KVH Industries Reports Fourth Quarter and Full Year 2019 Results
MIDDLETOWN, RI, February 28, 2020 — KVH Industries, Inc., (Nasdaq: KVHI) reported financial results for the fourth quarter and fiscal year ended December 31, 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.
Fourth Quarter 2019 Highlights
• Total revenue from continuing operations increased by 7% in the fourth quarter of 2019 to $42.5 million from $39.7 million in the fourth quarter of 2018.
• AgilePlans revenues were up 78% compared to the fourth quarter of 2018 and continues to grow.
• mini-VSAT Broadband airtime revenue, which includes AgilePlans, grew $1.0 million, or 6%, to $19.1 million compared to $18.1 million in the fourth quarter of 2018, driven by an 11% increase in mini-VSAT Broadband airtime subscribers.
• TACNAV product sales grew $1.9 million to $3.4 million, and fiber optic gyro (FOG) product sales grew $0.4 million to $7.6 million, compared to the fourth quarter of 2018.
• Net loss from continuing operations in the fourth quarter of 2019 was $2.9 million, or $0.17 per share, compared to a net loss of $2.7 million, or $0.15 per share in the fourth quarter of 2018.
• Non-GAAP net loss from continuing operations in the fourth quarter of 2019 was $0.5 million, or $0.03 per share, compared to the non-GAAP net loss of $1.1 million, or $0.07 per share in the fourth quarter of 2018.
• Non-GAAP adjusted EBITDA from continuing operations in the fourth quarter of 2019 was $0.7 million, compared to $1.0 million in the fourth quarter of 2018.
• For continuing operations for the full year 2019, total revenues increased 3%, mini-VSAT Broadband airtime revenue increased 9%, and FOG revenues decreased 6%. The GAAP EPS loss increased 37% for the year.
• Total EPS for the full year was $1.90, which includes EPS from discontinued operations of $2.82.
• KVH repurchased $1.3 million of common stock as part of its recently announced share repurchase program.
Commenting on the quarter, Martin Kits van Heyningen, KVH’s Chief Executive Officer, said “Our core business and strategic plan delivered according to our expectations in the fourth quarter. Our AgilePlans program continues to drive growth in our airtime revenue and subscriber base, with our subscriber base increasing 11% compared to the end of last year. Not only did our AgilePlans revenue increase 78% compared to the fourth quarter of 2018, but it increased 9% compared to the third quarter of this year and 33% compared to the second quarter. In addition, we saw a 5% increase in FOG sales this quarter, an
encouraging sign after several quarters of relatively flat sales for this key product group. Our TACNAV sales were also encouraging, growing $1.9 million, or 119%, compared to the fourth quarter of last year.
“Development of our key strategic initiatives remains on track as we expect to start integrating our new PIC technology into our FOG products at the end of the first quarter of 2020. We continue to develop our new KVH Watch IoT platform, having added key staff in the last month to lead our business development efforts. Finally, we anticipate continued growth in our AgilePlans as we expand the offering to new markets, like the AgilePlans Regional launch we announced this week, and provide dealer incentives to keep the momentum robust.
“Our 2020 revenue and earnings guidance reflects continued positive momentum in our core business. We expect significant growth in revenues and earnings in 2020, recovering some of the reduction in revenue and earnings associated with the very successful Videotel divestiture. We are highly focused on executing against our strategic plan and development roadmap going forward. Further, we expect that the investments in key initiatives and technologies that we have made, and will continue to make in 2020, will create a solid foundation for continued, meaningful revenue and earnings growth in 2021 and beyond which, we believe, will translate into enhanced shareholder value.”
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 fourth quarter of 2019, net sales for our mobile connectivity segment increased $0.3 million, or 1%, compared to the fourth quarter of 2018. Mobile connectivity sales increased due to a $1.0 million increase in our mini-VSAT Broadband airtime revenue, which resulted in part from an 11% increase in subscribers, partially offset by a $0.2 million decrease in mobile connectivity product sales and a $0.2 million decrease in content revenue. In the fourth quarter of 2019, net sales for our inertial navigation segment increased $2.4 million, or 24%, compared to the fourth quarter of 2018. Inertial navigation sales increased primarily due to a $0.4 million increase in FOG sales, a $1.9 million increase in TACNAV sales and a $0.4 million increase in contracted engineering service sales, partially offset by a $0.3 million decrease in OEM product sales and other repair revenue.
Financial Highlights - From Continuing Operations (in millions, except per share data)
Quarter Ended December 31, Year Ended December 31, 2019 2018 2019 2018 GAAP Results Revenue $ 42.5 $ 39.7 $ 157.9 $ 153.0 Net loss $ (2.9) $ (2.7) $ (16.0) $ (11.4) Net loss per share $ (0.17) $ (0.15) $ (0.92) $ (0.67) Non-GAAP Results Net loss $ (0.5) $ (1.1) $ (8.2) $ (5.2) Net loss per share $ (0.03) $ (0.07) $ (0.47) $ (0.30) Adjusted EBITDA $ 0.7 $ 1.0 $ (4.2) $ 1.2
For more information regarding our non-GAAP financial measures, see the tables at the end of this release.
Fourth Quarter Financial Summary Revenue was $42.5 million for the fourth quarter of 2019, an increase of 7% compared to $39.7 million in the fourth quarter of 2018. Product revenues for the fourth quarter of 2019 were $18.7 million, 12% higher than the prior year quarter, primarily due to a $2.1 million increase in inertial navigation product sales, offset in part by a $0.2 million decrease in mobile connectivity product sales. VSAT shipments under AgilePlans are not recognized as product revenue in the period of shipment but rather are included in airtime service revenue on a monthly basis. Inertial navigation product sales increased primarily due to a $1.9 million increase in TACNAV product sales and a $0.4 million increase in FOG product sales, partially offset by a $0.2 million decrease in OEM product sales. Service revenues for the fourth quarter of 2019 were $23.8 million, an increase of 4% compared to the fourth quarter of 2018, due to a $0.5 million increase in mobile connectivity service sales and a $0.3 million increase in inertial navigation service sales. Airtime service revenues, which include mini-VSAT Broadband airtime revenues, increased 6% compared to the fourth quarter of 2018. Content revenues decreased by 6% compared to the fourth quarter of 2018. Our engineering service revenues in the fourth quarter of 2019 increased $0.4 million compared to the fourth quarter of 2018. Our operating expenses increased $2.6 million to $19.2 million for the fourth quarter of 2019 compared to $16.6 million for the fourth quarter of 2018 primarily due to a $2.3 million increase in salaries, benefits, and payroll taxes.
Full Year Financial Summary For the year ended December 31, 2019, revenue was $157.9 million, an increase of 3% compared to $153.0 million for the year ended December 31, 2018. Product revenues for the year ended December 31, 2019 were $61.9 million, which was 2% lower than the prior year, due to a $1.6 million, or 5%, decrease in inertial navigation product sales, partially offset by a $0.2 million, or 1%, increase in our mobile connectivity product sales. Inertial navigation product sales decreased primarily due to a $1.7 million decrease in FOG product sales and a $0.3 million decrease in OEM product sales, partially offset by a $0.4 million increase in TACNAV product sales. Mobile connectivity product sales increased primarily due to a $0.8 million increase in marine product sales, partially offset by a $0.5 million decrease in land product sales. Service revenues for the year ended December 31, 2019 were $96.0 million, an increase of 7% compared to $89.8 million for the year ended December 31, 2018, due to a $5.8 million increase in mobile connectivity service sales and a $0.4 million increase in inertial navigation service sales. Airtime service revenues, which include mini-VSAT Broadband airtime revenues, increased 9%. Content revenues in the year ended December 31, 2019 decreased by 11% compared to the year ended December 31, 2018. Our engineering service revenues in the year ended December 31, 2019 increased 27% compared to the year ended December 31, 2018. Operating expenses increased by $6.1 million year-over-year to $74.8 million in the year ended December 31, 2019 from $68.7 million in the year ended December 31, 2018. The increase was primarily due to a $5.3 million increase in salaries, benefits, and payroll taxes and a $0.7 million increase in expensed materials.
First Quarter 2020 and Full Year 2020 Outlook
Our guidance for continuing operations for the first quarter and full year of 2020 is below. We expect our revenues and EBITDA for the full year 2020 to grow significantly, with revenues at the midpoint of our guidance growing by 12%. We expect our mini-VSAT Broadband airtime revenues to grow by 12% to 15%, driven largely by an expansion of our AgilePlans offering and incentives to our dealer partners to encourage greater promotion of the AgilePlans program. We expect to see significant growth in our FOG business, as we entered 2020 with a FOG backlog of over $13.2 million, of which $10.4 million is expected to ship this year. We expect to see significant growth in our TACNAV business, building off the momentum with which we ended 2019. Our new photonic chip-based FOG products will be incorporated into our portfolio of FOG products starting at the end of the first quarter and continuing throughout the year, as we continue to invest in this technology to support the current fast growing autonomous everything market, and in anticipation of the emergence of the autonomous vehicle market.
(in millions, except per share data) First Quarter Full Year From To From To Revenue $ 36.0 $ 39.0 $ 170.0 $ 185.0 GAAP EPS $ (0.42) $ (0.31) $ (0.81) $ (0.58) Non-GAAP EPS $ (0.26) $ (0.17) $ (0.34) $ (0.17) Non-GAAP adjusted EBITDA $ (4.0) $ (2.0) $ 2.0 $ 6.0
Other Recent Announcements
• KVH introduced TracVision UHD7, a high-performance 60 cm (24 inch) marine satellite TV antenna designed to provide boat owners, charter yacht guests, and commercial vessel crews with access to ultra-high-definition (UHD) and 4K programming from DIRECTV as well as regular HD programming from other leading satellite TV providers.
• KVH announced the successful installation of its first joint maritime IoT system on an active working vessel. The team installed a KVH Watch VSAT antenna for IoT connectivity and the Kognifai Vessel Insight platform on Simrad Echo, a Norwegian research vessel owned and operated by Kongsberg Digital, which will continue normal operations during the pilot maritime IoT project. Together, KVH Watch and Kognifai Vessel Insight provide an integrated infrastructure for IoT connectivity and vessel-to-shore data.
• KVH announced that BW Group signed a contract to continue KVH VSAT service for at least five years and is upgrading 102 vessels to utilize KVH’s mini-VSAT Broadband HTS network for advanced satellite communications.
• KVH announced that Lockheed Martin selected KVH to develop and deliver the next-generation multi-axis fiber optic gyro (FOG) sensor for the IRST21 sensor system, which Boeing and the U.S. Navy are integrating into the F/A-18 E/F combat aircraft.
• KVH launched KVH Link, a new digital content service that addresses two pressing needs in commercial maritime: News and entertainment content to improve crew wellbeing and operations data to optimize vessel performance.
• KVH announced the expansion of AgilePlans Service with Regional Solutions for smaller commercial vessels.
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 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. |
