KVH Industries, Inc., (Nasdaq:KVHI) today reported financial
results for the first quarter ended March 31, 2014. Revenue for the
first quarter of 2014 was $37.0 million, down 7% from the quarter
ended March 31, 2013. A net loss for the period of $1.1 million, or
$0.07 per share was reported. During the same period last year the
company reported net income of $2.0 million or $0.13 per diluted
share on revenues of $39.9 million.
"Our first quarter results were in line with our previous
guidance and reflected continued solid growth in our mobile
broadband communications business offset by the expected sharp
year-over-year decline in TACNAV® sales in our guidance and
stabilization business," said Martin Kits van Heyningen, KVH's
chief executive officer. "We were pleased with the growth in our
maritime VSAT airtime revenues in the first quarter which increased
37% compared to the same quarter last year. We continue to grow our
multi-year subscription base both for VSAT airtime and for our
media business."
KVH's mobile communications revenue, including KVH Media Group
services, was $29.0 million for the first quarter of 2014, a 27%
increase year-over-year. Combined, mini-VSAT Broadbandsm airtime
and TracPhone® product revenues in the first quarter amounted to
$18.8 million, up 27% compared to the same period last year.
Maritime satellite TV sales decreased 9% year-over-year primarily
as a result of the unseasonably cold spring that impacted the North
American leisure marine market and a temporary component shortage
for one of KVH's popular TracVision® products that resulted in
exiting the quarter with more backlog than normal. KVH Media Group
service revenues were $3.3 million in the first quarter.
"We continue to be encouraged with the progress we are making in
building our mobile broadband business," said Mr. Kits van
Heyningen. "Our mini-VSAT Broadband service continues to expand and
we were pleased that an April 2014 research report from the
internationally-recognized firm Euroconsult, estimated that our
share of the maritime VSAT market is now 26%. This is up from 16%
published in a Euroconsult report two years ago, and they estimated
our market share as double that of our next closest competitor. We
have also just launched a new series of TracVision satellite TV
products that are compatible with the next generation of TV
satellites, which will begin shipping in the second quarter. In
addition, we are now live with our new IP-MobileCast™ service."
KVH's guidance and stabilization revenue, which relates to its
fiber optic gyro (FOG) solutions, TACNAV military navigation
systems, and related services, was $8.0 million in the first
quarter of 2014, down 53% year-over-year. This decline was expected
as KVH had recorded $6.2 million of TACNAV product revenues under
the large Saudi Arabian National Guard contract in the first
quarter of 2013 and none under that contract in the current
quarter. During the first quarter, sales of KVH FOGs were down 16%,
at $5.0 million, compared to the same period in 2013, but were up
7% sequentially.
"The decline in our guidance and stabilization revenues reflects
the importance of a relatively small number of large contracts,
primarily in our TACNAV business," said Mr. Kits van Heyningen. "We
continue to be optimistic about our guidance and stabilization
business, and believe we will see another significant TACNAV order
from a customer in the Middle East within the next few months."
Speaking about the company's financial results, Peter Rendall,
KVH's chief financial officer, said, "We were pleased with the
overall financial performance of our mobile communications business
which saw solid year-over-year growth. Service revenues reported in
the first quarter, the majority of which were subscription-based,
represented 51% of total revenues compared to 37% reported in the
first quarter of 2013. Our mini-VSAT Broadband airtime gross profit
margin of 37% in the first quarter of this year compares favorably
with the 33% recorded in the same period last year, reflecting the
leverage of our network infrastructure. Quarterly operating
expenses were higher year-over-year and the increased expenses were
mostly related to the KVH Media Group business we acquired in May
last year together with incremental development costs associated
with the launch of the new IP-MobileCast service offering."
"For the second quarter of 2014, we expect revenue to be in the
range of $41 million to $45 million reflecting the continued
quarter-over-quarter and sequential growth from our mini-VSAT
Broadband business, the launch of our new TracVision satellite TV
products and a sequential increase in TACNAV sales. As a result, we
expect our net income for the quarter to be in the range of $0.03
to $0.08 per diluted share compared to a net income per diluted
share of $0.10 in the second quarter of 2013."
"Planning for the remainder of 2014, we expect our mini-VSAT
Broadband business to continue to show strong year-over-year
growth, driven by an overall increase in our mini-VSAT Broadband
customer base. We are encouraged by the visibility of some large
TACNAV opportunities and are therefore comfortable with our
previous full year guidance. Accordingly, our full year revenue
guidance is in the range of $165 million to $185 million. We still
expect to achieve a full year operating margin in the range of 4%
to 6% and we are projecting that our effective tax rate for the
year, excluding the effect of unforeseen discrete items, will be
approximately 40%. On this basis, we expect our full year EPS to be
in the range of $0.30 to $0.40 per share."
Mr. Kits van Heyningen concluded, "We have established a strong
leadership position in the maritime VSAT market, and we are taking
steps to continue our momentum with our new IP-MobileCast content
delivery service, which is the first globally available satellite
multicast service to deliver news, sports, TV and movie
entertainment to the maritime industry. Our guidance and
stabilization revenues have a tendency to be lumpy, but we see very
encouraging signs that we'll win significant new contracts that
would return this revenue to being a more significant part of our
overall business."
Recent Operational Highlights:
04/11/14 |
KVH Film Considered for Prestigious Maritime
Safety Award |
|
|
04/09/14 |
2014 FIFA World Cup™ Coverage to be Available
to Merchant Maritime Customers via KVH's Satellite Network |
|
|
04/08/14 |
Candice Pascal Joins KVH to Manage
Relationships with Content Providers |
|
|
04/03/14 |
KVH mini-VSAT Broadband Network Increases
Lead in Maritime VSAT Market Share -Euroconsult Report |
|
|
03/27/14 |
RHL Hamburger Lloyd Tanker Selects KVH
mini-VSAT Broadband to Provide Global Broadband Service for
Tankers |
|
|
03/20/14 |
KVH Adds Four New Marine Satellite TV Antenna
Systems to its Award-winning TracVision Line |
|
|
03/18/14 |
Crewtoo Social Media Site Launches Online
Maritime Jobs Board |
|
|
02/27/14 |
Crewtoo Social Media Site for Seafarers
Exceeds 100,000 Members |
KVH is webcasting its first quarter conference call live at
10:30 a.m. Eastern time today 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 and an
MP3 podcast will also be available on the company website within
three hours of the completion of the call.
About KVH Industries, Inc.
KVH Industries, Inc., is a leading manufacturer of solutions
that provide global high-speed Internet, television, and voice
services via satellite to mobile users at sea, on land, and in the
air as well as a leading provider of commercially-licensed news,
sports, music, movies and training video content to commercial and
leisure customers in the maritime, hotel, and retail markets. KVH
is also a premier manufacturer of high-performance navigational
sensors and integrated inertial systems for defense and commercial
guidance and stabilization applications. The company is
headquartered in Middletown, Rhode Island, with sales offices in
the United Kingdom, Denmark, Norway, Singapore, Japan, and Cyprus,
as well as a subsidiary in Brazil that manages local sales.
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, and our anticipated revenue growth, earnings,
competitive positioning, profitability, and the likelihood and
timing of product orders. The actual results we achieve could
differ materially from the statements made in this press release.
Factors that might cause these differences include, but are not
limited to: the impact of extended economic weakness and high fuel
prices on the sale and use of marine vessels, particularly in
Europe and Asia; potential unanticipated technical or legal
impediments that could delay or impede new service rollout plans or
expected strategic relationships; the need to increase sales of the
TracPhone V-IP series products and related services to improve
airtime gross margins; the need for, or delays in, qualification of
products to customer or regulatory standards; unanticipated
declines or changes in customer demand, due to competitive,
economic, seasonal, and other factors, particularly with respect to
the TracPhone V-IP series products; potential further declines and
unpredictability in military sales, including to foreign customers;
the unpredictability of defense budget priorities as well as the
order timing, purchasing schedules, and priorities for our defense
products, including possible order cancellations; the uncertain
impact of actual and potential budget cuts by government customers,
including the effects of sequestration; potential reductions in our
overall gross margins in the event of a shift in product mix;
unanticipated increases in media costs or loss of distribution
rights; and currency fluctuations, export restrictions, delays in
procuring export licenses, and other international risks. These and
other factors are discussed in more detail in our Annual Report on
Form 10-K filed with the Securities and Exchange Commission on
March 17, 2014. Copies are available through our Investor Relations
department and website, http://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 the following marks: KVH, KVH logo, Azimuth,
TracVision, TracPhone, Tri-Americas, CommBox, TACNAV,
IP-MobileCast, Sailcomp, mini-VSAT Broadband and the mini-VSAT
Broadband logo, E•Core, Crewtoo, Muzo, and the banded, dome-shaped
housing of its satellite antennas. Other trademarks are the
property of their respective companies.
|
KVH Industries, Inc.
and Subsidiaries |
CONDENSED
CONSOLIDATED BALANCE SHEETS |
(in thousands,
unaudited) |
|
|
|
|
March 31, |
December 31, |
|
2014 |
2013 |
ASSETS |
|
|
|
|
|
Cash, cash equivalents and
marketable securities |
$ 53,708 |
$ 55,744 |
Accounts receivable, net |
28,173 |
27,549 |
Inventories |
18,704 |
18,255 |
Deferred income taxes |
3,128 |
3,060 |
Other current assets |
4,726 |
3,784 |
|
108,439 |
108,392 |
|
|
|
Property and equipment,
net |
36,682 |
37,142 |
Goodwill |
18,407 |
18,281 |
Intangible assets, net |
14,654 |
14,987 |
Other non-current assets |
4,801 |
5,047 |
|
|
|
|
$ 182,983 |
$ 183,849 |
|
|
|
LIABILITIES AND STOCKHOLDERS'
EQUITY |
|
|
Accounts payable and accrued
expenses |
$ 22,382 |
$ 23,329 |
Deferred revenue |
5,735 |
4,858 |
Current portion of long-term
debt |
1,282 |
1,272 |
|
29,399 |
29,459 |
|
|
|
Other long-term
liabilities |
569 |
829 |
Long-term debt, excluding
current portion |
6,770 |
7,094 |
Line of credit |
30,000 |
30,000 |
Stockholders' equity |
116,245 |
116,467 |
|
|
|
|
$ 182,983 |
$ 183,849 |
|
KVH Industries, Inc.
and Subsidiaries |
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS |
(in thousands, except
per share amounts, unaudited) |
|
|
|
|
Three Months
Ended |
|
March
31, |
|
2014 |
2013 |
Sales: |
|
|
Product |
$ 18,007 |
$ 25,216 |
Service |
18,978 |
14,711 |
Net sales |
36,985 |
39,927 |
|
|
|
Costs and expenses: |
|
|
Costs of product sales |
11,332 |
13,909 |
Costs of service sales |
11,060 |
10,249 |
Research and development |
3,667 |
2,950 |
Sales, marketing and
support |
7,470 |
6,943 |
General and administrative |
5,150 |
3,374 |
Total costs and
expenses |
38,679 |
37,425 |
|
|
|
(Loss) income from
operations |
(1,694) |
2,502 |
|
|
|
Interest
income |
210 |
168 |
Interest
expense |
191 |
76 |
Other income,
net |
107 |
24 |
|
|
|
(Loss) income before
income tax (benefit ) expense |
(1,568) |
2,618 |
Income tax (benefit)
expense |
(445) |
655 |
Net (loss)
income |
$ (1,123) |
$ 1,963 |
|
|
|
Net (loss) income per common
share: |
|
|
Basic and diluted |
$ (0.07) |
$ 0.13 |
|
|
|
Weighted average number of common
shares outstanding: |
|
|
Basic |
15,313 |
14,989 |
Diluted |
15,313 |
15,219 |
CONTACT: KVH Industries, Inc.
Peter Rendall
401-847-3327
prendall@kvh.com
FTI Consulting
Christine Mohrmann
212-850-5600
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