KVH Industries, Inc. (Nasdaq: KVHI) reported financial results for
the quarter ended September 30, 2019 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.
Third Quarter 2019 Highlights
- Total revenue from continuing
operations in the third quarter of 2019 was $39.3 million. Revenue
for the quarter reflected a positive prior period adjustment of
$0.5 million relating to the implementation of ASC 606 for products
sold under sales-type leases. Without the adjustment, total revenue
for the third quarter of 2019 was down slightly from the prior
period.
- AgilePlans, our Connectivity as a
Service Program, amounted to 70% of our total commercial maritime
VSAT shipments and 53% of our total VSAT product shipments for the
quarter.
- AgilePlans revenues were up over
100% compared to the third quarter of 2018 and now represents 24%
of all subscribers.
- Our mini-VSAT Broadband airtime
revenue, which includes AgilePlans, grew $1.9 million or 11%,
compared to the third quarter of 2018, driven by a 15% increase in
subscribers.
- Fiber optic gyro (FOG) sales
decreased $1.7 million compared to the third quarter of 2018, but
inertial navigation backlog grew to $22.2 million, the highest it
has been since 2014.
- Net loss from continuing operations
in the third quarter of 2019 was $3.3 million, or $0.19 per share,
compared to a net loss of $1.9 million, or $0.11 per share in the
third quarter of 2018.
- Non-GAAP net loss from continuing
operations in the third quarter of 2019 was $2.2 million, or $0.12
per share, compared to $0.7 million, or $0.04 per share, in the
third quarter of 2018.
- Non-GAAP adjusted EBITDA from
continuing operations in the third quarter of 2019 was a loss of
$1.2 million, compared to a gain of $1.1 million in the third
quarter of 2018.
Commenting on the quarter, Martin Kits van
Heyningen, KVH’s chief executive officer, said, “Our core business
in our mobile connectivity segment continued to expand in the third
quarter, in line with our expectations. We are very pleased with
our quarterly and year to date double-digit growth for both airtime
revenue and subscribers. AgilePlans continues to be an important
driver of that growth. Our airtime gross margins remained steady
for the quarter with further improvement expected in the fourth
quarter. Customer timing resulted in quarterly FOG revenue that was
somewhat lower than expected. However, our inertial navigation
backlog reached a five-year high, and customer schedules are
aligning for an anticipated strong fourth quarter. More
importantly, we are accelerating investments in our key strategic
initiatives, including our photonic chip technology, which has
entered the design verification test phase within select KVH
products, and our KVH Watch IoT connectivity as a service, which is
entering the pilot deployment phase.”
The company continues to classify the results of
the Videotel business as a discontinued operation and therefore
Videotel is excluded from the segment information below.
The company operates in two segments, mobile
connectivity and inertial navigation. In the third quarter of 2019,
net sales for the mobile connectivity segment increased $2.4
million, or 8%, as compared to the third quarter of 2018, primarily
as a result of a $1.9 million increase in our mini-VSAT Broadband
airtime revenue, which resulted in part from a 15% increase in
subscribers, and a $0.5 million positive prior period adjustment to
marine mobile connectivity product sales relating to the
implementation of ASC 606 as it pertains to sales-type leases. In
the third quarter of 2019, net sales for our inertial navigation
segment decreased $2.4 million, or 24%, compared to the third
quarter of 2018. This decrease was primarily due to a $1.9 million
decrease in FOG and OEM product sales and a $0.3 million decrease
in inertial navigation engineering service revenues.
Financial Highlights - From Continuing
Operations (in millions, except per share data)
|
|
Three Months EndedSeptember
30, |
|
Nine Months EndedSeptember
30, |
|
|
2019 |
|
2018 |
|
2019 |
|
2018 |
GAAP Results |
|
|
|
|
|
|
|
|
Revenue |
|
$ |
39.3 |
|
|
$ |
39.3 |
|
|
$ |
115.4 |
|
|
$ |
113.3 |
|
Net
loss |
|
$ |
(3.3 |
) |
|
$ |
(1.9 |
) |
|
$ |
(13.1 |
) |
|
$ |
(8.8 |
) |
Net loss
per diluted share |
|
$ |
(0.19 |
) |
|
$ |
(0.11 |
) |
|
$ |
(0.75 |
) |
|
$ |
(0.52 |
) |
|
|
|
|
|
|
|
|
|
Non-GAAP Results |
|
|
|
|
|
|
|
|
Net
loss |
|
$ |
(2.2 |
) |
|
$ |
(0.7 |
) |
|
$ |
(7.7 |
) |
|
$ |
(4.1 |
) |
Net loss
per diluted share |
|
$ |
(0.12 |
) |
|
$ |
(0.04 |
) |
|
$ |
(0.44 |
) |
|
$ |
(0.24 |
) |
Adjusted
EBITDA |
|
$ |
(1.2 |
) |
|
$ |
1.1 |
|
|
$ |
(4.9 |
) |
|
$ |
0.3 |
|
For more information regarding our non-GAAP
financial measures, see the tables at the end of this release.
Third Quarter Financial Summary
Revenue was $39.3 million for the third quarter
of 2019, which reflected a positive adjustment of $0.5 million as
discussed above. Without the prior period adjustment, revenue for
the third quarter of 2019 was down slightly from the prior
period.
Product revenues for the third quarter of 2019
were $14.8 million, compared to the third quarter of 2018 of $16.4
million, primarily due to a $2.1 million decrease in inertial
navigation, partially offset by a $0.5 million increase in mobile
connectivity product sales. The decrease in inertial navigation
sales is primarily due to a $1.7 million decrease in FOG product
sales and a $0.2 million decrease in TACNAV product sales. The
increase in mobile connectivity product sales is primarily due to a
$0.7 million increase in marine mobile communications product
sales, which includes the $0.5 million positive, prior period
adjustment as discussed above, partially offset by a $0.2 million
decrease in land mobile communications product sales.
Service revenues for the third quarter of 2019
were $24.5 million, an increase of 7% compared to the third quarter
of 2018, primarily due to a $1.9 million increase in mobile
connectivity service sales. Airtime service revenues, which include
mini-VSAT Broadband airtime revenues, increased 11% in the third
quarter of 2019 compared to the third quarter of 2018 due to a 15%
increase in subscribers. Inertial navigation engineering service
revenues for the third quarter of 2019 decreased by $0.3 million,
or 27%, compared to the third quarter of 2018.
Our operating expenses increased $1.0 million
year-over-year to $18.3 million compared to $17.3 million in the
third quarter of 2018 primarily due to increased spending to
support our focus on service delivery and our key initiatives such
as the photonic chip-based gyro.
Nine Months Ended September 30 Financial
Summary
Revenue was $115.4 million for the nine months
ended September 30, 2019, which reflected a positive prior period
adjustment of $1.4 million related to our accounting for sales-type
leases. Without the adjustment, revenue for the nine months ended
September 30, 2019 was slightly greater compared to the prior
period.
Product revenues for the nine months ended
September 30, 2019 were $43.2 million, which were lower than
product revenues for the nine months ended September 30, 2018,
largely due to a $3.8 million decrease in inertial navigation
product sales, a $0.9 million decrease in mobile connectivity
product sales (excluding the adjustment discussed above), of which
$0.5 million represented a decrease in TracVision product sales and
a $0.4 million decrease in sales of land mobile communications
products. Inertial navigation product sales decreased primarily due
to a $2.3 million decrease in FOG and OEM product sales and a $1.5
million decrease in TACNAV product sales.
Service revenues for the nine months ended
September 30, 2019 were $72.2 million, an increase of 8% compared
to the nine months ended September 30, 2018 due to a $5.3 million
increase in mobile connectivity service sales and a $0.1 million
increase in inertial navigation service sales. Airtime service
revenues, which include mini-VSAT Broadband airtime revenues,
increased 11% due to a 15% increase in subscribers and due to
revenue from an engineering service contract of $0.6 million.
Content service revenues in the nine months ended September 30,
2019, decreased by 11% compared to the nine months ended September
30, 2018.
Our operating expenses increased $3.6 million
year-over-year to $55.7 million in the nine months ended September
30, 2019 compared to $52.1 million in the nine months ended
September 30, 2018. The key drivers were an increase in salaries,
benefits, and payroll taxes of $3.1 million, and a $0.6 million
increase in expensed materials.
Fourth Quarter 2019 and Full Year 2019
Outlook
Our guidance for continuing operations for the
fourth quarter and full year of 2019 is below. The reduction in
full year revenues, EPS and EBITDA results primarily from lower
than expected sales of our FOG products in the third quarter and
anticipated continued short-term softness in the fourth quarter. In
the fourth quarter, we expect to continue to invest in the
development of our photonic chip-based FOG, our new IoT
connectivity as a service (KVH Watch) and promotional costs and
incentives to accelerate the growth of our AgilePlans offering. We
continue to expect that our airtime gross margin will continue to
grow throughout the year and that our AgilePlans program will be
cash flow positive by the end of the year.
(in millions, except per
share data) |
|
Fourth Quarter |
|
Full Year |
|
|
From |
|
To |
|
From |
|
To |
Revenue |
|
$ |
41.0 |
|
|
$ |
45.0 |
|
|
$ |
156.3 |
|
|
$ |
160.3 |
|
GAAP EPS |
|
$ |
(0.15 |
) |
|
$ |
(0.04 |
) |
|
$ |
(0.90 |
) |
|
$ |
(0.79 |
) |
Non-GAAP EPS |
|
$ |
(0.06 |
) |
|
$ |
0.02 |
|
|
$ |
(0.50 |
) |
|
$ |
(0.41 |
) |
Non-GAAP adjusted EBITDA |
|
$ |
0.5 |
|
|
$ |
2.5 |
|
|
$ |
(4.4 |
) |
|
$ |
(2.4 |
) |
Other Recent Announcements
- KVH celebrated the shipment of its
10,000th VSAT system, a milestone that showcases the maritime VSAT
market share leader’s unique value proposition by providing a fully
integrated communications solution for mariners.
- KVH announced that it would be
hosting an investor and analyst day on November 14, 2019.
- KVH received a $4.0 million order
for its precision DSP-3100 fiber optic gyros (FOGs) from Kongsberg
Defence & Aerospace AS (KDA) for use in the U.S. Army’s Common
Remotely Operated Weapon Stations (CROWS). Shipments to KDA are
expected to be completed by year end 2020.
- KVH introduced KVH Elite, a premium
unlimited VSAT streaming service delivering HD-quality, dedicated
bandwidth to yachts in selected geographic regions. The new KVH
Elite streaming service is expected to launch in November 2019 from
Florida through the Caribbean, including the islands of the eastern
Caribbean, with Mediterranean coverage expected in 2020.
- KVH announced that its Board of
Directors has authorized a share repurchase program of up to 1
million shares, or approximately 5.5% of the company’s outstanding
common stock.
- KVH received orders totaling $6.7
million for its fiber optic gyro (FOG)-based TACNAV tactical
navigation systems. Shipments from one of these orders will be
completed in 2019; shipments from the other order is expected to
begin in the fourth quarter of 2019 and continue through 2021.
- The National Marine Electronics
Association recognized three KVH marine systems - TracPhone V3-HTS,
TracPhone LTE-1, and TracVision TV3 - with 2019 Product of
Excellence Awards.
- KVH announced that Iridium Certus
is now available as a companion to KVH VSAT systems for optimal
vessel communications.
- KVH was named an official supplier
of New York Yacht Club American Magic, challenger for the 36th
America’s Cup. KVH connectivity systems have been installed on the
team’s powerful chase boats to facilitate high-speed data
transmissions from ship to shore while KVH FOG-based inertial
systems will be used aboard the race vessel to help optimize
performance.
- KVH joined Smart Maritime Network
(SMN) as one of the founding members of the initiative dedicated to
supporting collaboration and standardization in the development of
IT systems for the shipping sector.
Please review the corresponding press releases
for more details regarding these developments.
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, which may include constant-currency revenue, non-GAAP
net income (loss), non-GAAP diluted EPS, and non-GAAP adjusted
EBITDA, 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. Constant-currency
revenue is calculated on the basis of local currency results, using
foreign currency exchange rates applicable to the earlier
comparative period, and management believes that presenting
information on a constant-currency basis helps management and
investors to isolate the impact of changes in those rates from
other factors. 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,
comparison to competitors’ operating results, and determination of
management incentive compensation. 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 net income (loss),
non-GAAP diluted EPS, and non-GAAP adjusted EBITDA, include the
following:
- Non-GAAP net income (loss) and
non-GAAP diluted EPS exclude amortization of intangibles,
stock-based compensation expense, employee termination and other
non-recurring costs, transaction-related legal fees, non-recurring
inventory reserve and other non-recurring costs, foreign exchange
transaction gains and losses, the tax effect of the foregoing and
certain discrete tax charges, including changes in our valuation
allowance and other tax adjustments.
- Non-GAAP adjusted EBITDA represents
net income (loss) before interest income, interest expense, income
taxes, depreciation, amortization, stock-based compensation,
employee termination and other non-recurring costs,
transaction-related legal fees, foreign exchange transaction
gains and losses, non-recurring inventory reserves and other
non-recurring costs.
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.
Future Non-GAAP Adjustments
Future GAAP diluted EPS may be affected by
changes in ongoing assumptions and judgments, and may also be
affected by non-recurring, unusual or unanticipated charges,
expenses or gains, which are excluded in the calculation of our
non-GAAP diluted EPS guidance as described in this press
release.
Because non-GAAP financial measures exclude the
effect of items that will 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., (Nasdaq: KVHI), is a
global leader in mobile connectivity and inertial navigation
systems, innovating to enable a mobile world. The market leader in
maritime VSAT, KVH designs, manufactures, and provides connectivity
and content services globally. KVH is also a premier manufacturer
of high-performance sensors and integrated inertial systems for
defense and commercial applications. Founded in 1982, the company
is based in Middletown, RI, with research, development, and
manufacturing operations in Middletown, RI, and Tinley Park, IL,
and more than a dozen offices around the globe.
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
product orders. Actual results could differ materially from the
result 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: decreased
profitability and cash flow resulting from the sale of our Videotel
business, a history and expectation of continuing losses as we
increase investments in various initiatives; potential liabilities
arising from our sale of Videotel, including a working capital
adjustment liability; the uncertain duration of the initial adverse
impact on our overall revenues of our new AgilePlans and KVH Watch,
under which we recognize no revenue for product sales, either at
the time of shipment or over the contract term; increased costs
arising from the new HTS network; the impact of recent changes in
revenue recognition and lease accounting standards, including
potential changes in the interpretation of those standards;
potential adverse events arising out of accounting errors and the
correction thereof, including adverse reactions from investors,
research analysts, regulators and others, including adverse changes
in our projected financial performance; increased costs of new
initiatives; the uncertain impact of tax reform, and federal budget
deficits, government shutdowns and Congressional deadlock; 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
photonic chip and other product and service development efforts;
delays in the receipt of anticipated orders for our products and
services, including significant orders for TACNAV products, or the
potential failure of such orders to occur at all; continued adverse
impacts of currency fluctuations, particularly the British Pound;
risks associated with the impact of Brexit on sales and operations
in the U.K. and Europe and on the overall global economy; 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; continued substantial fluctuations in military sales,
including to foreign customers; the unpredictability of defense
budget priorities as well as the order timing, purchasing
schedules, and priorities for defense products, including possible
order cancellations; the uncertain impact of potential budget cuts
by government customers; 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
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 TracPhone V-HTS series, including with respect to
new pricing models; increased price and service competition in the
mobile connectivity market; anticipated increased expenses
associated with investments in new technology and new initiatives;
exposure for potential intellectual property infringement;
potential additional litigation expenses; fluctuations in interest
rates; potential changes in tax and accounting requirements or
assessments, including management’s assessment of the probability
and effect of future events; stock price volatility; 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 August 2, 2019. 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 but not limited to the following marks:
KVH, TracVision, TracPhone, CommBox, TACNAV, IP-MobileCast, KVH
Watch, mini-VSAT Broadband, NEWSlink, KVH OneCare, and AgilePlans.
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 EndedSeptember
30, |
|
Nine Months EndedSeptember
30, |
|
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Sales: |
|
|
|
|
|
|
|
|
Product |
|
$ |
14,808 |
|
|
$ |
16,367 |
|
|
$ |
43,212 |
|
|
$ |
46,521 |
|
Service |
|
24,503 |
|
|
22,945 |
|
|
72,205 |
|
|
66,828 |
|
Net sales |
|
39,311 |
|
|
39,312 |
|
|
115,417 |
|
|
113,349 |
|
Costs and expenses: |
|
|
|
|
|
|
|
|
Costs of product sales |
|
10,823 |
|
|
9,767 |
|
|
31,756 |
|
|
28,784 |
|
Costs of service sales |
|
15,029 |
|
|
14,133 |
|
|
45,781 |
|
|
40,734 |
|
Research and development |
|
4,327 |
|
|
3,789 |
|
|
11,993 |
|
|
11,288 |
|
Sales, marketing and support |
|
7,717 |
|
|
7,346 |
|
|
24,700 |
|
|
22,532 |
|
General and administrative |
|
6,273 |
|
|
6,134 |
|
|
18,958 |
|
|
18,280 |
|
Total costs and expenses |
|
44,169 |
|
|
41,169 |
|
|
133,188 |
|
|
121,618 |
|
Loss from operations |
|
(4,858 |
) |
|
(1,857 |
) |
|
(17,771 |
) |
|
(8,269 |
) |
Interest income |
|
451 |
|
|
158 |
|
|
1,626 |
|
|
451 |
|
Interest expense |
|
73 |
|
|
446 |
|
|
1,016 |
|
|
1,282 |
|
Other income, net |
|
680 |
|
|
222 |
|
|
922 |
|
|
459 |
|
Loss from continuing operations before income tax (benefit)
expense |
|
(3,800 |
) |
|
(1,923 |
) |
|
(16,239 |
) |
|
(8,641 |
) |
Income tax (benefit) expense
from continuing operations |
|
(492 |
) |
|
8 |
|
|
(3,140 |
) |
|
138 |
|
Net loss from continuing operations |
|
$ |
(3,308 |
) |
|
$ |
(1,931 |
) |
|
$ |
(13,099 |
) |
|
$ |
(8,779 |
) |
|
|
|
|
|
|
|
|
|
Net (loss) income from
discontinued operations, net of tax |
|
(1,036 |
) |
|
757 |
|
|
49,837 |
|
|
2,369 |
|
Net (loss) income |
|
$ |
(4,344 |
) |
|
$ |
(1,174 |
) |
|
$ |
36,738 |
|
|
$ |
(6,410 |
) |
|
|
|
|
|
|
|
|
|
Net loss from
continuing operations per common share |
|
|
|
|
|
|
|
|
Basic and diluted |
|
$ |
(0.19 |
) |
|
$ |
(0.11 |
) |
|
$ |
(0.75 |
) |
|
$ |
(0.52 |
) |
Net (loss) income from
discontinued operations per common share |
|
|
|
|
|
|
|
|
Basic and diluted |
|
$ |
(0.06 |
) |
|
$ |
0.04 |
|
|
$ |
2.86 |
|
|
$ |
0.14 |
|
Net (loss) income per
common share |
|
|
|
|
|
|
|
|
Basic and diluted |
|
$ |
(0.25 |
) |
|
$ |
(0.07 |
) |
|
$ |
2.11 |
|
|
$ |
(0.38 |
) |
Weighted average
number of common shares outstanding: |
|
|
|
|
|
|
|
|
Basic and diluted |
|
17,521 |
|
|
17,188 |
|
|
17,429 |
|
|
17,025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
KVH INDUSTRIES, INC. AND
SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE
SHEETS(in thousands, unaudited)
|
|
September 30,2019 |
|
December 31,2018 |
ASSETS |
|
|
|
|
Cash, cash equivalents and marketable securities |
|
$ |
55,568 |
|
|
$ |
15,237 |
|
Accounts receivable, net |
|
29,979 |
|
|
28,592 |
|
Inventories |
|
25,317 |
|
|
22,942 |
|
Other current assets and contract assets |
|
4,528 |
|
|
6,098 |
|
Current assets held for sale |
|
— |
|
|
4,871 |
|
Total current assets |
|
115,392 |
|
|
77,740 |
|
Property and equipment, net |
|
52,661 |
|
|
50,633 |
|
Goodwill |
|
14,667 |
|
|
15,031 |
|
Intangible assets, net |
|
4,840 |
|
|
5,661 |
|
Right of use assets |
|
6,951 |
|
|
— |
|
Other non-current assets and contract assets |
|
9,540 |
|
|
12,455 |
|
Non-current deferred income tax asset |
|
131 |
|
|
226 |
|
Non-current assets held for sale |
|
— |
|
|
25,906 |
|
Total assets |
|
$ |
204,182 |
|
|
$ |
187,652 |
|
LIABILITIES AND
STOCKHOLDERS’ EQUITY |
|
|
|
|
Accounts payable and accrued expenses |
|
$ |
32,368 |
|
|
$ |
33,831 |
|
Contract liabilities |
|
5,701 |
|
|
7,647 |
|
Current portion of long-term debt |
|
— |
|
|
9,928 |
|
Current operating lease liability |
|
3,584 |
|
|
— |
|
Current liabilities held for sale |
|
— |
|
|
4,604 |
|
Total current liabilities |
|
41,653 |
|
|
56,010 |
|
Other long-term liabilities |
|
1,445 |
|
|
1,920 |
|
Long-term operating lease liability |
|
3,388 |
|
|
— |
|
Long-term contract liabilities |
|
5,194 |
|
|
9,070 |
|
Long-term debt, excluding current portion |
|
— |
|
|
19,437 |
|
Non-current deferred tax liability |
|
835 |
|
|
887 |
|
Non-current liabilities held for sale |
|
— |
|
|
813 |
|
Stockholders’ equity |
|
151,667 |
|
|
99,515 |
|
Total liabilities and stockholders’ equity |
|
$ |
204,182 |
|
|
$ |
187,652 |
|
|
|
|
|
|
|
|
|
|
KVH INDUSTRIES, INC. AND
SUBSIDIARIESRECONCILIATION OF GAAP NET LOSS FROM
CONTINUING OPERATIONS TO NON-GAAP NET LOSS FROM CONTINUING
OPERATIONS(in thousands, except per share amounts,
unaudited)
|
|
Three Months EndedSeptember
30, |
|
Nine Months EndedSeptember
30, |
|
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Net loss from continuing operations - GAAP
(a) |
|
$ |
(3,308 |
) |
|
$ |
(1,931 |
) |
|
$ |
(13,099 |
) |
|
$ |
(8,779 |
) |
Amortization of intangibles |
|
237 |
|
|
246 |
|
|
732 |
|
|
764 |
|
Stock-based compensation expense |
|
1,112 |
|
|
860 |
|
|
3,019 |
|
|
2,452 |
|
Employee termination and other non-recurring costs |
|
— |
|
|
— |
|
|
— |
|
|
195 |
|
Transaction-related legal fees |
|
— |
|
|
— |
|
|
224 |
|
|
— |
|
Non-recurring inventory reserve |
|
— |
|
|
— |
|
|
2,137 |
|
|
— |
|
Other non-recurring costs |
|
— |
|
|
— |
|
|
216 |
|
|
— |
|
Foreign exchange transaction gain |
|
(582 |
) |
|
(164 |
) |
|
(807 |
) |
|
(346 |
) |
Tax effect on the foregoing |
|
(166 |
) |
|
(194 |
) |
|
(1,162 |
) |
|
(628 |
) |
Change in valuation allowance and other tax adjustments (b) |
|
532 |
|
|
514 |
|
|
1,048 |
|
|
2,273 |
|
Net loss from
continuing operations - Non-GAAP (a) |
|
$ |
(2,175 |
) |
|
$ |
(669 |
) |
|
$ |
(7,692 |
) |
|
$ |
(4,069 |
) |
|
|
|
|
|
|
|
|
|
Net loss from
continuing operations per common share - Non-GAAP: |
|
|
|
|
|
|
|
|
Basic and diluted |
|
$ |
(0.12 |
) |
|
$ |
(0.04 |
) |
|
$ |
(0.44 |
) |
|
$ |
(0.24 |
) |
|
|
|
|
|
|
|
|
|
Weighted average
number of common shares outstanding: |
|
|
|
|
|
|
|
|
Basic and diluted |
|
17,521 |
|
|
17,188 |
|
|
17,429 |
|
|
17,025 |
|
- Net loss from continuing operations
- GAAP and net loss from continuing operations - Non-GAAP includes
the impact of the adjustment relating to the implementation of ASC
606 as it relates to sales-type leases, which unfavorably impacted
both the net loss from continuing operations - GAAP and net loss
from continuing operations - Non-GAAP by approximately $0.3 million
for both the three and nine months ended September 30, 2019. Net
loss from continuing operations per common share - GAAP and net
loss from continuing operations per common share - Non-GAAP were
also unfavorably impacted by $0.02 for both the three and nine
months ended September 30, 2019.
- Represents a change in the
valuation allowance on current year United States net operating
losses, research and development tax credits and uncertain tax
position adjustments.
KVH INDUSTRIES, INC. AND
SUBSIDIARIESRECONCILIATION OF GAAP NET LOSS FROM
CONTINUING OPERATIONS TO NON-GAAPEBITDA AND
NON-GAAP ADJUSTED EBITDA FROM CONTINUING
OPERATIONS(in thousands, unaudited)
|
|
Three Months EndedSeptember
30, |
|
Nine Months Ended September 30, |
|
|
2019 |
|
2018 |
|
2019 |
|
2018 |
GAAP net loss from continuing operations |
|
$ |
(3,308 |
) |
|
$ |
(1,931 |
) |
|
$ |
(13,099 |
) |
|
$ |
(8,779 |
) |
Income tax expense |
|
(492 |
) |
|
8 |
|
|
(3,140 |
) |
|
138 |
|
Interest (income) expense, net |
|
(378 |
) |
|
288 |
|
|
(610 |
) |
|
831 |
|
Depreciation and amortization |
|
2,483 |
|
|
2,006 |
|
|
7,185 |
|
|
5,780 |
|
Non-GAAP
EBITDA |
|
(1,695 |
) |
|
371 |
|
|
(9,664 |
) |
|
(2,030 |
) |
Stock-based compensation expense |
|
1,112 |
|
|
860 |
|
|
3,019 |
|
|
2,452 |
|
Employee termination and other non-recurring costs |
|
— |
|
|
— |
|
|
— |
|
|
195 |
|
Transaction-related legal fees |
|
— |
|
|
— |
|
|
224 |
|
|
— |
|
Non-recurring inventory reserve |
|
— |
|
|
— |
|
|
2,137 |
|
|
— |
|
Other non-recurring costs |
|
— |
|
|
— |
|
|
216 |
|
|
— |
|
Foreign exchange transaction gain |
|
(582 |
) |
|
(164 |
) |
|
(807 |
) |
|
(346 |
) |
Non-GAAP adjusted
EBITDA from continuing operations (a) |
|
$ |
(1,165 |
) |
|
$ |
1,067 |
|
|
$ |
(4,875 |
) |
|
$ |
271 |
|
- Non-GAAP adjusted EBITDA from
continuing operations includes the impact of the adjustment
relating to the implementation of ASC 606 as it relates to
sales-type leases, which unfavorably impacted Non-GAAP adjusted
EBITDA from continuing operations by approximately $0.3 million for
both the three and nine months ended September 30, 2019.
KVH INDUSTRIES, INC. AND
SUBSIDIARIESREVENUE AND OPERATING INCOME (LOSS) BY
SEGMENT FROM CONTINUING OPERATIONS(in millions
except for percentages, unaudited)
Segment Net
Sales |
|
Three Months EndedSeptember
30, |
|
Nine Months EndedSeptember
30, |
|
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Mobile connectivity
sales |
|
|
|
|
|
|
|
|
Product |
|
$ |
8.1 |
|
|
$ |
7.6 |
|
|
$ |
24.0 |
|
|
$ |
23.6 |
|
Service |
|
23.6 |
|
|
21.7 |
|
|
68.0 |
|
|
62.7 |
|
Net sales |
|
$ |
31.7 |
|
|
$ |
29.3 |
|
|
$ |
92.0 |
|
|
$ |
86.3 |
|
|
|
|
|
|
|
|
|
|
Inertial navigation
sales |
|
|
|
|
|
|
|
|
Product |
|
$ |
6.7 |
|
|
$ |
8.7 |
|
|
$ |
19.2 |
|
|
$ |
22.9 |
|
Service |
|
0.9 |
|
|
1.3 |
|
|
4.2 |
|
|
4.1 |
|
Net sales |
|
$ |
7.6 |
|
|
$ |
10.0 |
|
|
$ |
23.4 |
|
|
$ |
27.0 |
|
Operating (Loss)
Income |
|
Three Months EndedSeptember
30, |
|
Nine Months EndedSeptember
30, |
|
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Mobile connectivity |
|
$ |
(0.2 |
) |
|
$ |
0.5 |
|
|
$ |
(4.1 |
) |
|
$ |
0.8 |
|
Inertial
navigation |
|
(0.2 |
) |
|
1.9 |
|
|
— |
|
|
3.8 |
|
|
|
(0.4 |
) |
|
2.4 |
|
|
(4.1 |
) |
|
4.6 |
|
Unallocated |
|
(4.4 |
) |
|
(4.3 |
) |
|
(13.7 |
) |
|
(12.8 |
) |
Loss from operations |
|
$ |
(4.8 |
) |
|
$ |
(1.9 |
) |
|
$ |
(17.8 |
) |
|
$ |
(8.2 |
) |
|
|
Three Months EndedSeptember
30, |
|
Nine Months EndedSeptember
30, |
|
|
2019 |
|
2018 |
|
2019 |
|
2018 |
|
|
|
Mobile Connectivity
Revenue Components |
|
(percentage of net sales) |
Product sales |
|
21 |
% |
|
19 |
% |
|
21 |
% |
|
21 |
% |
mini-VSAT Broadband airtime |
|
48 |
% |
|
46 |
% |
|
49 |
% |
|
46 |
% |
Content service |
|
6 |
% |
|
7 |
% |
|
6 |
% |
|
8 |
% |
Inertial Navigation
Revenue Components |
|
|
|
|
|
|
|
|
FOG-based products |
|
15 |
% |
|
21 |
% |
|
15 |
% |
|
18 |
% |
Tactical navigation products |
|
1 |
% |
|
2 |
% |
|
1 |
% |
|
3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
KVH INDUSTRIES, INC. AND
SUBSIDIARIESNON-GAAP EPS
GUIDANCE(unaudited)
|
|
Fourth
QuarterFiscal 2019 (Projected) |
|
Full
YearFiscal 2019 (Projected) |
Net loss from continuing
operations per common share |
|
$(0.15) - $(0.04) |
|
$(0.90) - $(0.79) |
|
|
|
|
|
Estimated amortization of
intangibles (a) |
|
$0.01 |
|
$0.06 |
Estimated stock-based
compensation expense |
|
$0.09 |
|
$0.26 |
Non-recurring inventory
reserve |
|
$0.00 |
|
$0.12 |
Transaction-related legal
fees |
|
$0.00 |
|
$0.01 |
Other non-recurring costs |
|
$0.00 |
|
$0.01 |
Foreign exchange transaction
gain |
|
$0.00 |
|
$(0.05) |
Estimated tax effect on the
foregoing |
|
$(0.02) |
|
$(0.09) |
Change in valuation allowance
and other tax adjustments (b) |
|
$0.01 - $(0.02) |
|
$0.08 - $0.06 |
|
|
|
|
|
Non-GAAP net (loss) income
from continuing operations per common share (c) |
|
$(0.06) - $0.02 |
|
$(0.50) - $(0.41) |
- Includes amortization of intangible
assets resulting from acquisitions.
- Represents incremental forecasted
valuation allowance that we expect to record against additional
deferred tax assets generated in 2019.
- Assumes no significant change in
realized and unrealized foreign exchange transaction gains and
losses.
KVH INDUSTRIES, INC. AND
SUBSIDIARIESNON-GAAP ADJUSTED EBITDA
GUIDANCE(in millions, unaudited)
|
|
Fourth Quarter
Fiscal 2019 (Projected) |
|
Full
YearFiscal 2019 (Projected) |
GAAP net loss from continuing
operations |
|
$(2.7) - $(0.7) |
|
$(15.8) - $(13.8) |
|
|
|
|
|
Estimated income tax
provision |
|
$(0.8) |
|
$(3.9) |
Estimated interest income,
net |
|
$(0.1) |
|
$(0.7) |
Estimated depreciation and
amortization (a) |
|
$2.6 |
|
$9.8 |
Estimated stock-based
compensation expense |
|
$1.5 |
|
$4.5 |
Estimated transaction-related
legal fees |
|
$0.0 |
|
$0.2 |
Estimated non-recurring
costs |
|
$0.0 |
|
$0.2 |
Foreign exchange transaction
gain |
|
$0.0 |
|
$(0.8) |
Estimated non-recurring
inventory reserve |
|
$0.0 |
|
$2.1 |
Non-GAAP adjusted EBITDA from
continuing operations (b) |
|
$0.5 - $2.5 |
|
$(4.4) - $(2.4) |
- Reflects amortization of intangible
assets resulting from acquisitions and depreciation of fixed
assets.
- Assumes no significant change in
realized and unrealized foreign exchange transaction gains and
losses.
|
|
|
|
|
Contact: |
|
KVH Industries, Inc.Brent Bruun401-845-8194bbruun@kvh.com |
|
FTI ConsultingChristine Mohrmann212-850-5600 |
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