Agreed. There are so many things to be excited about. What’s clear to me, from the analyst questions over the last several quarters, is that they don’t fully understand how big of a deal this is or they are just reserving judgement until the inertial navigation category has a material move. Hearing that KVH is working to improve production capacity of the IMU category and adding a second shift, are very strong leading indicators of accelerating revenue growth for several quarters to come. It’s my understanding that most non military revenues are individual fog sales and not packaged IMU/INS sales. A changing mix to higher priced IMUs could significantly a material change in overall sales and margins, excluding the impact of the photonic chip FOG, down the road. All signs in inertial navigation are that we will continue to see sales increase during this transition period from expensive, low volume to inexpensive, high volume.
The more immediate opportunity in accelerating stock performance is the core vsat business. Q3 will signify a return to growth for mobile connectivity. Q4 2015 was the last time mobile connectivity saw year over year growth and also, the last time both segments grew, at the same time. It’s been a long time coming. It appears installed units came in slightly below 400 and considering orders exceeded that, I’m estimating 420-450 installs for q3. Orders in q3 will likely slow down a bit before the next uptick related to the next HTS product announcement, in the coming months. Although I’m estimating 7% Vsat Service revenue growth in q3, I think orders exceeding installs suggest there is a possibility it could be closer to 10%. SatComm hardware is likely to return to growth in q3, as well. Assuming stable content, we are likely to see overall mobile connectivity top line, grow at double digits, beginning in q4 and continuing for at least 2 years. Likely closer to 4 years. This assumes that momentum continues, based on a broadening HTS product portfolio over at least the next 2 years. A run rate above 500 units per quarter is now very likely in 2019, under this scenario.
With a clear path to accelerating top and bottom line growth, in the core KVH business segment, its becoming increasingly difficult to find a scenario in which KVH does not grow to over a $500mm market cap within a year. Shareholders are currently getting a free call option on a photonic chip based gyro that has the potential to be worth several billion in the next few years. It’s hard to grasp what kind of change that could mean for a company that has never sold more than 10k units, of a single product, in a single year. It’s exciting and when they finally announce available samples, in the coming months, the headline is likely to garner broader investment attention akin to the Mobileye camera, Nvidia GPU or even the tracvision A5. The market potential of the photonic chip based FOG is way bigger than the tracvision A5 ever was.
Aw |
