our operating expenses decreased $3.5 million to
$11.7 million for the second quarter of 2023 compared to
$15.2 million for the second quarter of 2022. This decrease
was due to a $2.8 million decrease in general and administrative
costs, a $0.5 million reduction in sales, marketing and support
costs, and a $0.2 million decrease in research and development
costs. These reductions were primarily due to the restructuring
actions taken in March 2022 and reserve adjustments in the second
quarter of 2023.
Six Months Ended June
30 Financial Summary
Revenue was $67.9 million for the six
months ended June 30, 2023, an increase of less than 1% compared to
$67.7 million for the six months ended June 30, 2022.
Product revenues for the six months ended June
30, 2023 were $10.4 million, a decrease of 21% compared to the
six months ended June 30, 2022. The decrease in product sales was
primarily driven by a $2.0 million decrease in TracVision product
sales and a $1.3 million decrease in VSAT product sales.
Service revenues for the six months ended June
30, 2023 were $57.5 million, an increase of 5% compared to the
six months ended June 30, 2022. The increase in service sales was
primarily due to a $4.1 million increase in our VSAT Broadband
service sales, partially offset by a $1.0 million decrease in
content service sales primarily driven by the sale of a subsidiary
in April 2022.
Our operating expenses decreased
$7.6 million to $24.6 million in the six months ended
June 30, 2023 compared to $32.3 million in the six months
ended June 30, 2022. This decrease resulted primarily from a $5.4
million decrease in salaries, benefits and taxes (which includes
consideration of prior period costs associated with the March 2022
reduction in workforce and expenses related to the separation and
retirement of the former Chief Executive Officer), a $0.6 million
decrease in recruiting and relocation expense, a $0.5 million
decrease in expensed materials, and a $0.3 million decrease in bad
debt expense, as well as a $0.7 million reimbursement by EMCORE for
expenses incurred under the Transition Service Agreement relating
to the sale of the Inertial Navigation business in 2022.
Other Recent Announcements
- August 7, 2023 – KVH Joins ISWAN
and Its Worldwide Commitment to Seafarer Welfare
- May 9, 2023 – KVH ONE OpenNet
Program Brings Benefits of KVH Global HTS Network to Non-KVH
Antennas
Conference Call Details
KVH Industries will host a conference call today
at 9:00 a.m. ET through the company’s website. The conference call
can be accessed at investors.kvh.com and listeners are welcome
to submit questions pertaining to the earnings release and
conference call to ir@kvh.com. The audio archive will be available
on the company website within three hours of the completion of the
call.
Non-GAAP Financial Measures
This release provides non-GAAP financial
information as a supplement to our condensed consolidated financial
statements, which are prepared in accordance with generally
accepted accounting principles (“GAAP”). Management uses these
non-GAAP financial measures internally in analyzing financial
results to assess operational performance. The presentation of this
financial information is not intended to be considered in isolation
or as a substitute for the financial information prepared in
accordance with GAAP. The non-GAAP financial measures used in this
press release adjust for specified items that can be highly
variable or difficult to predict. Management generally uses these
non-GAAP financial measures to facilitate financial and operational
decision-making, including evaluation of our historical operating
results and comparison to competitors’ operating results. These
non-GAAP financial measures reflect an additional way of viewing
aspects of our operations that, when viewed with GAAP results and
the reconciliations to corresponding GAAP financial measures, may
provide a more complete understanding of factors and trends
affecting our business.
Some limitations of non-GAAP adjusted EBITDA,
include the following: non-GAAP adjusted EBITDA represents net
income (loss) before, as applicable, interest income, net, income
tax expense (benefit), depreciation, amortization, stock-based
compensation expense, goodwill impairment charges, intangible asset
impairment charge, CEO separation costs, transaction-related and
other variable legal and advisory fees, obsolete inventory
recovery, gains and losses on sale of subsidiaries, foreign
exchange transaction gains and losses, and income from loan
forgiveness.
Other companies, including companies in KVH’s
industry, may calculate these non-GAAP financial measures
differently or not at all, which will reduce their usefulness as a
comparative measure.
Because non-GAAP financial measures exclude the
effect of items that increase or decrease our reported results of
operations, management strongly encourages investors to review our
consolidated financial statements and publicly filed reports in
their entirety. Reconciliations of the non-GAAP financial measures
to the most directly comparable GAAP financial measures are
included in the tables accompanying this release.
About KVH Industries, Inc.
KVH Industries, Inc., is a global leader in
mobile connectivity systems, with innovative technology designed to
enable a mobile world. A market leader in maritime VSAT, KVH
designs, manufactures, and provides connectivity and content
services globally. Founded in 1982, the company has more than a
dozen offices around the globe with research, development, and
manufacturing operations based in Middletown, RI.
This press release contains forward-looking
statements that involve risks and uncertainties. For example,
forward-looking statements include statements regarding our
financial goals for future periods, the success of our new
initiatives, our investment plans, our development goals, our
anticipated revenue and earnings, and the impact of our future
initiatives on revenue, competitive positioning, profitability, and
orders. Actual results could differ materially from the results
projected in or implied by the forward-looking statements made in
this press release. Factors that might cause these differences
include, but are not limited to: uncertainty regarding customer
responses to new product and service introductions; challenges and
potential additional expenses in retaining our employees,
particularly in the current competitive labor market characterized
by rising wages; uncertainties created by our new business
strategy, which may impact customer recruitment and retention; the
uncertain impact of ongoing disruptions in our supply chain and
associated increases in our costs; the uncertain impact of rising
inflation, particularly with respect to fuel costs, and fears of
recession; the uncertain impact of the war in Ukraine;
unanticipated changes or disruptions in our markets; increased
competition, including as a result of industry consolidation and
from companies offering networks with greater communication
security options or other advantages; technological breakthroughs
by competitors; changes in customer priorities or preferences;
potential customer terminations; unanticipated liabilities; the
potential that competitors will design around or invalidate our
intellectual property rights; a history of losses; continued
fluctuations in quarterly results; the uncertain impact of federal
budget deficits, Congressional deadlock and the federal debt
ceiling; the uncertain impact of changes in trade policy, including
actual and potential new or higher tariffs and trade barriers, as
well as trade wars with other countries; unanticipated obstacles in
our product and service development, cost engineering and
manufacturing efforts; adverse impacts of currency fluctuations;
our ability to successfully commercialize our new initiatives
without unanticipated additional expenses or delays; potential
reduced sales to companies in or dependent upon the turbulent oil
and gas industry; the impact of extended economic weakness on the
sale and use of marine vessels and recreational vehicles; the
potential inability to increase or maintain our market share in the
market for airtime services; the need to increase sales of the
TracNet H-series and TracPhone V-HTS series products and related
services to maintain and improve airtime gross margins; the need
for, or delays in, qualification of products to customer or
regulatory standards; potential declines or changes in customer
demand, due to economic, weather-related, seasonal, and other
factors, particularly with respect to the TracNet H-series and
TracPhone V-HTS series, including with respect to new pricing
models; increased price and service competition in the mobile
connectivity market; exposure for potential intellectual property
infringement; changes in tax and accounting requirements or
assessments; and export restrictions, delays in procuring export
licenses, and other international risks. These and other factors
are discussed in more detail in our Quarterly Report on Form 10-Q
filed with the Securities and Exchange Commission on May 5, 2023.
Copies are available through our Investor Relations department and
website, investors.kvh.com. We do not assume any obligation to
update our forward-looking statements to reflect new information
and developments.
KVH Industries, Inc., has used, registered, or
applied to register its trademarks in the USA and other countries
around the world, including but not limited to the following marks:
KVH, KVH ONE, TracPhone, and TracNet. Other trademarks are the
property of their respective companies.
KVH INDUSTRIES, INC. AND SUBSIDIARIESCONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS(in thousands, except
per share amounts, unaudited) |
|
|
Three months endedJune 30, |
|
Six months endedJune 30, |
|
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Sales: |
|
|
|
|
|
|
|
|
Product |
|
$ |
5,425 |
|
|
$ |
6,620 |
|
|
$ |
10,374 |
|
|
$ |
13,183 |
|
Service |
|
|
28,746 |
|
|
|
27,933 |
|
|
|
57,486 |
|
|
|
54,521 |
|
Net sales |
|
|
34,171 |
|
|
|
34,553 |
|
|
|
67,860 |
|
|
|
67,704 |
|
Costs and
expenses: |
|
|
|
|
|
|
|
|
Costs of product sales |
|
|
6,633 |
|
|
|
5,198 |
|
|
|
11,867 |
|
|
|
10,616 |
|
Costs of service sales |
|
|
15,534 |
|
|
|
15,200 |
|
|
|
31,610 |
|
|
|
30,126 |
|
Research and development |
|
|
2,416 |
|
|
|
2,624 |
|
|
|
4,981 |
|
|
|
5,635 |
|
Sales, marketing and support |
|
|
5,142 |
|
|
|
5,676 |
|
|
|
10,854 |
|
|
|
12,645 |
|
General and administrative |
|
|
4,122 |
|
|
|
6,898 |
|
|
|
8,772 |
|
|
|
13,973 |
|
Total costs and expenses |
|
|
33,847 |
|
|
|
35,596 |
|
|
|
68,084 |
|
|
|
72,995 |
|
Income (loss) from operations |
|
|
324 |
|
|
|
(1,043 |
) |
|
|
(224 |
) |
|
|
(5,291 |
) |
Interest income |
|
|
885 |
|
|
|
201 |
|
|
|
1,663 |
|
|
|
409 |
|
Interest expense |
|
|
— |
|
|
|
1 |
|
|
|
— |
|
|
|
2 |
|
Other (expense) income, net |
|
|
(238 |
) |
|
|
889 |
|
|
|
(462 |
) |
|
|
992 |
|
Income (loss) from continuing operations before income tax
expense |
|
|
971 |
|
|
|
46 |
|
|
|
977 |
|
|
|
(3,892 |
) |
Income tax expense from
continuing operations |
|
|
46 |
|
|
|
235 |
|
|
|
64 |
|
|
|
564 |
|
Net income (loss) from continuing operations |
|
$ |
925 |
|
|
$ |
(189 |
) |
|
$ |
913 |
|
|
$ |
(4,456 |
) |
Net loss from discontinued
operations, net of tax |
|
|
— |
|
|
|
(1,255 |
) |
|
|
— |
|
|
|
(1,680 |
) |
Net income (loss) |
|
$ |
925 |
|
|
$ |
(1,444 |
) |
|
$ |
913 |
|
|
$ |
(6,136 |
) |
|
|
|
|
|
|
|
|
|
Net income (loss) from
continuing operations per common share |
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.05 |
|
|
$ |
(0.01 |
) |
|
$ |
0.05 |
|
|
$ |
(0.24 |
) |
Diluted |
|
$ |
0.05 |
|
|
$ |
(0.01 |
) |
|
$ |
0.05 |
|
|
$ |
(0.24 |
) |
|
|
|
|
|
|
|
|
|
Net loss from
discontinued operations per common share |
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.00 |
|
|
$ |
(0.07 |
) |
|
$ |
0.00 |
|
|
$ |
(0.09 |
) |
Diluted |
|
$ |
0.00 |
|
|
$ |
(0.07 |
) |
|
$ |
0.00 |
|
|
$ |
(0.09 |
) |
|
|
|
|
|
|
|
|
|
Net income (loss) per
common share |
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.05 |
|
|
$ |
(0.08 |
) |
|
$ |
0.05 |
|
|
$ |
(0.33 |
) |
Diluted |
|
$ |
0.05 |
|
|
$ |
(0.08 |
) |
|
$ |
0.05 |
|
|
$ |
(0.33 |
) |
|
|
|
|
|
|
|
|
|
Weighted average
number of common shares outstanding: |
|
|
|
|
|
|
|
|
Basic |
|
|
19,153 |
|
|
|
18,564 |
|
|
|
19,018 |
|
|
|
18,507 |
|
Diluted |
|
|
19,275 |
|
|
|
18,564 |
|
|
|
19,161 |
|
|
|
18,507 |
|
KVH INDUSTRIES, INC. AND SUBSIDIARIESCONDENSED
CONSOLIDATED BALANCE SHEETS(in thousands,
unaudited) |
|
|
June 30,2023 |
|
December 31,2022 |
ASSETS |
|
|
|
|
Cash, cash equivalents and marketable securities |
|
$ |
70,974 |
|
|
$ |
76,736 |
|
Accounts receivable, net |
|
|
26,975 |
|
|
|
27,427 |
|
Inventories, net |
|
|
24,179 |
|
|
|
22,730 |
|
Other current assets and contract assets |
|
|
3,544 |
|
|
|
4,310 |
|
Total current assets |
|
|
125,672 |
|
|
|
131,203 |
|
Property and equipment, net |
|
|
50,790 |
|
|
|
53,118 |
|
Goodwill |
|
|
5,351 |
|
|
|
5,308 |
|
Intangible assets, net |
|
|
283 |
|
|
|
404 |
|
Right of use assets |
|
|
1,582 |
|
|
|
2,168 |
|
Other non-current assets and contract assets |
|
|
7,345 |
|
|
|
8,070 |
|
Non-current deferred income taxes |
|
|
258 |
|
|
|
259 |
|
Total assets |
|
$ |
191,281 |
|
|
$ |
200,530 |
|
LIABILITIES AND
STOCKHOLDERS’ EQUITY |
|
|
|
|
Accounts payable and accrued expenses |
|
$ |
21,412 |
|
|
|
34,228 |
|
Contract liabilities |
|
|
3,310 |
|
|
|
3,108 |
|
Current operating lease liability |
|
|
1,207 |
|
|
|
1,532 |
|
Total current liabilities |
|
|
25,929 |
|
|
|
38,868 |
|
Other long-term liabilities |
|
|
— |
|
|
|
— |
|
Long-term operating lease liability |
|
|
371 |
|
|
|
636 |
|
Long-term contract liabilities |
|
|
4,220 |
|
|
|
4,315 |
|
Non-current deferred tax liability |
|
|
57 |
|
|
|
55 |
|
Stockholders’ equity |
|
|
160,704 |
|
|
|
156,656 |
|
Total liabilities and stockholders’ equity |
|
$ |
191,281 |
|
|
$ |
200,530 |
|
KVH INDUSTRIES, INC. AND
SUBSIDIARIESRECONCILIATION OF GAAP NET INCOME (LOSS) FROM
CONTINUING OPERATIONS TO NON-GAAPEBITDA AND NON-GAAP
ADJUSTED EBITDA FROM CONTINUING OPERATIONS(in
thousands, unaudited) |
|
|
Three months endedJune 30, |
|
Six months endedJune 30, |
|
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Net income (loss) from
continuing operations - GAAP |
|
$ |
925 |
|
|
$ |
(189 |
) |
|
$ |
913 |
|
|
$ |
(4,456 |
) |
Income tax expense |
|
|
46 |
|
|
|
235 |
|
|
|
64 |
|
|
|
564 |
|
Interest income, net |
|
|
(885 |
) |
|
|
(200 |
) |
|
|
(1,663 |
) |
|
|
(407 |
) |
Depreciation and amortization |
|
|
3,459 |
|
|
|
3,368 |
|
|
|
6,920 |
|
|
|
6,627 |
|
Non-GAAP EBITDA from
continuing operations |
|
|
3,545 |
|
|
|
3,214 |
|
|
|
6,234 |
|
|
|
2,328 |
|
Stock-based compensation expense |
|
|
578 |
|
|
|
614 |
|
|
|
874 |
|
|
|
1,348 |
|
Employee termination and other non-recurring costs |
|
|
— |
|
|
|
179 |
|
|
|
— |
|
|
|
1,535 |
|
CEO separation costs |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
539 |
|
Transaction-related and other variable legal and advisory fees |
|
|
— |
|
|
|
157 |
|
|
|
234 |
|
|
|
484 |
|
Non-recurring inventory reserve |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Gain on sale of a subsidiary |
|
|
— |
|
|
|
(631 |
) |
|
|
— |
|
|
|
(631 |
) |
Foreign exchange transaction loss (gain) |
|
|
56 |
|
|
|
(284 |
) |
|
|
110 |
|
|
|
(559 |
) |
Non-GAAP adjusted
EBITDA from continuing operations |
|
$ |
4,179 |
|
|
$ |
3,249 |
|
|
$ |
7,452 |
|
|
$ |
5,044 |
|
Contact: |
KVH Industries, Inc.Roger Kuebel401-608-8945rkuebel@kvh.com |
FTI ConsultingChristine Mohrmann212-850-5600 |
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KVH Industries (NASDAQ:KVHI)
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From May 2023 to May 2024