To: WalterP who wrote (7013 ) 7/24/2018 11:54:22 AM From: awecr2 Read Replies (2) | Respond to This announcement suggests what I think we had all been suspecting. For the last two years, prior to V7-HTS, KVH quarterly run rate was at or below 200 and not somewhere in the 200-300 range, like they have been implying. I have been modeling on the 200 number for awhile now. It just didn’t make sense that revenues weren’t growing, even in the face of laid up O&G units. What this disclosure suggests to me is that KVH is setting the reset button to show dramatic accelerated growth and give the market a reference point. Otherwise, such an announcement would be an embarrassment and not one to brag about. It reflects a significant loss in market share to Inmarsat, in 2017. That isn’t surprising. It’s likely the reason KVH started CaaS before it had an HTS product. I don’t think it helped, however. CaaS needed an HTS product to be successful. I think this also implies that KVH started the year with an active base in the 5k to 6k, considering laid up and scrapped hardware. We should remember that KVH credits owners for product replacement. Based on these indicators, KVH likely sold/leased 300-320 units, in the 1st quarter. Not huge but a very good start to a new upward trajectory. Considering KVH was making improvements to production capacity, I think they are likely to improve production quarterly, by 10%, until there is a balance. It’s likely we will see a V11HTS product, in Q4. Under these assumptions, there is a high probability Q4 will see the return to double digit growth for minivsat. It could happen in Q3 but that’s predicated on the improvements of the install rate. Overall return to growth will begin in Q3 and start to accelerate in Q4. That could be delayed by one quarter if content remains a drag on growth. It’s the one category that is difficult to model. They have the new training products but it’s difficult to discern if it’s just plugging the hole or an actual breakthrough product. Leisure content still needs to be improved, imo, to really get this category moving. Otherwise they are just replacing the DVD business with an ok replacement deliver business. A return to vsat growth should help, however. If they could just figure out a better mobilecast model, we could see the entire hardware/content CaaS model accelerate dramatically. We aren’t there yet. But we are going in the right direct for the first time in a long while.
