KVHI - Earnings call transcript Q3 2018

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Operator

Ladies and gentlemen good day and welcome to the KVH Industries Incorporated Third Quarter 2018 Earnings Conference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Mr. Don Reilly. Please go ahead, sir.

Don Reilly

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

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

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

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

Martin Kits van Heyningen

an results with our revenues the our which increase while VSAT report $X.X results to momentum us over third These the our in of were everyone. guidance. that year, for for first than line positive of quarter the drove million, was to strong record of today. QX more last X% XXX% year. for was pleased and Major half $X.X reflect Don, was quarter Thank million, continuation good joining morning shipments, you year. $XX.X quarter results Total for of same all a grew the you, our from last last the compared time factor in year. EBITDA third third quarter up that I'm Thank a adjusted million the quarter

our fact first In than nine of of XXXX shipments through more all already VSAT year surpassed months shipments XX%. have the for the by our

but time grew Our of as AgilePlans Service XX% traditional of Connectivity by driver subscriptions program VSAT increased a as our our compared growth, airtime of X% to was same the a At significant product year. almost QX this sales well. last

more specifically in at are say that timely could keep now our the to orders Looking fill for quarter we we maritime production a the AgilePlans, capacity entered I am pleased than and with able SATCOM growing more our up fashion demand we to with expanded we system.

This VSAT in we in shipping results cooperation our quarter. leisure year, our selecting the installations improve seen partners with Since are positive markets, generation next JSAT. data speed to orders. delivery efforts efforts of XX% field and In implementation both Most VX-HTS channel AgilePlan addition December over which data supported VX-HTS a high our we by global reflected installation today. use in of year which revolutionary been our began Intelsat never results. that's network and we we fast performance Perfect was Mbps responses that for download TracPhone and VX-HTS, in come VSAT. XX a record the both of antenna. continue these a in the delivers with of level a commercial as quarterly last are last we've XX were All channel, centimeter a with unlimited ago fleets and increase launched maritime SKY which and for The systems separate is as introduced worldwide, possible one product It remains speed

system combined also announced an world's delivers access room quality HD this per such serves and for a how internet boats month-to-month some that level that that only well size faster sailboats along megabits. fast communications with X available using services to airtime Show Now, into Customers the that tools to enjoy X TracPhone TracPhone data in the meter The suite a diameter plan for commercial VSAT XX computing The as an system, second, vessel plus speed streaming the and powerboats applied flexibility, network don't down fastest, is at antennas. visibility an megabits fastest XX.X at speed they VX-HTS's airtimes, maritime data Not connectivity have up used. VX-HTS, make added inches innovation it value satellite system Lauderdale hour. this same work VX-HTS large a plans and It speed small as they've their of just entry ultra-compact that complete XXX X boats VX-HTS. morning to affordable antennas. metered same of in $XX as full smaller fishing as is controls fast over starts its network for have help lightest, can and Fort their ensure per the megabits the we've powerful VSAT VSAT is data, at second has pounds, Boat both ultra-compact with month smallest, with be and as offshore and the and it's unveiled choice high and than only also scheduled

addition product. for line. It’s potential the new about product excited very newest the HTS are to our We this

begin region. the channel technology the the The of Singtel to customers announcement following customers during today. and services sales of for potential new grew Asia's our to Singtel competing shipments one the is third leading largest global partnership quarter, service August. our SATCOM worldwide end with communications audience group a of of and expect providers We at in

other busiest our the content we KVH's new training access increased increase AsiaPac products around based Manager news, with SATCOM expanded only Result position customers maritime to QX. solutions. of fleets will in reinforces in and and our but not make our quality, were quarter believe us that the turnaround although products great service VSAT We value launch validates and for as beginning its leading The visibility mobile opportunity and AgilePlans. lower Videotel optimistic task saw Performance platform the in revenues in including In largest are of to the bode and business industry, that return growth, subscribers number providing be the achieve some region, of and will competencies the connectivity our Singtel offerings, for Now the of it which for our maritime our is the the content performance this we ports a world. business. is an

the using TV inclusion drive strategy of sales was go part continues of to customers for of content selecting Our that airtime the of KVH. NEWSlink well, with to XX% reporting reason AgilePlan

our growth an training on the of training reduced the quarter. drive of Videotel feature competency now churn. and increase continues helped adoption online XX and has the the of platform based points and launch On to Manager and Performance over that's grow, new XX% the task with eligible last The

customer won LTE-X cellular tightly used here both best though on in our come integrated TracPhone strongly services coverage year This to The of solution professionals our end second our We by in has speeds of Marine continue TracPhone communication TracVision who system comprise a be key year proud Electronics boats that on a services, United a And adding next as and our The And introduced smaller our and system to few the to the the States, global our vessels. we're annual the new with well future the the the marks consecutive and and TracVision product system larger XX% that XXst based SATCOM over see from software offshore and commitment months, of our TV-X which Association. finally, excellence as be faster the at system, recognized complement with having bringing partners this were outstanding quarter. as roaming. interest services VSAT strong VX-HTS us systems standalone marine was has very deliver the success. revenues honored extended hardware the of that experiences XXth we'll products, the and to the and and new support, Even believe that we in TV again to having it awards honor. their our National members NMEA September. received is TracPhone coverage

Xth lower to we've expand to gyro inertial continuing recently growth our business. Fiber demand this XX% market. and platforms, quarter rose demand mobile of high high facility fully cost staffed the Turning in Airborne our consecutive the the towards like capacity customer result requirements was double-digit of applications in everything. and second is over autonomous to We're efforts a navigation match and our imagine Illinois. optic this year-over-year, sales our in general for performance shift our jump in move stabilization, mapping at autonomous This

Our an and integration, accuracy, performance these and choice reliability compact them system's ideal make outstanding easy applications. design for

$X On $XXX,XXX market sales part business, that weapon precision need sign saw a pointing part a systems. business for and core In TACNAV addition, these order We've critical starting again. this our from weapon million to side a recently continue in our weapon stabilized to a grow which that's requirements a of received meet ability systems. our have year-over-year. our of years our is we been supplier to decline high to remote many stations Thanks to the

seeing we're encouraging some However, very industry. in this signs

about one that For few voices compliment inertial among the of backup concern ours and a GPS. as GPS both many for raised value a years the navigation and was system vulnerabilities

coming years. army the with position deploy and solutions schedules the on navigation, onboard is coming U.S. setting of this and in to vehicles thousands Now assured aggressive military timing issue is

Separately, itself systems and finally, army prime get on of in make automotive incorporated end these military this our take FOG the APNT samples chip inertial weeks. new few space, a the with and is in partner by its our to continues the goal of before compact a we deliver remain possibilities technology. samples on precision into field TACNAV continue contractors upcoming the the We're fab second integration We a we diligently for customers our we're photonic the so this very align and and full to ranges systems and initiatives. of leading pace technology advantage the strategic Our with working well. year. towards to of And proceeding planners, to in house to can prove have XD progress to the development nav qualifying the to few test of expect system automotive next

nav groundbreaking we year. start right HTS photonic the I of and technology conclusion, the military market, year, we're we We're I base the the assured customer developing navigation in a innovative about very into making in the half the services. set our of pursuing strategic AgilePlans our continued market. inertial progress path believe at and feel the for on this momentum the pipeline including And the continued building on development outstanding first whole as and products our continued the launching built for year, XXXX. year for initiatives growth QX achieving of for ourselves So the new positive for efforts products, for expansion

Now, Don? numbers. turn back call I'll the to for the Don

Don Reilly

Martin. you, Thank

mentioned of our quarter third XXXX. was in was our to $XX.X quarter Martin this which revenue within As earlier, range, guidance million previously $XX.X third recorded compares announced million, the

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

Service to due increase XX% marine year. about by as to of growth, last sales. by Martin decreased mobile $X.X mini-VSAT or offering. broadband revenue XX% The continued $XXX,XXX shipments $X.X connectivity X% mobile also sales segment. this segment Our growing content a was of increased $X.X commercial $X.X top the about revenue were a program revenue sales, product this Non-recurring engineering revenues TACNAV service in connection compared in with million this over $X.X in due shipments to respect standard approximately prior our our its of our XXXX increased and FOG connectivity from over mentioned offset the of the unit offset XXX impacted and year. up solid revenue revenue adoption MC quarter, airtime product revenue QX primarily X% segment, XX% from total mini-VSAT our service In by business lower ASC Sequentially, XXXX. sales were our quarter new the million revenues while line of to in increase product negatively million broadband land in of X% an increase X%. increased decrease airtime million. $X.X million training million partially agile QX or in of product With The revenues to and XX% compared new

navigation was XX%. third inertial over $XX.X XX.X% quarter margin From to under gross decreased million a the of year expenses slightly and For the gross flat quarter. mobile in gross just as our margin margin year. for consolidated remained third to Operating this quarter, and perspective, just last profit XX% last our segment third our compared year's was XX.X% connectivity at

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

with an connectivity operating million year. $X.X of segment generated last mobile million of $X Our profit compared

our the navigation profit had operating an of for million segment year. compared last inertial $XXX,XXX with While $X.X quarter

$X.X slightly million Our year. million unallocated by to from increased $XXX,XXX $X.X operations loss from -- last

for overall XX% the Our rate expense earnings. third which tax foreign was effective our just on under tax reflected the quarter

in net U.S. tax as quarter third losses allowance incurred by XXXX rules. deferred the the by we valuation generated For the accounting operating recorded required of a on assets

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

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

recorded quarter As Martin mentioned, our with compared year. was adjusted EBITDA for last $X.X million the million $X.X third

the For a million, morning. of please year. measures, to of our our release complete compared provided last reconciliation non-GAAP increase refer operations that's cash Net to earnings was $X this in that an was by quarter $XXX,XXX published

the to were was expenditures expenditures end attributable our up the capital million and the capital million, somewhat additional in debt from the program. net $X due mostly QX Our of quarter our quarter Agile at to $XX.X

negatively inertial navigation year full now was at and continued of guidance quarter services $X.X end which the impacts program, of operating record which partly covenant which and amount products with attributable we’ve to more investment as extent launch headroom, markets. initiatives agreement as As principles of reduction be us certain margins I’ll the are our versus And earned decline and $XX impacts as earnings in reduced expected a yesterday, remainder photonic being completed you which of recent products. debt repaying more our and in know from during lower that due product long-term Also higher of particular net than that, with earnings, release approximately described we was international about in chip-based significantly somewhat improved scheduled although revenue million revenues with continue million of to of result our our Total by as earnings to the provides in The our year, million, the than of of FOG. will service in the our We’ve million earnings. included for which restatement service high a the to delivered full during Martin associated to for our initiatives. $X.X year. beyond delivered should fourth margins to able lower our QX is XXXX. backlog execute September QX of outlook on is and turn orders, XXXX. we year and September scheduled the our improve The end to QX continue our somewhat AgilePlans the full which this for of revenues Backlog continuing $XX.X our such at these reflects some remainder success to be expectations the also And for new tensions to long-term our we margins $X.X be clinical expenses in to and million, period. QX well forecast the TACNAV contributes as in VX-HTS expected lower earnings new

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

EPS is our $XXX of for to revenue EPS $XX range as is $X.XX range January you per in the our a to companies share. public expected be expected Xst guidance standard $X.XX the from GAAP in U.S. non-GAAP $X.XX to negative full For be this is the to million. year, on year. full is were negative to know $XX year adopt a revenue $X.XX our to million million expectations And diluted $XXX million, Also and all to required adjusted of share new recognition EBITDA our per of

amounts For million $X fourth fourth reductions and $XXX,XXX $X.XX is adjusted us and to year. standard revenues to the reflected The in expected in respectively, guidance the and provided. EBITDA reduce are and in non-GAAP quarter the EPS to respectively. full full that expected $X is quarter be $XXX,XXX million the for amounts by the by $X.XX in new These year

capital expenditures of For our will exchange the that no million, foreign XXXX expect be $XX currency this changes rates. assume there and be million we to will $XX range in significant in

concludes that So our Q&A over operator morning’s the to remarks. portion of for call. line prepared the call now this turn Operator? I’ll the open to the

Operator

Thank Our comes McIlree [Operator you Capital. first question Mr. Jim Chardan sir. Instructions] from with

James McIlree

you. thank Good Yes, morning.

Martin Kits van Heyningen

morning. Good

James McIlree

how the -- TACNAV guidance expecting how much the you to make reduction on so Can indicate it you’re TACNAV much sense. have reduction

Don Reilly

huge a Yes, I say it’s it’s a but think -- I not element. it’s factor, would

So have parts. complex moving as business know different you we fairly of lot with a a

think So year. I I upside for say more was would that the for that the TACNAV guidance

it’s significant a I not think important, factor. but So

Martin Kits van Heyningen

TACNAC... So

James McIlree

So you would…

Martin Kits van Heyningen

what high-end us the brought I with our of closer would to TACNAV TACNAV would have expect say we the range.

So it. the upside expecting that have we look we'll doesn’t are

So we the comes that higher end. because is now come range down of a within out

James McIlree

it delayed predict than front. on reasonable it know to Okay. difficult more the going it's it's And a But expectation? I happen Is what's to gone. seems like political

Don Reilly

Yes.

have seeing any events at are delays, how but haven't going I just point think we we these would anything. to trouble seen so. this accelerate I say

crystal in now looking ball we forward assume so QX. our it's I’d in is say happening nothing So --

James McIlree

you're for elaborate Martin what integration or Can strategic that for? sale kind there? a on looking little distribution bit you looking Is tech a what a Okay. you or or a chip. photonic the a transfer partial do mentioned you of or partnership on product And

Martin Kits van Heyningen

Yes.

bring product a So partner help help to at looking strong this what credible for who we're market and us deliver is can scale.

manufacturing. on of in been today designed in very self-driving have product But We they it technology in a credibility and of and these in So cars to the we've be be the strong programs it. successful getting been partner road part I’d that very our front the getting decision some in to has have market. of feel order makers. We've high into of it our us scale most prototypes helpful would who again to volume key to succeed transition for when successful

we're So looking that's for. what

James McIlree

you long And But I what get a in just the think it's difficult of might time takes that. to accomplish it how best take partnership? terms know predict, it to to guess do

Martin Kits van Heyningen

forward. by we is it wait. done Because Yes. certainly it's that to get goal middle I'd don't push two we move or quarter Well of to done next if our the on XXXX would want so in then we alone. say I'd the say can not

So…

James McIlree

are right. they What you All after to get customers steps quarter. delivering And said the samples you're samples? this

Martin Kits van Heyningen

today's single happy we're And what today whether want So they're what delivering product customers deliver demonstrate and IMUs that full are buying than the is to them fit doing function they're better and form, as is they're buying who these with access are the to we is and product they're or happy that they're we're something with. performance. buying identical or good the performance buying that

then once that, design, cost question remaining demonstrated be to know we've the of we only new is going less. dramatically which So the is the

where customers that chip So we've photonic promising. performance been we now at the we're this want delivers confidence that to the give stage our new

James McIlree

Good lot. a with everything. Thanks great. Okay, luck

Martin Kits van Heyningen

you. Thank

Operator

Thank you.

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

Rich Valera

Thank good you morning.

on to to the go fair pretty up want a level follow neutral much supply auto after a of and assuming of that OEMs. partnership you'd of below level Is I'm wanted can OEM presumably Jim's to company sort one the Just all question, sort assessment? that

Martin Kits van Heyningen

what exactly That's we're targeting. Yes.

for manufacturer So key that And logical don't we're some in place now. example. be selling We locked to although a be to have would OEM want we to start. to that one

is want others. sell would could and somebody to we neutral So who

Rich Valera

admittedly of you XQ. what Any the some sense. activity on and in I'm then mini-VSAT progress a how was unit appreciated? a color if there order off very had color will on how shipments. order you be some sense very XQ strong you strong give I the makes think obviously strong wondering And trended give Right, can Can activity. any

Martin Kits van Heyningen

of so the of slowest is the one seasonally year. Yes, QX

it So see great was in such strong to performance QX.

again we expect QX strong. So be to

able just the we're that to very continuing installations the of been pleased accelerate pace that So we've and and delivery. momentum is

we're on to is pretty is range, a vessels which that actual XX day on lead the good. XX in global for time which down So to in installation basis,

Don Reilly

was quarter record XXXX for QX company an the And shipments, versus any this of any overall was -- a but was in QX QX. of QX year a

Martin Kits van Heyningen

I think QX was not...

Rich Valera

Yes, to seasonally an and Martin was I'm right. referring that probably your from up down and sounds from I orders order like was significantly that it probably QX perspective from comments, guessing be fair? an sequentially, which perspective. typical year-over-year would Is order

Martin Kits van Heyningen

That's correct. very Yes, close QX is but it very to was which unusual.

Don Reilly

for have So a say might QX quarter quarter of -- the year. was company I record to misspoke, any I overall any every of meant

Rich Valera

Fair enough.

Martin Kits van Heyningen

a record. was QX It

Rich Valera

to just the subs. airtime and the And perfect. it, then around understand wanted dynamics Got mini-VSAT

but or it grew at, if like mini-VSAT why your overall So think if that's airtime year-over-year not they're growing sounds of that's airtime, at I'm airtime I not least X% same X%. and sure And rate? subs revs you sort wondering said grew the

Don Reilly

and the to let's going if XXX during in on months the because the you so was you're add average math quarter during that you've you three adding fashion for for the XX Yes, on added exiting. XXX zero linear subs a subs then quarter subs make easy say imagine it quarter just

the for would it times be ARPU. So if look XX the you the equal at quarter of of revenue

it's when half exactly linear. it's So almost

the so for average of subscribers the revenue number the ended growth the -- is so quarter of the the I'm the growth saying the quarter , in subscriber with last is follow You whereas day number up on you it’s of for quarter. the

Martin Kits van Heyningen

last So revenue. of up the with flat be you quarter of on if could all came subscribers growth of the your day XX%

Don Reilly

Right.

Martin Kits van Heyningen

your day one be on The And the would identical. expecting. quarter of all conversely if they you subscribers then added you're way

Rich Valera

period growth the is what of guess year-over-year which subs the the quarters for in quarter would sort theory three incremental… that I right adding to be been in revenue. prior in quarter happens current then be final fourth quarter, confusing the And of you've would part driving

Martin Kits van Heyningen

the to always subs. So to of prior of and so right it's prior number the it’s always compared compared both the yes, -- years year compared revenues

reported the growth the thing that's that So number is revenue in that quarter, based the is the last total subscriber subscribers was of paying subs of the But money. the subscribers. only on Meaning day number if airtime are confusing of the growth you will. on the average in days

Rich Valera

Right.

Martin Kits van Heyningen

-- if same be the it's exactly subs to the going always you're ending linear, adding day half if subscriber every is the that it's So always of total.

Rich Valera

Got it, And just was? guys have think enough. us tell convenient historically be you airtime that fair given can to you I the clear, what Do actually actually you wanted that number. revenue have

Don Reilly

just Yes. $XX It was million.

Rich Valera

Got it. wanted And just this then to revisit order TACNAV situation. large

of Martin one have which no as you orders of various least and far I some built in of no is but and orders semi obviously think I that the mini-ESAT, large a think in now inventory are is it cancellations got sort three waiting but changes completion. of at we're an we in and sort that yes, already the as to of of So say others of there we've still states developments the that new Right fair least those identified handful is or over answer past in at not know. two sort if we've

Martin Kits van Heyningen

things. anything not. And how that accelerate everybody going see we're else actually distraction seems news and No, that’s would again to to absolutely to hard trying in just factor that We're just to related not read happened. it's the that in it's we're factoring it's taking we like because forecast, that like

QX us it So no into put to reason for guidance.

-- the timing, that's stress So bad I this has that just not and all. but happened positively nothing what impact you may are thinking

Rich Valera

for That's in could then actual FOG the gave percentages for point. TACNAV, you a numbers I you dollar know the quarter? fair the actually And but one. give final and those

Don Reilly

Sure.

$XXX,XXX. sales So in were the was about million our $X.X our TACNAV FOG quarter and sales

Rich Valera

Got it.

Thanks Appreciate me. for it. it gentlemen. that's Okay,

Don Reilly

Thanks.

Martin Kits van Heyningen

All right, thank you.

Operator

you. Thank

with Chris Quilty Quilty Analytics. comes next Our question from

Chris Quilty

Thanks.

follow a for Don, heard front up Just you maybe I the a can give and the again X.X number, missed navigation integer. on that backlog inertial

Don Reilly

Yes.

just from second. I'll my it back read script. one Just

Chris Quilty

the in can pull there, we’re gross while also margin quarter? up you And mini-VSAT the

Don Reilly

Yes.

be first $X.X $X.X backlog this So year. million to internal for scheduled million, was nav shipped

Chris Quilty

Got you.

Don Reilly

margin our XX.X%. time say was And air XX%,

Chris Quilty

Okay.

what down was a margin? bit, decrease So driving in that's the little

Martin Kits van Heyningen

actually expected. it's Well, we up sequentially as

of to So speak color let point specific a I'll just from view. Don numbers. the But

added So end we're we running the effectively year, as ACS two the network at of very networks. last

onboard subscribers larger spread we number the over a subscribers. add cost and as are being So coming of that's

actually sequentially. we're turnaround pleased in that with saw improving we QX So the margins pretty

We expect we on continue HCS more and QX as into get that trend network. our more to people

Don Reilly

had second and onetime did nicely the other quarter like the issues. some actually we some So from quarter. cost But second margin improve quite as mentioned

improving, we improve. XX.X% expect it's it So to yes. continue

Chris Quilty

Okay.

Don Reilly

not improving have fast still improving or as continue probably we confident but expected, might So too. level as our and definitely hoped

Martin Kits van Heyningen

And Right. speaking ARPU. then about

So And sequentially up I increasing well. are bit as a they actually ARPUs are think year-over-year. little

right So in also direction. going that's the

Chris Quilty

And And again are seeing well minimum? trend the And a being of above upward is that? in you if what's migration AgilePlans? any that AgilePlans so driving

Martin Kits van Heyningen

total speaking of which I also was so we're in little the a Yeah increase But ARPU. AgilePlans for bit about seeing ARPU nice. ARPU, is

Xx So Xx it's still holding the minimum. at to

is the continuing are higher which people to great. So packages, buy

the been it’s up slightly anything on ARPU, more now. than so it's if year So a

good to see. that’s So

the a movie offering far improvements air in package, further as a require upgrade. As that's not ARPU are server, so which an media over new does we

in And we have the rolled new out. of here. So we’ve other options some introducing be couple content that we'll that next just months

are up, subscribers ARPU are up, was up. overall, So unit shipments

as going. Don be, happy I up. agree gross pretty is with that we're the while not happy And the as we're things way could with trend it margin the are with So

as right well. in moving that's So the direction

Chris Quilty

non-AgilePlans of much. I that declined. think AgilePlans Okay. down other of the thing that up Was was as the sequentially of a One percent quarter, simply being so commercial because in number

I that sector? another is think like XX%

Martin Kits van Heyningen

stat that's now. right a I No, you're non-important think right,

think is great buy they I fleets had is which to want happened us. couple a big the who what of we hardware, decided for

So they Agile, want do is happy than to buy we’re perfectly which rather with.

So a sales the that’s -- typical for demand but no seen not then the reduction so negative still we’ve Agile. Agile going and commercial in

Chris Quilty

prognosis now, longer business? was growth couple you that years in and your that’s Content achieve up of can for struggling also and for what’s a whether of been Okay. near-term term sort

Martin Kits van Heyningen

addressed down my we’re the in was together where new of we features that’s prepared actually business, our number new quarter. to vessels Yes, the we and I remarks see and starting this content have software which and and training call what grow content actually

was increase subscriber. of think number net there an I the in

expect on So of seen yet. we that that growth revenue line, but do return the haven’t to we

quarter. year-over-year So this that was down

Chris Quilty

you. well, that most sufficient business at it’s either is you of can continue Got supporting visibility of the as or Do this I pipeline XXXX? to grow What’s the rates the your really business outlook have customer you contracts sort profit think mean you operating point. double-digit FOG at doing into into XXXX? And with go your

Martin Kits van Heyningen

nav And we point this guidance at inertial our but anything both reversed. are VSAT basically for think and trends haven’t have true obviously I we that so, yet, for at to looking don’t be seen trends these think that’s tells QX business. the we’re and business I going us that our

positive and So and we’re on nice trajectory in. successfully market designed getting a customers are customers to with their were who more products

optimistic that should we’re So that trend continue.

Chris Quilty

a the of to started just And there is the or business growth broad based? really any it drive certain single in or that application is there truly item a either customer has

Martin Kits van Heyningen

It’s for pretty there there, some order vehicles these we autonomous autonomous I a unit. on for drone vehicles for million basis based, is but $X.X get stuff there’s sort yesterday of mean in inertial measurement nice also big daily again broad

so I there So different our it’s very when about FOG think applications. -- business are many

autonomous So it’s really everything now. is that

of lot there. different a seeing we’re opportunities So

Chris Quilty

business. give some on regional the business issues any And obviously are QX European just Got to the back softness, that seasonality impacting on are a Asia final When question or how you we basis at you region concern? look you. seeing either you get that Pacific mini-VSAT

Martin Kits van Heyningen

bookings Asia is basis new players sales No, haven’t that our in some but are seen always you have We European new global on a we anything really strong. there been the see have with market, we’re strong regional especially very the and product. optimistic and

We’re going to faster it’s segment another terms speed. both of a and in whole return down link to forward address up dramatically

expecting So that continue. we are growth to

Chris Quilty

VX higher was to that will also mean revenue AgilePlans be VX know but that of VX, it always volume than in attached VX have will I And more is that metered… contribution terms volume a product the that or I important terms of in how of is

Martin Kits van Heyningen

Yes, so right. that’s

going relatively a a hardware of HTS it’s cost AgilePlans. hardware the fishing, great out for part the be are hold workboats, to another think but to to pricing there replacement speed VX, be VX straight we just systems So the affordable that won’t L-band compared and with It’s sale a for category.

year the this dramatically VX. the out sell actually we’ve of course over VX the So seen

So we think because of wasn't. VX was HTS and VX

we're just market. sort to expecting So of part reignite that the of

Chris Quilty

on good Perfect. the Congrats results.

Martin Kits van Heyningen

Great. Thanks, Chris.

Operator

you. Thank

Prentiss question from Rick James. with next comes Raymond Our

Rick Prentiss

Hey, good guys. morning

Martin Kits van Heyningen

Hey, Rick.

Rick Prentiss

a follow up couple Hey. questions. Wanted of do to

political inventory of orders. and a didn't it that tensions you guidance still ever or this that of you'd you in some were hadn't an international or been is the mentioned extra First, two the side. on put when kind in large in guidance... those I Is the the just three think TACNAV big in case had couple the TACNAV TACNAV

Martin Kits van Heyningen

Yes.

So out TACNAV orders was the into related year. there some in that were when more our that mentioned very the guidance there range, amounts sort of of the not guidance the was running annual smaller set we Don in high-end at it were the beginning to as backed of large mill but the guidance was

Rick Prentiss

Right. really still cleared. kind one as get in very are wait and to weren’t that But a in guidance those large guidance you the for not

Martin Kits van Heyningen

That's correct.

Rick Prentiss

question. Okay. of follow a the on AgilePlan And on one up the then Chris's

commercial up? Agile think you your And XXs. think that production the I little Agile think capabilities had Should XX% XX% took to on does be. ability there hit where XXs of any you what really was heads it mentioned as that into back we to take a get in fulfill You sales was the bit, it time. impact Could rate you this the could of get That overtime? down because of about do sales it think

Martin Kits van Heyningen

Right.

to see couldn't reason don't I any think why I get XX%. it So up

that business we but I model the share straight very dramatically Agile a It's think this growth. continues AgilePlans is prefer be again sale. market sort used of pace not increase the a attractive, to gain to that over of and to we've that

hardware wants other customer for it's fantastic right better. to a buy out cash words in flow the that's actually So if us of in terms

I But So continue attractive to there anything in think is think model that it's I this wrong not that market going selling is we grow. it's to commercial do we're think the and that hardware.

Rick Prentiss

like just it said. sales facilitate you And really Right.

Okay.

Martin Kits van Heyningen

the do like your want as what your you really big software or long want preference as you theirs. on do on you software It's is of cloud the care premise. become companies And don’t it a customer

Rick Prentiss

margin, you Yes. further have happy and far that gross improvement, would both than there on help think think? to And you you you then a you're available. as has Can not you pacing. but little you understand the couple how and it’s expect us maybe where improvement at as could those options take of it benefit margins head times long on you've touched been And as going slower a

Martin Kits van Heyningen

probably Yes, be won't -- back to but the -- expect we get XXXX, high-XXs. we think in in to historically, not we're

the should Next progresses closer And off getting year we should get we to start -- with by were as plus. where we year year closer and XX historically.

Rick Prentiss

the the what to What And you and was the restricted? it you looking Okay, are redone debt that you've get the of debt covenants less that get briefly there, make real to kind covenants. sense. do then on to your also redo lighter the some catalyst touched

Don Reilly

due first on the reason was debt XXXX. the of July is So

that. get So out front of in I wanted to

debt current. So then as the report I have to

so that to in. run bank particular were make that, in real the issues revolver. the month we less happened doing CapEx covenant we the have partners requirement that with increase we covenants coming certainly on our work that up that was the to since any honestly. So cash. driver eats quite against to restrictive But we don't And

a us covenant least So is leverage covenant ratio ability up it. But X.X ratio scaling the the if revolver a us the but to debt not down we affect against the flow at the at borrow term, to to was could leverage of end of against ratio invest. old requirement more requirement our leverage very need cash event or high X.X, allowing run that new the constraints -- the any in X.X year the gives it to

Rick Prentiss

whole fit ramp the And looking and at? into you is photonic that that might be partnership chip

Martin Kits van Heyningen

I'm that not that really part sure of would this. be

we mentioned anyway XXXX in mind my in the where this AgilePlan. agreement more deal least was see I that at in Don into due we coming as the years entered So envisioned hadn't ago bank as

it to sense our business were doing in to So today. model it debt makes the that. the maybe agreement And realities supportive very get as is they match of

or it anything relate I chips raising photonic to really So, think like. money don't or for FOG

Rick Prentiss

want that leverage. have It equipment to is you sales obviously if because tied to to capital to the able you and will meet have really the just AgilePlan need you to be you of some strong or capitalize

Martin Kits van Heyningen

Yes, you That's right. have it. got

Rick Prentiss

because just with bring the thoughts what was might I figure out I supplier. future to Yes, FOG, occur partner for table the any like CapEx Okay. just to or about would the trying structuring was with relationship the how the that

Martin Kits van Heyningen

brings for. No, really credibility We're and minded for open looking are we're we’re the fairly that work. two how about us something could it things Those looking scale.

Rick Prentiss

a Show, exciting good day looks it like there. the the Great, product launch Fort Boat well have with down Lauderdale

Martin Kits van Heyningen

Yes, we're it. forward Thank to you. looking

Operator

further no this questions in time we have at the Speakers, queue.

Martin Kits van Heyningen

Great. Don directly follow-up And with contact you. we'll Thank sign to or feel questions. and off free myself at this any as always time

Operator

gentlemen and this morning's that concludes Ladies presentation.

thank your us disconnect joining this And may lines. phone you You for morning.

KVH Industries (KVHI) 31 Oct 182018 Q3 Earnings call transcript