KVHI - Earnings call transcript Q4 2017

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Operator

Good day, and welcome to the KVH Industries Incorporated, Fourth Quarter and Year-end 2017 Earnings Conference Call. Today’s conference is being recorded. At this time, I'd like to turn the conference over to Don Reilly, Chief Financial Officer. Please go ahead.

Don Reilly

Thank you, operator. everyone. morning, Good the us results joining quarter discuss Industries’ included KVH full morning. published Thanks our today guidance quarter in is which and all first release for fourth we year, this for of to earnings the and XXXX Officer. the Executive me company’s on van the is call With Kits Martin Heyningen, Chief The earnings Relations our on Department. also and release website is available Investor from our

to call, replay would like listen website. you on access you recording today’s to If of webcast can a our a

web, free are actual certain uncertainties revise or to no the many to via those This conference statements. contain cause forward-looking questions results any and listening will ir@kvh.com. materially undertake from obligation forward-looking expressed you’re If to our feel differ that may assumptions subject in update submit to We call these that statements to statements.

and we in to and our turn call our certain reconciliations website. under definitions which November I like find release We our you file made Risk SEC time, cautionary statements XX-Q financial will those of as would filings, Xnd these from in Martin? quarter Form our over filings GAAP to Factors our review XX-K heading the also the We of later Information third on XXXX well available comparable SEC section of Form non-GAAP in filed the to today these directly discuss Investor company’s expect the you measures, to measures. press At specifically and will the Martin. this as to non-GAAP measures encourage measures

Martin Kits van Heyningen

revenue many remember than reported our however high-end which positive at EPS well The which guidance thanks one us it's business guidance which came rather our million, a in fourth revenue was good upfront. important now double fronts. of was and EBITDA the million, of ahead was which everyone revenue morning, non-GAAP today. was monthly all Don $X.XX, joining impacted is QX $X.X our to QX recognizes hardware Thanks, our for by is AgilePlans that us model, on and $XX quarter range. for

XXXX, we KVH. year. on report goals I'm initiatives important set strategic a year terrific and for we four investing into to Going several made that major all of would laid it in transformative be We out was this pleased that them. progress

we new we product, as AgilePlans. our First, introduced Connectivity a which Service call

and photonic Second, technology we new VX HCS navigation TACNAV as bit network deployment launched successfully for made for platform. development market. our Army, satellite major worldwide XD completed Three, based the hardware our our new for positioned technical of chip breakthroughs assured car the navigation. with solution throughput high testing our a several optic now on we fiber system, gyro and broad TracPhone rounds lastly, potential U.S. And is of well driverless the

Looking to these an us the seeing XXXX, impact the company. a and the to our new for we’re development transition they're initiatives of the having They're on year helping make impact investment already phase and of growth exciting from business.

and It's innovative positively delivering Last ecosystem, mobile The new our results and and Subscription selling, received the content last leveraging unique clearly the new market. connectivity service to end-to-end been momentum to April, our customers market. an locked as commercial the to high solution creating by barriers illustrate model market we quarters disruptive are AgilePlans, business provider building. entry. that three approach SATCOM is strengths at deploying from succeeding. the Let's is entirely start introduced to SATCOM KVH in hardware the with and units

needle Program, that business the quarter In change three both subscription we're rate. will that sales has there Churn into VSAT fact more new launched conceive to overall a When model, main only subscribers show exchanging quarter very do the the it regular continuing since every units move network would we trend and first growth. and significant Service but something on we of success confident and simply sold this risks: basis on our we AgilePlans was wanted AgilePlans doubled significantly unit would orders the That growth units were consider a is trajectory. be introduced. a XXXX for ARPUs, put that the and Connectivity one-to-one the we if risk, When We would with failure. as

price AgilePlans have would no then entry started commitments, month we everyone XX be of now had was use expect would contracts Schiffahrt been unit it. we example. only compared was E.R. our in at a three in last we deployment contract were after here and months know. XX% $XXX what that We dramatically. then And a attractive challenge. margins couple all XXXX, would and with lowest looking quarters, announced the is Secondly, for no risk another up to rate, with lastly, an unit That and potentially Well expensive people for If locked Units a and to of on forward that new vessels return year, QX into their recently us. that for increase inclusive. volumes

other We sales coming most board. have accelerating. many fleets importantly, on were And

are returned ARPUs tripled a they lastly, AgilePlans non Second, And and unit higher, no offer. not commitment the are our a been level customer’s despite having entry subscriptions, XX% single than and from that subscriptions, has vessel.

going get biggest installations, demand. increasing we We installation pace how match so units conservative first accelerate are demonstrated. into AgilePlans in our risks we issue, production our are a overall. backlog the faster indicator And a revenues, the this substantial momentum and which are potential now concern an can we these leading future a create new have year, planning half results So, a as our were of as business activate to fact them the revenue. QX, increased model result, in of subscription AgilePlans VSAT in can simply generating that up our has in and bit for the -- the Unit investing momentum not and strong volumes, our of has are

with we part more this we than in declines AgilePlans In we demand end software stopped subscribers new it in We content it business, subscribers launched over have and QX, you of XXXX. and increase the value further training in of the Videotel business, we saw now XXX,XXX Not further push been will of seeing users total X,XXX only vessels appeal brand on net Performance As growth in drive using know, AgilePlans content platform. and the Videotel and But solutions. September, expect total added combination improvements to very our the received for the services. It’s platform. Manager our will in our the been services unique already the for is hardware, our decline, content. in well

mobile in XX second, upload great of that data for launch satellite also solutions not AgilePlans plans, coverage HTS within our XX networks, additional that the new Coupled we new miles square December are unlimited HD for new gigabyte TracPhone unique high a a is the faster our plans, new but second, times advantage VX-HTS Our are hardware, speed significant supporting coupled network, provide streaming connectivity content getting we’re channel, of At by channel. also other with simultaneous mini-VSAT was customers. than and onboard speeds or capable the of fast live competitive network new higher video which builds we and now megabits available both -- megabits per delivering differentiator global competitive accelerating speeds with is our created our announced this as went that our demand a major global have high-throughput before, X new use X significant strategic our per reviews anywhere million providing the now now on hybrid This coverage, live last network. initiative are download area. only which with competing as our November. speeds high-speed over conferencing from These

the plan platform we with the and products of extend development forward, new services XXXX. HTS Going in to

customers builds resulting yard the relationship partnership As Wednesday, new we we leisure The in also a performing part a investment throughput, working November. by last HTS in announced partner. and we established KVH, markets. well, super on uptime Intelsat, in and $X.X happy million satellite very strategic on SKY effort, which JSAT, the commercial, with our On announced is Perfect outstanding network this extremely with board of great have

have maritime needs. Epic will a industry this value speeds and and JSAT Satellite Pacific history together that Intelsat to their We are Asia, capacity can we new in better using together, critical global to Working Ocean. launch satellites connectivity are in our and of added the provide this the year in that region. planning technologies, in much strength provide us new and working provided a satellite over faster the coverage reliable which order our with have leverage and services

together So, next-generation broadband currently supportive the the efforts we a have unmatched our capabilities network industry. new created and in our fully and partners two maritime with in are of features area

inertial our momentum, especially that our we I in FOG was in by technical achieving We million. systems. progress fiber excellent pleased, enjoying for that to has on It’s some sales currently to inertial The insertion bottlenecks a cleared in that our first demand in building our of also see our total basis. measurement continuing it revenue inertial units This growth XXXX significant optic million of we have that systems, up continue another by production continue am optic other highest a navigation achieved business, unit parameters, that capping of performing quarter our mix gyros our been in laws this prototype XXXX. when chip. are and we to gyro strong fourth QX, on this all new are quarter QX. but particularly consider $X.X chip, business for backlog we target fiber gyro was photonic is growth milestone expect clear QX measurement and be should around FOG for is our our to $XX make end row after the on the Moving causing year-over-year double-digit on trend we the strong. based growth and

done toward another milestone provides flexibility the us, of much for While and development to further there is evidence our be still is approach. this

We working design chip further low and improvement. optical companies. packaging of Each the on foundries shows iteration working a cost and currently production are solutions with

is deliver on year. and the with We end new still goal have the already to the majority road self-driving spec of the to are customers able optic the today our prototype be a key complaint fiber cars chip to by provided for that gyros

fiber the Our optic performance mass be high ability to critical to the driverless gyros of produce industry. car will success

looking to to market. technology establish will at process the can partners During mass build production customers and bring relationships with quality we this us capabilities XXXX, who help to be or scale

discussion to those happen work the military for XXXX short-term Middle-East the are typical. including their orders the continue in our toward our market, in guidance. we’ve international underway we not about in TACNAV and relative local in is large develop in are annual expect Within or customers’ country, to of the Asia the Currently while systems, content them content domestic fairly to procurements, looking this signing so defense countries value we many

Here due to alone be and assured FOG forces to at in our puts Army a the new jamming. program test U.S. on U.S. underwent This installation in round a position XD the navigation recently dependency GPS initiative. product part based QX, military the timing risk by at recognizes household TACNAV military of as

un-jamable navigation performance of Our and -- systems the overall. are improve and the of also GPS also provide performance tactical

latest the immunity absence the as previous counter systems to Our to in feedback measures. GPS, of army on our demonstrations preliminary accuracy electronic was Based demonstrate expected. and the well performed impressive to testing showed meant

and strides new So, and new new the business in aggressive set took am for technology, of in the in development proud and the XXXX some say goals. rolled summary to goals tremendous risk out and we new services for products models, opportunities. those achieved markets, I We technology and in emerging major invest new company we to made

quarter, entering business transformation continued the our in momentum XXXX. results, Our fourth our are we with and model and very pleased

the at numbers. turn Don to to I to call like Don? look Now, would over the

Don Reilly

Martin. you, Thank

year. for sales the cost year, separation Product employee or for certain in navigation and year. came year By We orders in bonuses business incurred recorded growing in segment up million with With of within $X.X fourth year-over-year actions about the from lower included variable million, profit EBITDA unit million margin of X.X fourth quarter TACNAC quarter $XX in for with sharing orders our navigation have from or mobile overall with range, As revenues shipments be XX.X%, $X.X a our revenues million The fourth expected mobile at adjusted this lower $XX.X to comparable were fourth The compared to year Martin of with quarter. $XX.X along lower million, cost fourth took cost last offset sales quarter our million of only was decreased year. segment in to was non-GAAP we the our percentage of prior in decreased we gross model. our up in decreased $XX.X points as growth the quarter quarter. connectivity year were as personnel quarter margin $X.X for for of or prior continued a with our TACNAV its were our last mobile connectivity impacted expenses decreased marine the quarter would mobile unfavorable mix quarter million, fourth XX.X%, connectivity by airtime this X% of the $X.X the general. offering. the in received the up segment. prior and year. total and XXXX. XX% Broadband From inertial partially about of was the higher million to which program launch while the i.e., Revenue million, from to as XX% consolidated those the prior to segment, revenues partially cost as And cost product million, in separation is related commercial to our $XX.X quarter, $X.X discrete be fourth we quarter. and from Operating decline revenue third our about fourth Within margin was quarter subscription excluded this $XX.X points, these was adjusted as $XX.X $X.X million XX.X% in due quarter fourth our approximately our In higher concluded product timing XX% from fourth XX.X%, last this those about connection Agile connection percentage the to inertial still fourth gross cost and compares international get sales perspective, this shipments steady the inertial million, compared the revenue Service decreased nonrecurring navigation connectivity consider $X.X quarter the prior cost the would items, year EPS. a year we this in about of lower year-end. that prior computation quarter remained employee in The product cost but XX%. was those for and solid trued X.X% the down quarter separation them our profit approximately at segment we XX% in the gross declined the quarter the variable X.X approximately Mini-VSAT of we in year. in earlier our XXXX. realized million by before consulting $X.X segment, AgilePlans in our FOG in top-line revenue navigation mentioned million, inertial our XX% fourth large contract the the the million revenue result when on our driven this which compensation of TACNAV segment primarily reduction quarter guidance segment increased large decreased of fourth we deliveries not respect of

operations million operating in loss recorded quarter, fourth loss in and in QX from with resulted expenses million, $X.X the revenue, $X.X of the of XXXX. compared the these changes For margins

segment compared profit the last with year, loss mobile $X year. for million operating while an of our $X.X operating million $X.X an of generated Our connectivity navigation with had quarter million inertial profit of operating segment compared last million $X.X

Our $X.X million. decreased unallocated loss

the negative which foreign tax Our XX.X%, overall quarter was fourth for effective tax reflected on our expense the rate earnings.

quarter accounting tax by on required assets by we XXXX, the losses recorded fourth year in the as rules. a incurred full the valuation net For allowance deferred U.S. and operating generated

quarter XXXX rate the assets. tax for the valuation recorded a deferred passed significant we computing EPS. effective this did be allowance have U.S. tax we income As this we’ve net The not rate not non-GAAP of on non-cash the consider the Tax impact do and Cuts and of a our XXXX. though fourth valuation item, excluded when on newly Act Jobs reserve discrete allowance impact And impact expected in to tax to

of last a period the EPS For million, and stock-based non-GAAP loss million which fourth diluted excludes the with as a amortization quarter fourth On $X.X quarter. non-GAAP year. we items, last higher compensation quarter, for last share guidance recorded year. net compared provided loss compared discrete same a for with was of was EPS with $X.XX of loss significantly of fourth And had per the was same intangible net quarter per per share million $X.X for $X.XX the was basis, we net the year. than our million loss share, net the which a $X.X in income $X expense, diluted compared period $X.XX range in the net

quarter $X.X last of $X.X higher than in the year, fourth also adjusted range. compared recorded the EBITDA significantly Our million guidance our quarter million with for was

non-GAAP earlier this measures, to was For morning. please earnings release that a complete our reconciliation of refer our published

XXXX the this was the which net down million prior of for first million from increase the the $X.X Capital $X.X will to mostly Our guidance a million $X.X XXXX. more cash an impact our quarter. unchanged to quarter the ASC just of about year operations million, in about now were year fourth I'll that $X.X flow million, second. XXX, I note from and XXXX. $X.X and to of expenditures at compared was discuss of end quarter Please includes adopting outlook from With full turn our debt that

quarter the follows, be in million to to negative between be estimated in negative $X.XX million. $X.XX. of -- range of is to $X.X Non-GAAP and Our guidance million is in is and $X.XX the EPS GAAP to $X.XX the EBITDA is revenue negative the be adjusted to rage $XX expected $X.X EPS share range be for first be to as $XX estimated million to negative per to to of

first negative we reference, of quarter we the XXXX million. For our in EBITDA reported of -- adjust adjusted $X.X

For guidance million. million $XXX year, is revenue the to $XXX full our

is range per overtime, $XX negative guidance is non-GAAP negative of from million. GAAP our not revenues of product recognized the revenue to our full our per whereby largely Our expectations XXXX to $XX XXXX midpoint, recurring to of the At but and and AgilePlans programs, lower for VSAT million are is immediately, revenue, a service year revenue to policy. from recognition is sales share even recognized also $X.XX EPS our $X.XX with EBITDA EPS diluted ranges success QX, our due which with adjusted $X.XX share, are the result $X.XX instead QX, change in to generating be

the As in were companies revenue new to recognition January you a adopt U.S. X, public required know all XXXX. on standard

rates. the be guidance of we be new significant million will million. and reflected assumes provided. capital $X.X EPS by expect million to range currency full by EBITDA quarter foreign amounts million million non-GAAP in us This year will first that $X and in In $XX by are standard and the in in year there I and $X.XX. $X.X $XX no For respectively, million revenue that full adjusted in XXXX, $X exchange our and reduce to the These respectively expenditures again expected for amounts guidance changes is the the

vehicles to encouraging. key year The and and Martin APNT. earlier, made at XXXX. we're And military great and of of really well those benefits to important made that high-throughput our We've happy and you. XXXX initiatives great service the to of I we're on AgilePlans cost progress the rollout technology introduction very initiatives start the is That track from an TACNAV low The the for XXXX questions anyone for as up, questions. into critical momentum wrapping starting towards see has very was with really transition demand satellite our take with developing we in autonomous now remarks. of complete. our and year. the strategic this So new on continues said year, transition support progress Operator? the Martin FOG is would gone concludes be Thank

Operator

[Operator Prentiss Raymond Thank go Ric with We'll you. to Instructions] James. first

Ric Prentiss

Hi, good morning guys.

Martin Kits van Heyningen

Hi, Ric.

Ric Prentiss

pipeline, But think an of of questions bucket. you lot quick But but those back large might obviously of like update could, still already on the done contracts the what to a sales, you also have the out just expect magnitude that's keeping if you Couple it what of base, are the I out your kind kind I international And building of sounds guidance. you've -- that the delays what in kind And guidance. make said of on be. of already. sales

Martin Kits van Heyningen

Sure.

So, the forecastable. yes, we the And demonstrated In easily we that's do quarter-by-quarter. still expect just the orders this timing with comfortable is something this not feel that past don't year. we've

So in that's didn't the why we guidance. put

material you're a we’ve on purchased So correct previously.

a we local adamant is probably type some local brackets discussions confidence of forward. in still contract's which Customer thing. have high and that are some cables moving installation that would content, about for it. calibration mean now of us There So ongoing degree

program, and seeing with things more of are to that to impact it as just procurement of defense but overall their no own. types countries our So fairly these of indigenous develop now are want business we're typical

money local that defense way So a in their they to too. want spend companies helps

upside. what the size that's $XX overall that of So the be we're on order in this maybe year the the order shippable order still scope million terms orders on might of or status, at of the in the of

Ric Prentiss

G&A should done million initiatives. the that we with of that I line going a the other think think bit. is mentioned G&A $X kind some us call, on to bit about little but of down of just a quarter of is to came in you you're the now Don how a fourth of costs your Or forward? one the things think was it And trying level interesting little Great. And new

Don Reilly

quarter of mentioned to some earlier is our created quarter a we to run rate would fourth had -- aberration The up of as have fourth bit reduce appear versus what which compensation, an true we quarters I our variable

Martin Kits van Heyningen

is that my took is he saying away. Don politely you being polite; bonus

Don Reilly

I And quarter guess money own during pulled quarter. I and has that every discretionary some The had we some consulting had back discretion then note it. we -- the the also costs we on

I’d indicator So versus the rate is for due I’d I’d of say to good in fourth a some a say -- quarter one-time pretty we I XXXX, expect XXXX lower what say might bit run XXXX, would of be XXXX, cost these little fourth reductions, quarter say.

Ric Prentiss

you that sense, from makes on side, progress helps. making good a some maybe Okay, picture it chip. are the larger And then product obviously

and we us important from as of Help as at about at vehicle to are market large. foundries, what’s looking the the think the look understand, which market worked strategic standpoint, product might potential it, marketplace, the how As you of be side could of it kind distribution, having you looking manufacturing at you understand on help landscape, approaching autonomous quite the a us what partners, side we’re mean?

Martin Kits van Heyningen

future been works super of until what road well optic and that self-driving current have, and is it cars which this requirements that fiber the gyro, Right, meets are the our selling on all so incredible up we point, have the accuracy and standalone is there being we designed. are which basically

and today vehicle. you most works self-driving that that but that today, not is great, in their product using think have people we got everybody everybody, So the a

comparable working of things So something product types performance, similar but our worry has interaction that that here they don’t thing points need. this more about that are at the is our works great, customers on we that with costs, because price the deliver will would are been is much to new

they out -- different can what two on looking we little have next that foundries on types are side, terms we are and a And that or delivered at to larger a tier a with technology would sort of in that doing market not produce practical rather customer proto from out packaging, supplier people company work who a for taking enter working that and that’s that’s side think currently tier volumes. further, So automotive them like bit a we in packaging things think of try are product further, then than so working looking side, scale, with X can the are that scale that great so a it leverage looking ones a is single challenge already, X to suppliers is I we devices bit big the partnerships, KVH. with currently that’s be

Ric Prentiss

us for And as to what anticipating you per as and price are far point hit scaling. remind the point What back as number on of you goal just the at want be the FOGs FOG? points far as price price and scalability car

Martin Kits van Heyningen

to reduce by order excess volumes and the Yes, I is in they that that gyros think an $X,XXX in roughly our right now are expensive goal of fairly self it magnitude. around call medium

we range. quantities $XXXish So in in are the millions of

Ric Prentiss

lot growth a investment helps year Great, to that a obviously year. shift from big

So glad to back that path. on getting growth see

Martin Kits van Heyningen

you. thank Yes,

Don Reilly

Thanks.

Operator

and go next to And we Needham will Company. with Rich Valera

Rich Valera

some for units? not Thanks. units that’s kind like increasing total I wonder unit much can Thank am quarter-over-quarter, of they orders commentary And think for look AgilePlans, you you. Martin you know XX% units of total quarter-over-quarter? just shift maybe gave -- up you on I actual units any shipments a if were how -- give of capturing versus year-over-year, sure I -- total what mentioned for to AgilePlans of that numbers order orders the but I

Martin Kits van Heyningen

of that is encouraging total the is business units thing so increasing. Right, model, regardless

going So were XX% units QX, to where into started -- we in up year-over-year, total way we they see are so are that in tangible a all…

Rich Valera

quarter-over-quarter? that Was

Martin Kits van Heyningen

XX%. last of compare fourth quarter the was Sequentially. Yes to when we year, it up

Rich Valera

third versus of Right, the quarter XXXX?

Martin Kits van Heyningen

as would off which the in the though for growth, And I really at XX% are don't us growth that -- is dramatic that type consider range, AgilePlans head, into for we're to appears growth QX but a looking -- top it of hoping huge at what significant it’s really what this and been of is momentum. development XXXX, the we number we've really going striving we because would to XX% change have looking that. my doing that's very

Rich Valera

XX% And what's XX% to that relative too?

Martin Kits van Heyningen

The units. prior year total

Rich Valera

first about Got want thinking just Are the on for or sure it. a just I whole quarter, you XXXX that? that was as to clear make

Martin Kits van Heyningen

as think I both. Well,

Rich Valera

it. Got

Martin Kits van Heyningen

So, guidance at get they don't revenue that's supposed the work. model business a again this you in big this that's unites right But is because see those jump monthly build to exactly if are okay, you as away, look how now. installed,

because five us is four great to So, revenue years once units of for future predictor the revenue installed for typically. a generate obviously increasing you're they

Rich Valera

understanding, That And future great. are then sounds and that just makes orders predictor of total sense. growth a

the at for If kind -- year the revenue so with you went growth to X% range of were the revenue for deceleration of of you kind line last look the X% started in the with finished kind revenue the quarters the you two and mini-VSAT X% actually of service X% a growth revenue as in year year. your to growth year-over-year range,

trend and start you accelerating head what is into there as to expect year-over-year we expect XXXX? would curious, Just growth XXXX? you you decreasing head is ARPU into the that that or as what that is that dynamic Do to how

Martin Kits van Heyningen

we announced launch it we went it networks that November live expect in we do so to we was December. part those Yes, of in that new accelerate,

and quarter entry it's surprisingly we're triple the previous ARPU this our of demand. now XX%, a high, plan the starting the AgilePlans ARPU. that it's level I So, And benefits that than increased about mentioned XX% the also higher on is seeing with

expect do XXXX. going we revenues into to service accelerate So,

Don Reilly

sequentially the airtime Steve, in revenue over And year for so third reference fourth about the full X%, in was unit X.X%. just And mini-VSAT quarter increased XX%. volumes versus growth quarter,

Rich Valera

there. number. momentum great like some a underlying that's nice sounds Okay, It

deal, these collaboration, the guys of from from from there or any market prospective, of you you get on maybe this doing capability to marketing wasn't there incremental it together what color go confidence of you in at wanted on else and clear very premium, a just some that nice money of guys but to about guys any vote sort product side anything, nice the -- anything put are great talk sort sort Martin? you to obviously JSAT you they me a could is get a that So something

Martin Kits van Heyningen

we're network. satellites so Yes, their their and into integrating hubs our

them there, are markets internet We so using we’ll a value a year, that things through beam And their our they will really aware coverage working spotting over of be that which we're the obviously. in services commercial there coverage pacific, in but will a interested global very network. is on technology already along in satellite into pushing great addition So Japan, new -- a this added have the have developing strong be [ph]. give it's Intelsat and Asia, some satellites with they're to on which -- also launch which will type some we’ll

Rich Valera

quarter? more on one that fourth business then navigation I if the just that give in XXXX could And could like into how for Great. basis actual business a baked in the on And business? year-over-year of revenue you inertial your that about business, the you thinking what’s are guidance

Martin Kits van Heyningen

to that that’s stabilization four a guidance in a now Don for let last which for the four but lumpy, I’ll and minute now specifically, gyro quarters inertial drones leading the looking quarters we business seen is the Sure, optic up but TACNAV fiber for navigations, have this question -- double-digit double-digits. side, we map used number answer is being row because based on growing are growth is at

as already in we kind QX received XXXX. So mentioned million. to number orders backlog big $X and have of we are that a growth continue got of we expecting over in And I have

So we are at continuing. looking that trend

Don Reilly

for for segments quarter a for tell the navigation number and our will quarter is and our fourth whole shows the earnings full fourth in revenues which inertial our schedule but release there the income was $X,XXX,XXX. year, I So, in operating you

Rich Valera

am you I I Got if I the I could? on commented number know you. it year-over-year? would told thank for, just can G&A, items in I more sorry, it, you think, you said one looking that’s R&D about you was think that how G&A OpEx sales about other marketing and be flattish potentially and trend year-over-year the would you XXXX, talk that Don

Don Reilly

even or think should marketing up I G&A down. single-digits relatively flat, but and high single-digits. should low sales be be and will or flat R&D Sure, be slightly,

Martin Kits van Heyningen

hard pretty our get Right, try total to as as last so close we possible. to OpEx actual year’s and work to be

So that’s towards. work we what

Rich Valera

for Alright it. thanks my much very taking questions. Got

Martin Kits van Heyningen

Rich. Thanks,

Operator

with Jim next come Chardan. question McIlree will our And from

Don Reilly

Jim. Hey,

Martin Kits van Heyningen

Jim. morning, Good

Jim McIlree

you. Yes, good morning, thank

year on VSATs? growth VSATs, little in in growth bit the a unit more was for the Just what unit this

Don Reilly

Yes, question. good

look get do ask Just while give me I I your don’t Why mind. question a next second will up, it you that you. you for

Jim McIlree

Yes, that’s no problem.

guidance year revenue looking are of $XX talking it? a for you seems how like about we it and the are at guidance the So numbers -- flat the roundish just million increase TACNAV kind is that’s

Martin Kits van Heyningen

would would TACNAV I be Yes, down and up. orders FOG overall these flat be forecasting think to without international

is NAV inertial in So, up. total

Jim McIlree

Right.

have the FOG of that So you growth the the expect over quarters. prior you the continuation seen

mobile to And come of expected the increases, so in this how where I increase and to big or in airtime content as that and increase in big just because coming have mostly revenue training? in are happens that got XXXX, service trying coming the figure you -- sales I going unit out, big we is am have looking know right? is you that it’s the that So for connectivity is out also but is increase

Martin Kits van Heyningen

business many Right, the different in both and so services have parts of hardware obviously content. and we

you in unit -- in will the in purchasing segment which right, growth but leisure are hardware. VSAT still business is be revenue in So only the primarily the

moving So the which VSATs towards think other we TracVision markets. but the will be maritime all AgilePlans, hardware all have, will still But monthly. of you commercial have we majority know vast we the as non-commercial not leisure and recognize for be

Jim McIlree

I see.

a -- sorry. expecting am you’re I So

Don Reilly

XX%. down is volume unit total about year-over-year The

Jim McIlree

And market Okay. Martin expecting sounds year? like it consumer then a this are strong you so

Martin Kits van Heyningen

leisure follow buying been the good which good generally will think but been I mean, this generally leisure it’s marine today, where I the marine for it’s market, the up stock trends be market, market thing. year, and market boats the people which to is in consumer it’s

in expect market we consumer yes be So, to the XXXX. good

Jim McIlree

Right.

for me. Yes, yes, I it lot that’s think Okay, great, a luck. good and thanks

Martin Kits van Heyningen

Thanks, Jim.

Operator

with go Chris Analytics. will We Quilty next to Quilty

Chris Quilty

want smoothly. Have hurricane you seen it things any you fairly quarter, and Thanks. of a that of saw did disruption last activity bit down you I the seems transition like from to Martin, little follow-up knock-on impacts?

Martin Kits van Heyningen

behind No, us. I think that’s generally

like the hit pretty well. usage there think to I in Barts Saint and people the going was some leisure so going traveling disruption are to So hard, places, obviously air just Saint you down be sort not Caribbean on that as so Martin people side Puerto weren’t because of Rico time popular saw

part So -- our as going of planning I been that hasn’t but think forward. process addressed

don’t big think it’s So issue. a I

Chris Quilty

Got that you. got XXX And XXX that actually you in we’re stuck we have kind unit to are of dancing numbers sort around fair assume some now the love of at through if hard some been but unit point, you for issues; barrier I that breaking to would it years.

Martin Kits van Heyningen

Well, goal that I that was our certainly do in not that case think to is the in XXXX XXXX.

Chris Quilty

there. that Well, unit volumes get after would XX% grown to XX% you’ve to

Martin Kits van Heyningen

Yes.

Chris Quilty

do of buys, the largest what and to down position spot in coming terms infrastructure, cast relative another you to a question operator guys capacity, KU want And I you see So strategies satellite speed HTS market on of and different what Intelsat long-term capacity, your in HTS the that’s of those you very you in your know out strategy see KU had -- modeling your or do is with space what only the capacity aviation securing HTS. is global competitors side really have pipe how doing, the competition? built on do terms

Martin Kits van Heyningen

and what there I is working that Epic for number has global and or will -- an mentioned -- the are it I like Asia, it of a which I they haven’t is JSAT coverage. of they Epic online, specifically for question seen first, looks big increasing Overall there are Satellite. satellite of of your answering seems doing like remarks on coming a Satellite be lot with my Intelsat are part seen last announcements in haven’t additional satellites no prepared capacity plans

should the I solutions us solve really since there a I it is are lot sides going our a strategy on be to it’s that things of perspective, we And about real our bundled one which nicely cost think from very So that looks buyer. was the like help of customer like capacity, that problem.

second reliably. less megabit on who can in my got about the ship it’s becoming as ocean my solve the IT of and to who problem cheapest the per has middle So opposed less

issue. my And content other and service all support solve and

installed who and So, are here, really the and that’s we serviced. can get that the activate seeing key becoming differentiator

good So I see up going for the for us see cost speeds good come online, down, and which are capacity I coming customer. which is is

So…

Chris Quilty

AgilePlans? do is Great. the obviously the AgilePlans into free. in it is Talk bundled Where the that it giving of seen a factor for XXXX on business content going call being about the content and one see the you of for now driving the ARPUs line portion you business, for have in content is away and drivers or higher what your what an have that independent reportable

Martin Kits van Heyningen

think point away don’t free. for I that to careful Yes, we very internally we out anything are give

that's all hardware in not the people So case. words other free now, get free free think free you this, that, content, actually

and in it's So bundle of a everything adjuster data amount that where sell the we is the get. they

get So, you that's price to how the point.

of that. get included certain for $XXX that the are with plan number you megabytes So,

and So you between standalone expect to that continue. AgilePlans a transition a buying as content we But buying to there just and that as is that. right, of continues said business product are having switch it the people as evolve, part

more now where buying we're selling area so Now we package to customers we also movie side, one are are year. we first are on some subscribers buying the the them that content. seeing the half or a had lost buying was The over problem that the having they’re actually of training some up

basis this First we and a of three terms as managing growth board. product, training for the quarters software in of which QX, just a UI constant really year Performance really, status positive on business administration see in And that's fantastic number mentioned we next seeing growth on subscribers. I currency of which turned we're tools the is around got new that and art the now Videotel individuals expect positive to Manager, state and of

Chris Quilty

transition basis an continue probably AgilePlans overall on is XXXX, in like be down content sounds content towards the cause it again But we look will fair? when to that a to

Martin Kits van Heyningen

as our It’s probably our estimate, using content and again business to leverage but down flat a to business we're model. reasonable

for great us. able win flat. So, that's if a our that leverage do that, we VSAT by on and grow content side base we're the XX% But to content subscriber can to stays

Chris Quilty

trade. take I'll that

be So you a some introductions years, more overall have to lot just on you’ve the finally an getting product more two seem but been and excluding the the it of and flattish final you had Would line is business, it. autonomous product on of question attribute drones? world within the towards couple. other FOG market where vehicles, Or moving you’ve is had for FOG years to that specific and pretty traction last a indicative end things that

Martin Kits van Heyningen

right, that's new the think I inertial products, three single a fiber having accelerometers selling three the been And Yes, it's and measurement into software you big that well of is are really products gyros, sales driver units these product. the in our clearly but really an combined that optic impact, are autonomous everything are terms growth.

Chris Quilty

transferable? last you or or products to your is that eventually might And chipset I and help seem the quarter the into the it easily you costs was indicate be your it in Q down that legacy photonic integrated -- think or think, commentary, the drive pretty call

Martin Kits van Heyningen

is into transferable part definitely our product. it easily in and product hand, standard chip very in we hard be would the products. the easy if Well, is to The integrate creating the other the words, had true,

is yes, work, we answer use works, the way it we this our is, hope things it'll the in plan everything. will So, if

Chris Quilty

Awesome. Hope soon. that

Martin Kits van Heyningen

Great, me too.

Operator

back that I any sessions And over would closing conclude will remarks. turn conference the our question-and-answer speakers or additional for today. for to our like

Martin Kits van Heyningen

as and questions. Don Great. available you. for always any Thank follow-up are and again Thanks I

Don Reilly

Thank you.

Operator

participation. conference. today's thank We conclude you does your for That

now may You disconnect.

KVH Industries (KVHI) 2 Mar 182017 Q4 Earnings call transcript