KVHI - Earnings call transcript Q2 2018

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Operator

Good day, and welcome to the KVH Industries, Inc.

Second Quarter 2018 Earnings Conference Call. Conference is being recorded. At this time, I would like to turn the conference over to Mr. Don Reilly, CFO. sir. ahead, go Please

Don Reilly

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

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

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

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

Martin Kits van Heyningen

at morning, to at million that second $X.X respectively. outlined quarter Thanks, everyone. the high the our I'm growth beginning of to XXXX, Quarterly revenues to joining results exceeding pleased you was $XX.X of compared and report X% end today. increased and of that year. quarter demonstrate our we guidance, solid the EBITDA the Thank Don, for the us good and second million,

More reached our importantly, results strategic we milestone, record we the are mobile a shipping business, made and tremendous on levels, and VSAT activations company. initiatives, performance new the In systems connectivity shipments. and including of now quarterly our many X,XXX our on record achieved bookings, reshaping progress

AgilePlan all XXX% successfully was almost maritime VSAT of and Year-over-year Connectivity in shipped year In Service as nice up of shipments the XXXX many now compared of were unit XX% history quarter, up this was and trend. VSAT of we're last we unit quarter systems in shipments by QX second compared sales. first record months bookings up last XXX% our QX fact, were and were an in the in QX. XXXX, QX all-time any the by first of than a this Program. of in multiples year's VSAT seeing of as sequentially as performance driven Much where we're we XX-year XX% far were the and X which from XXXX. shipped XX% higher second in our to in quarter a business, our quarter AgilePlans AgilePlans to

on Nordic of only this a market before I smaller the by program a We're commercial package fleets the X Hamburg commitment broad year. the We of announced demand high-throughput as recently as XX satellite both being deploy market even believe result appeal global be anticipated. than AgilePlans stronger AgilePlans the of selected been with well our vessels as or with larger the organizations X network. vessels such our to end to we contract this but new of no that all-inclusive, expected successful, response of is has combined success in

last bottom of come As line Unit the up of a AgilePlans they shipments revenue margin steadily benefits expand compared of demand, this not sequentially. online. these were operational and will more increase to The up our and but only continuing as XXX% efficiency. we're accelerating capacity result year, production improve were to XX% systems

for Despite As do of get the well comes quarter, grew June immediate QX. as QX, but still we each the of program. AgilePlans ever is to hardware those into installations, growth. short-term won't compared revenue was have installations, revenue we benefit bodes for seen discussed of sales the month pace we new we XX% previously, be compounds. biggest unit this as subscription the carried our which benefit a installations the online, increasing not first But future until the that backlog recurring

rise, continue to traditional higher competitive While the note the bids shipments also sales hardware seeing and AgilePlan strength and VSAT We're also that around the in market year-over-year. it's important globe. markets to in orders continue win leisure to commercial were

our for customer, will are five the VX-HTS contract with customers, a TracPhone and TracPhone the airtime just existing a VX-HTS our tankers. has contract be extended for by our VXX-IP systems example, with that also chose announcement our Transpetro Also, XX For system year business vessels. not existing XX adding announced illustrated long-time KVH only we we BW to that expanding Group, additional Brazil-based vessels but

launched benefits speeds, fastest units. while path our service shipments December, in the ease of new of subscriber convert with the coverage, existing or or seen TracPhone history. those Overall, we VX-IP had network customers. the customers note which dual VX-HTS in a part Then, the went as enjoy to We've their in as so far, and product it's fairly channel an of but count to business onto existing offer important can unit for large conversions like and VSAT all existing a HTS better subscribers to upgrades systems the easy new vital our We we vessels airtime since network. our HTS our for retain Another is number that don't traditional upgrade the them move new we've and faster totals. adoption live of and we we they get business in KVH's

as took as got in it network. years this, and services. two many six almost to of all we get With mini-VSAT illustrated several months this we're Even us HTS standing not new by the as the still with network, products the new the first introduction of subscribers on year original recent of

revitalize First, our content software for play of the business. to has major with upgraded powerful a eLearning globe crew feature that a maritime ability enhances effectiveness Videotel help training. in the our subscription expect we the task-based This competency, Performance measure the and managers Manager which around been new called fleet is of part growth new will

services. and new working complement commercial is fast in coverage to KVH. We product of are both KVH under The for to system distribution as times our stream a finally, LTE-X convenience opportunity Garmin. Internet system. full expansion marine and the to agreement carriers. of have TracVision our for array XX other the cellular everything customers, TV solution. bridge and personal system customers, a faster gives for U.S. waters, communications use recently offshore, cellphones global customers it up the selected terms The TracPhone deck add are generating who our category fully well of well of and also is demand systems VSAT communication antenna speeds as robust to current as And a Early LTE-X WiFi of new the dome. to currently addition to shipments use than the offshore TracPhone And single dual who an their coverage might designed we for full regions than not products below attractive as to The offer VSAT launched part want and to their of high-gain as thanks service and exciting XX communication of suite satellite while a LTE for strong. need When The compact our incremental logical provides we're is offers with easy for with in more an systems might a revenue networking. multiple the integrated LTE-Advanced packages. their more new to it is solution. offers as makes built-in expand miles This of They actively announced data while solution coastal that a importantly, a use boats TracVision our resolution coverage, use leisure new system sales recurring to

Now well-established support marine to this new leading brand network. sales with and another while arrangement KVH disruption partners leisure minimal creating marine our

NAV our inertial to Now market. moving on

achieved includes in now precision compared for high the for also or is most acceleration, tremendous progress cycle new photonic achieved these year-over-year. now technical we've chips our than a XXXX demand inertial batch That's to latest our highest for Our higher-value the We've The such shock as ideal satellite high sixth chip-based to it optic growth. applications up big launch efforts dynamic production highly Last chip. continue our were were consecutive our capacity breakthrough. double-digit quarterly made on of performance quarter. applications, accelerometers, exciting of measurement fiber shipment XX% an month, of a XX% introduced of quarter up development increased aerospace vibration overall revenues new The XXG meet to last version our results the FOG rockets. second This represent solution gyro. revenues making and levels of with faster the IMU. news record including and We new expected photonic systems. units the new variant performance we year's for

all now are performance our of measures. We meeting or target gyro exceeding

X.X over values example, For bias of we're per seeing temp hour. degrees

develop autonomous into new is fact, something of to to best Now performance this all-fiber our customers, be went the gyro. than effort in but that that would something, we trying our for to suitable you FOG recall chip-based better we when this were equal vehicle or develop

this samples automotive to in year. able confident be this specification deliver now I'm compliant So later test that with customers hand, extremely we'll prototype to

the in cost addition, anticipate such incorporating are in groundbreaking scale we packaging working on that performance technology technologies benefits we're that In can every In the and the to of one future. our gyros volumes. meantime, automotive-type this

the experience actual's. we that at anticipated conclusion, we're we've initiatives our been We're in while to So our even strategic to last expenses on XXXX. beginning able growth below pleased of year's operating start execute keeping the

strong innovation and We and and of into shareholder continues pipeline products a a increased full backlog we we're on this into momentum for revenues later QX, and path year for that XXXX. towards the remain carried services the value. with anticipated future higher new Our confident and

for to Don? Now the Don to details I'd call numbers. the turn on like over some

Don Reilly

Thank you, Martin.

the slightly As This million Martin quarter recorded of $XX.X compares our was announced above to quarter second $XX.X was in previously mentioned which million, XXXX. revenue earlier, second guidance our range.

quarter $XX.X Product segment, $XXX,XXX. of X% As prior you connectivity decrease inertial product second our second $XX.X million million that about year. of million, year. and in in was from The impact $X.X $XX.X segment of navigation revenue recognition year. last for By $XX.X $XXX,XXX. standard, an an second revenues quarter the the million this mobile know, revenues increased increase we XXX million the second was million for from a second or ASC segment, $X increase in revenue quarter segment million, was or Service from standard or about implemented of the $X.X in our quarter our quarter the the the recorded of navigation new Revenue $X.X in XX%. the new of increased decreased million XX% inertial

Broadband With program, the Agile to compared engineering quarter, continued growing our recognition in mini-VSAT mobile airtime The lower to or XXXX and of content $XXX,XXX by X% second driven The decreased total respect segment, XX% quarter. by the training mini-VSAT our AgilePlans Broadband prior was Non-recurring allowed to impacted of unit decline us increase Service doubled approximately also our XX% this FOG or revenue commercial growth service. new the year's up subscription revenue this product $XXX,XXX high of shipments $XXX,XXX revenues XXXX. with more solid business service our the standard quarter segment. yet quarter $XXX,XXX in impact achieve first by in its this negatively new of the top fourth connection than X% shipments. offset were VSAT year. revenue and last while XX% revenues connectivity in about to increased line revenue an revenue of and In segment revenues of about offering, X% somewhat of our quarter adoption our about our connectivity Sequentially, due mobile increased of compared the to the service were largely about this XXX airtime total which in TACNAV sales $XXX,XXX. another X%. record shipments Our from

margin connectivity profit as last second the quarter, $XX while was gross quarter with the second in $XX.X From our from XX.X%. our inertial our mobile second million, decreased in segment the margin of for million about XX% of about navigation quarter down XX.X% Operating second the quarter margin perspective, consolidated expenses a year. of For was gross X% to last compared XX.X%, gross XXXX were year.

for so $X.X resulted these quarter, a compared second $X.X and last million of of revenue, in to And the operating operations in from expenses changes the year. margins loss million recorded loss

Our mobile million an compared of compared operating year. navigation last an inertial segment with segment last million about connectivity our had $XXX,XXX generated operating $X.X year, of $X.X and $X.X profit profit with million

$X.X million million from Our from year. $X.X unallocated loss operations $XXX,XXX last about by decreased to

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

half recorded losses net the quarter incurred valuation by allowance and deferred tax first required generated we a XXXX, operating U.S. on in accounting second rules. by assets the the The as of

to As item, this a net valuation non-cash discrete income we excluded reserve a consider when non-GAAP we've this allowance be EPS. computing

net per non-GAAP compared basis, of a net in other million share diluted loss the of EPS things with $X For recorded million of the last of tax period $X.XX with the a the termination the net per valuation for in share excludes per year. EPS income the and stock-based amortization same net year. for - as quarter, and year. a diluted of loss $X.XX those transaction our second change $X.X period compared in same was as as which same allowance, we quarter period intangibles, non-GAAP compared $XXX,XXX effect second of and per last net $X.XX was last loss well a share in had of was year. On compensation, all with loss the the last quarter gains $XXX,XXX exchange compared second And employee costs, $X.XX non-recurring the foreign losses to our share

second debt quarter the Backlog additional capital our mostly the $XX.X to of of compared adjusted and was expenditures, EBITDA Net earlier the HTS second to $X.X last operations year our products were to compared complete end June of With million network. Agile quarter from million. Of provided QX services was was $XX.X program of the morning. published the $X.X breakeven approximately now And release our due for with measures, please new scheduled year. amount, to outlook during XXXX. this quarter million. net QX attributable up from this Capital cash in our was year. inertial million, our the our million of cash non-GAAP expenditures that Total to I'll refer end the our of in Our earnings turn $X.X $X.X delivered for was $XX.X million this of for and And to approximately million a $X.X navigation backlog reconciliation recorded be was at million. for remainder at full XXXX. June third and is that,

the as Our for follows. quarter is guidance third

revenue quarter range of $X.XX in be million the to higher revenue XXXX increase in $XX quarter share guidance estimated to third Non-GAAP EBITDA is about per and in due mobile of $X range negative year, segment. sales and navigation our and our compared $X.XX to last our million $X.XX FOG of revenue with to X% and $XX the in to higher inertial Third million. connectivity represents GAAP million At to midpoint, of is airtime share. adjusted be expected in QX $X primarily the between an negative segment of EPS per EPS to $X.XX the expected be the range

year, full guidance For is the unchanged. our

revenue $XXX $XXX to million million. guidance is Our

negative year expectations negative a for Our of is full $X.XX EPS range per GAAP to $X.XX share.

could companies revenue U.S. X, full adjusted new public this Our non-GAAP unchanged, although know, and per million. EBITDA be our Also, recognize adopt be remains year amount be of on success our $XX the that to the year. to expected our program in to you expected $X.XX in impact $X.XX revenue range we AgilePlans to required out EPS acceleration standard to the to recognition negatively were would guidance will of from I is of the point is as January the or share, and earnings further million $XX able XXXX.

to For $XXX,XXX, year full adjusted respectively. us, and somewhat that been the about new reduced EBITDA year. by in standard is and revenues year earlier in has reduce estimate $X in expected million, million full third by the quarter $X.X respectively, million and our estimate and from The $X.X the

to These this significantly in can forecast mix is customers. guidance you of impacted it's as the As the are amount impact by the with reflected provided. precision we difficult imagine, amounts our

continue of there'll This be XXXX, no in our expect to $XX guidance changes range in will exchange million For significant foreign be we million. the capital currency $XX assumes to expenditures rates.

our prepared remarks, Thanks. the open for lines and the turn morning's of the call. now the call So Operator? that Q&A this concludes over and portion operator will to I

Operator

Instructions] [Operator of first from Analytics. Chris comes question Our you. Quilty Thank Quilty

Chris Quilty

last know, ship Is some fair quarter. impaired unmet were ability assume I due some to you've that all up Or hurdles? with mentioned cleared Martin, units still to in there to you demand? the quarter, this your is the it production production shipments VSAT XXX% that constraints you

Martin Kits van Heyningen

so we demands. unmet it than some did We down. we were shipped to the We still There's more build booked in quarter, bring hoping backlog.

generally, is the -- I constraint now that, So field -- installations but larger think installations.

would longer is say, a no So production, I constraint. back-through

Chris Quilty

seen of start that into a the really from of install to do to revenue QX event had of to billing. part we of Or pick it year? you when in early is ramp customer show rolling next more timing Does see QX? or six shipments. up? expect the start just months AgilePlan And When and again, -- do units we've We've a so go up

Martin Kits van Heyningen

QX, I see think it then starts ramp it QX. again in and in you'll

of So end subscribers at for between of of growth the a lot example, came June. mismatch there's subscriber a bit on a because those

So June was and activations. a big month for installs

will see a in But almost quarter's those you numbers, worth. the now we have round So QX. is, backlog

significant of So as those more get a jump. activated, see you'll

Chris Quilty

services, what trend packages plans And -- choosing add and in terms movie whatnot? are customers the those the and to training you versus of and wise on basic seeing ASP content for then

Martin Kits van Heyningen

are So coming expected. about ARPUs overall, where the we in

launched we It's in less So because we the now enough a we VX-HTS. is coverage the less much product. earlier it's a the expensive really XXs most seeing global are than faster. And the It's customers. year for -- -- the well, good were

but you So it's they're the ARPU, if -- up well. look held at VX very

So more people XXX% like are of it's revenue -- in the -- more buying so than package standard customer. XXX% much than the standard than more package, terms per

Chris Quilty

that TACNAV the say I crunch of you down. for the from were give the thought in also sales Don, I less housekeeping like at doubled, margin $X the script. stabilization more it numbers, quarter, a guidance than gross questions. than and least million couple heard and the you And Can mini-VSAT I the one backlog looks business? way quick sales clarification but the us TACNAV

color if that. could provide on you So some

Don Reilly

well, are a those So lot to about. think

me Let address that.

million quarter last margins TACNAV this VSAT sales were... versus year were the about of second So year. And quarter in $XXX,XXX the our second $X.X of in about product

Chris Quilty

typically service margin service the -- provide. is think what I you margin gross the

Don Reilly

Yes.

second so of little less Okay, this just the was a the yes, XX%, of [Indiscernible] -- year. quarter probably I neighborhood in over that in

where this and and it's had quarter recover our especially the quarter. the no in costs developments forward, year through that customers lower or a beyond. little quarter came HTS to a into But We expect matures quarter -- used more come in fourth margin baked no that some going the and less It's little that the third and surprises second and fourth less as onetime network the in of the to second more real third again guidance the than expected brought to. we recover We down online. first or the for quarter,

Martin Kits van Heyningen

closer be XX%. QX back to -- should

is this normal So the HTS. of startup

we rate and take the bounce from really expect we've we around to back So add grow for XX% continue to on continue had product, to margins good subscribers. the QX HTS a as there so

Chris Quilty

on things TACNAV, on picture orders large bigger pipeline, the And still progressing.

Martin Kits van Heyningen

that's for mean, to being last so content, to added local forecast long-term add I companies new requirement call, Yes, is in the as still our this which -- that's program. with mentioned working, a on I multiple

with our slowly, And we local companies partner. working but that near-term we're to it is progressing So our several in want don't progressing have who so guidance. be

Operator

Our next question of James. Raymond Prentiss comes Rick from

Rick Prentiss

out a obviously there then but your affect the down Start ground or seeing bigger wars interested on are you what wars What are mean? feeling you thinking affects about might the what on with picture sea. the question. it about how more loud how market on you? And headlines customers trade might guys are The trade about

Martin Kits van Heyningen

Yes.

any we and haven't seen we impact I any in think, haven't that guidance. from so far impact, our included

So products as for impacted there, none of of now. our us are

around us. tariffs trade global So I on it think is is the impact picture unclear what, would the have macro it's so any, if still continuing,

We or haven't anything seen in Asia. of or any boycott products our China

us. And costs materials, bit, things so far us so part little our for in a of significant not a good most materials are like cost and hurt our could and that the impact but products. of So metals of

aluminum, impacting So that of we do see us very don't much. I use really course, but

Rick Prentiss

Chris' piggybacking the would the think continue that start day the ramp expect modeling you about accelerate you then might out it breaking revenues obviously you've up been as Can separately? base as Agile adding success and could XX% on installs Because and you revenues build. product, the we you given we've the time envision build as XX%, the actually over that would to that seen. start to get of kind shipments shows of where question, And the to our

Martin Kits van Heyningen

will so will time that impact as is we in tiny do report become core it so that. we start material don't until what to this Traditionally, Yes, agree results I the But is monthly percentages things. probably wait over we big is business, we out. we that variations going you something I breaking think do enough with

Rick Prentiss

third goes. a as us is you even obviously, business? visibility start the we as But XXXX how we and potential model And How quarter chip think given you've the into might out how the look the as photonic what visibility update. on then putting the beyond? rest the you gives growth better about as of business And to XXXX, the visibility on on is far 'XX? of should the And subscription mean of thinking

Martin Kits van Heyningen

So to our as our visibility because is a of and I continues think, get company, more revenue more better recurring.

think fiber well. I So business and our backlog. optic bodes by in business, driven And TACNAV our that it tends be to

pretty So gyro QX. got we have backlog good decent example, fiber visibility, our already. pretty We've a in for for product optic

Agile as goes, we've far full to to XXXX As shipping. early do guidance expect see of the we obviously, but been the too impact all give there, products

starting So costs the product, that get too autonomous In XXXX, start, XX is would those. would into gyro, those lower in we'll XXXX. going in photonic our worth for for the standard so do months' which will revenue of But that some probably I be market get to from point early our more of would we hope automotive. a that in significantly at XXXX say

Rick Prentiss

here later this Does know about means in it about quiver? the into has launched The just Iridium both thinking How marketplace? a it general, in what But you should bit. been Certus How arrow about product I are year? Iridium out help offerings costs? we think your guys have product quite another being the there. Certus Certus is talked also, you

Martin Kits van Heyningen

We've as is compared a us. tooth Iridium for what that We help couple will OpenPort think and the in the backup a very using It's nice very Inmarsat a product has. been years, long backup. very to capable not it but

so backup. be use faster us. satellites, a again, we for great a should So this service as better, should new new Certus be product it it But

to VSAT. service. to have got compared -- never want expensive and VSAT slow customers they've out of coverage, you're very so it's to So very pole-to-pole But compared

So I second, speeds service. per and a they've at got mean, kilobits of really we're is second. per it back-up XX megabits XXX

not something you needed it's it for you unless would emergency. So choose

Operator

Needham Valera comes next Rich Company. of from Our question &

Rich Valera

if shipment XXX perhaps I'm XXX us you'd strong very historically unit a kind to be units, mean, there, a talked it know Martin, about, is. was range, this quarter I thinking and confirm level what to historical? sort this you and to you XXX. I maybe I'm that Can of level of was quarter, give relative of the give north of but don't about would shipments north I were So rough of that, where exact wondering, want you'd guessing

Martin Kits van Heyningen

Well, the any significantly previous outside you're historical other the above above and describing. north of and of quarter, ranges numbers

Rich Valera

And then than that prepared orders in that actually fact it Is like your remarks your correct? shipments. sounds were those stronger in

Martin Kits van Heyningen

Yes, very the a all-time again, that for was strong for beyond quarter, installations. that so were again, an range orders for bookings record activations, for bookings, shipments,

between see recognized. way this of just yet you strong a really bit revenue because little numbers, is And you quarter. record being the it's it's So mismatch -- a a earnings again, of these there's and and don't see record revenues

-- the perpetuity so and we come recording revenues, every day the as and -- this then start units gets with business model. in better but that So online compounds

Rich Valera

think, of expect in that? something the airtime Is So would and see fair out XQ. that a X% we north to should growth, of I figure XQ

Martin Kits van Heyningen

Yes.

Rich Valera

from And like least you where stand continuing of just you perspective And sounds the third a increase on a good do fulfillment shot the have matching to that? you quarter And I'm your of given actually at quarter in kind that are capacity? shipments it not shipment your second sure, backlog.

Martin Kits van Heyningen

We are.

yet. So there to order getting close, the We're but time we're we're XX average trying installation to to days. from not under be get

on continue in QX. something that's to So work we

expect, commercial of so triple-digit slowest we year summer, the the Europe, particularly but in the -- again, growth optimistically, this is traditionally year-over-year. it's in QX So quarter so market do not --

Rich Valera

are you pretty And where sounds here, the then on encouraging photonics it project there.

kind milestones between place you development to effectively a here Just take wondering what this this the into and the technology daily need What that that put basis. to into are ship additional there products of development there? on to get production is

Martin Kits van Heyningen

want right it's really but involved most involved packaging. there's -- I but and which to next the lot reliability that's to batch like and related we of in way big that, device from a to that, doing latest the work chips. -- a what of the now underestimate don't next way, things want So mean, amount cost-effective say step, in do to that's studies were then the that. got package is The and and there's I work and qualification so invention results, and best reliable testing I way we no this of this kind shocked at -- of really

and thing We were from incremental and were an resolved design, issues We improvement. big just expected the four happen. previous worked, all doesn't to which normally get the four addressing those issues of

I now. we're think So of schedule ahead

Rich Valera

And bookkeeping you the then revs? the just the ones. couple for Could quarter hardware a give revenue and VSAT May FOG of

Don Reilly

So for $X.X the quarter million. revenue And... FOG was

Rich Valera

And the mini ..

Don Reilly

So one second.

product was so [products], TVRO other million, So so were mini-VSAT revenues that right? mini-VSAT and excludes just $X.X --

Operator

next comes of Chardan James McIlree The from Capital. question

James McIlree

guidance stabilization an hearing I were the think you that asked answer. guys recall but for don't on backlog, I

Martin Kits van Heyningen

That was [stonewalling].

Don Reilly

was of The to also million. $XX.X yes. for $X.X that shipped navigation again. year. [stonewalling], total scheduled But And backlog $XX.X million but is this was million That it in I'll inertial say script, be it's my was and

James McIlree

base? subscribers the script as as subscriber But And of a is percent maybe this what well. was the in total the Agile

Martin Kits van Heyningen

number, becomes that given won't and haven't more until We it material. we

over units of thousands many shipped years. XX the we've So last

all it's now of of So XX% out the XX% shipments and commercial XX% or about so, shipments going new right door.

rapidly it's a building. So

Don Reilly

share subscriber -- not significant it it's a but imagine, base, is from our can it's becoming you not yet quarter. every But but as total bigger

Martin Kits van Heyningen

but the now has year built years. installed base over one for available been been it's XX So

So...

James McIlree

broadband of connectivity from revenue are up? standpoint, does sales product the everything us Or you showing sales, that throwing the versus where service that or into you're show are When disclosure a apart And hardware you airtime? splitting the just mobile contract? component so

Don Reilly

And record for our it. own we -- own hardware even airtime. separately. in don't customer is of as component recognize bill as way. it charge. monthly charge, but recognize in customer we We all won't The a It's analysis And attribute purposes, it hardware simply, airtime we the we it's far -- component, monthly our concerned, the a that

James McIlree

okay. understood, understood, No,

And all you enough until that so airtime maybe line expect in you segment big it broadband would categorize going to to out. it continue and the gets forward,

Martin Kits van Heyningen

Correct.

James McIlree

right. Okay,

Martin Kits van Heyningen

of Agile the of every sale million the year, head, million to unit in look $XX over product you So $XX last high-level if that's order revenue. at on a

don't want term, periods. a but that's it's revenue in it be it's a because So is not revenue in significant, accounting recognized pipeline, to say, the correct deferred future I the could

show and that's our adjustment. and doesn't XXX -- that -- up again, So in not

So the being and XXX due Agile say, some look at under but big mind it XXX." -- either. being because it's that people in don't revenue to that have they that We have an under keep wasn't recognized XXX, to changed also impact upfront isn't

recognition, significant So not due but to this any makes still sense. it's that terms impact all revenue if is of revenue XXX in a

Don Reilly

unfair Agile sales, we reported also have think think And those have it's shipments, would a product been they sales, that had all increase I But revenues. significant to in mean... current other that been shipments product would been Agile all

Martin Kits van Heyningen

that, that's a We think very good point.

are about] we the we that, new confident business certainly be done has [down growth. this if and So very XXX% needle, moved that hadn't model significantly we would

So...

James McIlree

is that's now, just you sort that over million $XX to out of the million $XX that threw or annual [Indiscernible]? that number an line Martin, And

Martin Kits van Heyningen

Yes, be would an annual number. that

James McIlree

And so million throw say, year base the next be that's because well, as would into $XX subscriber let's to something that unfair just revenues okay, cumulates grows. it

Martin Kits van Heyningen

Yes, right.

as [Indiscernible] we're over So -- airtime well. equipment or X amortizing years X that's the

James McIlree

And the right. here? sampling just -- vehicle at of to what photonic kind chip the far out you from map the auto understand the relative year. can All you end goes and think with companies I the of as want mentioned autonomous happens as I to the market,

X that like what's So autonomous years what? again, for then X and market? the just market, -- or that vehicle So next

Martin Kits van Heyningen

difficult the the success There's the autonomous in that about that is vehicle XX to that's they're or thing using of players XX some now of about players. all test. We've different Yes, product have sold our the different space. most companies, to in probably type forecast, prototype

So going it every it's happen what's on because are to XXXX programs is and these also year, very -- top is to secret the difficult it say -- acceptance. the depends all

so which that nothing now is do that accelerate our to a when designed prototypes but are is bunch that to there transition our great, And of production. to can but we these is get low-cost, we're there things in goal a production, a can been we there's stay before. goal to we we're So them into do will do getting whole designed what and so very excited we've to don't out. that's ready to that's that's the trying photonic be results why done super And this high-performance chip, now never with path we have that gyro been about because

So this is really a first.

James McIlree

And put these a this to talking into it would design line. So going that about ins car company. we're that right? would GM you're specific be for a at Is say model

Martin Kits van Heyningen

Yes.

ins... I think design

James McIlree

into somebody design would they that. And

Martin Kits van Heyningen

think they we design I companies. to in opportunity word strong platforms, is too to think experimental the for are these the car in as We're many we and prototypes that production. a stay have still because go in

James McIlree

so And in I time for not production, I some time designed RFP call a just an the it out in so from, forecast. auto does from it, you automobile, to know decision design to when and can have experience into that generally. that design let's you period I'm looking market, with probably, get of guess, then formally specific

Martin Kits van Heyningen

customers I mean, we are our faster they're are moving and than of that we than slower concerned potential are. some moving are others

end we any we've to in able that would We I a year to for that the quantity we'll but products. that really in XXX,XXX know say they significant XX,XXX producing XXXX timing. would volume. have the it's players that 'XX, say to by can to some people And space unlikely be the don't time, be So this automotive-qualified be think vehicles are told of there deliver that

Operator

We have Chris Analytics. question Quilty a of from Quilty follow-up

Chris Quilty

all the eventually mean capabilities, Tinley and about optic to infrastructure out transitioning in talked want qualification. just the I up that chipset, of get all all your drawing a of does Park legacy Martin, I that built stuff you've off written products gets you guess towers, When from [indiscernible]? photonic fiber winding that to

Martin Kits van Heyningen

difficult the so products that be But eventually. that ready that start absolutely expanding anything, we reason we fiber will go And Park plans still some zero to current we in splitters, I mentioned is the replace gyro manufacture this our is think to the continue. as modulators like polarizers a optic used production and So and the fiber, parts fiber individual putting components the couplers we'll about a ready that but who's But qualified. full there's to Tinley to facility. our customer XXXX a have so in talking then our point. And at XXXX, or production on in be for would write automotive production expect beyond, that to off do of be

shift starting second we're fact, In and we're on we're there busy working now a hiring. because very

Chris Quilty

And assume, photonic be that to process a would traditional so design, that probably set, military? long the to very chip qualification shift the other has customer from fair

Martin Kits van Heyningen

No, in we but this with be were honest planning to products. really you, on our high-end using

So a kind of surprise. it's of a bit

and opinion my put we're now what probably because we're it's eventually, is it products military including So going reevaluating stable. personal reliable in it. we'll with to everything more do But more

Chris Quilty

produce. to cost lower And

Martin Kits van Heyningen

Yes.

Chris Quilty

one X Any or you've So wise out Or final there It's competitive to moves seen doing the competitors in what AgilePlan. or your is that which position? been just order announcements in pricing only question, market? for or so. evaluation months are counter

Martin Kits van Heyningen

which of think Well, for is market. haven't a seen combination AgilePlans has it's live from HTS a specific really X I has the X, been for The I any those response things. network year. accelerating been and months, out

of where on I price sort competitors always price low in to is been like our the side. think play, commercial has

-- any but haven't no, seen So specific response. I

Operator

have further queue. questions we At no this in time,

Martin Kits van Heyningen

or Great. you. Well, to us speak this feel it time, if directly, and to us needs Thank free anybody with give up, we'll e-mail. wrap a call

Operator

concludes today's teleconference. and Ladies this you. Thank gentlemen,

You may now disconnect.

KVH Industries (KVHI) 5 Aug 182018 Q2 Earnings call transcript