KVHI - Earnings call 2 2022 | KVH Industries, Inc.

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Operator

Hello. My name is Lisa, and I will be your conference operator today. At this time, I would like to welcome everyone to the KVH Industries Reports Second Quarter 2022 Results Conference Call. [Operator Instructions] I would now like to turn the call over to Mr. Roger Kuebel. sir. ahead, go Please

Roger Kuebel

the Good for and results, KVH the published included Lisa. joining which you us in within we release today Industries earnings hour. afternoon, you, thank everyone, for are past Thank second quarter

company's Joining Brent Executive Bob Bruun; are Officer, Officer, Technology Chief me Chief call on Balog. the the and

in, of quick dive we Before announcements. a couple

which by at the Investor is available it on if would www.kvh.com the then then First, on release, Investors you found from section. like the scroll earnings a is can Investors KVH, About down our page, our also team. available clicking Recent copy website be This of and Relations on News to

our to recording to you call, website. like If on of a would it listen today's available will be

the free to feel are If to via you ir@kvh.com. listening questions submit web,

forward-looking SEC SEC the in certain XX-K, to which the no to in Finally, risks, Financial numerous under our XXXX and subject conference will our SEC this materially heading We our XX. cautionary release you under call on specifically statements differ Filings. SEC statements statements. in from statements. actual that on are any our company's may also are update and Form undertake those March made to forward-looking obligation expressed the earnings to review uncertainties Risk The with filed under these Investors cause section, available was Factors results We or company's the filings the in that in website Information, revise filings, encourage assumptions contain those then

our of GAAP non-GAAP definitions well you'll reconciliations measures to of non-GAAP certain discuss earnings financial these will We and measures, as find these as in release comparable measures. measures also

I'll our the you walk highlights the development, over as well to Now an call to important recent second quarter Brent. turn of as through

Brent Bruun

from period for QX everyone. material to operational leadership transition restructuring us, and positive March. the our our Thank good full quarter reorganization, our the that plans areas. for reflect the efficiencies made commitment future. subscriber and expenses results you, first new quarter is value employees We've our products, recorded and the new and strengthening core many future since restructuring share array in and regarding of pleased Roger, growth to for through in I'm generating for our business finalized launched a evening, improving second We wide the remaining and initiatives innovative significant a our our by progress increased shareholders.

offer and a and solutions to limited engaged mariners. We introduced unique with have turnover, products we've connectivity workforce that stable new

million, Supply a $XX.X in of down loss recorded led $XX.X from last a to quarter. significant last second was a revenue when over of improvement This we year-over-year is XQ the recorded our year million year. million. We directly million $X.X Financially, the loss $X.X for chain decline. challenges

million, was and progress our EBITDA in the highest connectivity business, foundation years. sustained mobile company. these robust the third adjusted Based in entered with Our a X on quarter growing $X.X results and a and we

deal and for inertial announced intellectual inertial million, the and all to is all-cash $XX navigation business This sale we today, Earlier EMCORE. factory our sensor includes an Park the Tinley of property. tactical navigation

In employees. navigation all employment addition, offered current EMCORE has to inertial

innovations in progress this after proud XXXX. and our very are purchasing We of business

primary has driver business and mobile always growth. revenue However, our connectivity been and key for

is top our commitment market priority. and this in investment Our

connectivity and the presents and Our for new technology mobile scale. opportunity expanding growth demand for

from best the use the sale proceeds growth. the support of evaluate carefully that will We to

highest-ever operating we some and Despite losing June expenses benefit the remaining legacy to our XX%. outstanding business. in revenue. about and our our network of revenue for $XX.X margin base to XQ like reasons network. mobile million from million to was I'd some airtime migration of month our future $XX.X year. also so associated had we're up Network from were airtime was revenue and of Total gross ArcLight the the to an ] down, Now HTS connectivity And subscribers, [ the of of connectivity shutdown $XX.X grew some year-over-year. share our excited customers last continue million, increased versus our X%

with By I'd like some subscribers of legacy subscribers. offer second airtime of context of ended our quarter network this affordable, the regarding relied are end our ArcLight metric, the to number more year, our by on continue subscribers. than base we of HTS to revenue a upon X,XXX subscribers. we airtime migration subscribers second numbers QX and X,XXX and roughly quarter supported HTS subscriber more our HTS we X,XXX X,XXX At expanded network quarterly population last key year, higher-margin will due to network. the We additional subscriber those the our roughly These end on successful efforts. basis. network. report XX% were our a

North we're Eastern our and in the service remains thriving KVH and Elsewhere mobile Mediterranean unlimited connectivity yachts Caribbean, business, strong, Elite for America. in super streaming

continue affordability leisure for we disrupting AgilePlans Additionally, our our July, hybrid of and trend alike. market. set maritime the KVH maritime These our family convenience, growth. the early standard the In network. integration, be engine for commercial antennas ONE remarkable These of to for new commercial TracNet continue critical speed boaters solutions and the and introduced solutions

line the is and modem our and X dome a requiring separate service solution the than the is and into hybrid that helps one competing Consolidating unique terminals. the as lighter far The in design we offshore. installation integrated speeds in ONE rather maximize more than underway also global shore-based offers new costs efficient TracNet devices networking a KVH cable is into design. a the as XX% game market. communication purchase, only and changer at the to single for of X and devices industry, a antenna. in much installation TracNet believe dome VSAT, hybrid requires communication WiFi terminals due single and that minimize TracNet and product network dock, offer is terminal cellular Each

data per TracNet TracPhone We offer XX-centimeter all XX-centimeter introduced our HXX. out and rolled us. and higher of also including We for HXX the TracNet X-meter customers the our terminals, model for to plans use unlimited high-speed the margins new VXX popular new dollar airtime HXX, extended with that more airtime our

TracNet new offers X-meter tremendous in plans. more gains efficiency airtime even reflected HXX affordable Our

TracNet season. and in mid-July, to off we're and about new an systems leisure campaign of shipped commercial kick start show the First aggressive the boat marketing trade with

shipments. we to On our the TV satellite in continue satellite of side -- strong side on the see unit demand business,

the However, the production in favored chain due systems TV supply quarter slowing smaller second our higher-value to the mix systems. challenges for

TV the a with entered quarter we of for products. $X.X result, a backlog million third our As mobile

path. the focus, minimize anticipate taking We demonstrated continue be impact. global environment results our we're challenging, reset supply are strategic steps our communication chain KVH. to a new to the and right from daily economic We Our we the renewed products continue on that and basis our on introducing quarter that innovative decisive second will challenges expect customers these to to that address operations

outstanding We are committed our value growth, long-term innovation services and products delivering shareholders. to and to and our customers to

that, call I'll financial the to details. turn With over Roger the for

Roger Kuebel

Thanks, Brent.

Brent quarter $XX.X in compared quarter As to XXXX. revenue in second of million at $XX.X came our the million recorded second mentioned earlier,

XX% was our XX%, inertial up million in year. an Our XX%. Service segment, margin This Revenue quarter gross X%. in mini-VSAT increased $X.X second million from service second was percentage to $X.X segment compared X% $X.X million, the connectivity quarter with due second percentage segment for from in million as $X.X from or XX% By revenue. million increased year-over-year, the was consolidated points decreasing profit million the X points. million our last of Revenue margin a of with navigation year. for revenue $XX.X of the mobile in last increase or a connectivity XX decreased revenue gross second primarily with quarter airtime mobile to $X.X quarter gross increase of margin Broadband increase $XX.X by

$XX.X approximately Brent December of on of second revenue in noted, over XXXX. a active shutdown year a approximately the as XX% the airtime legacy result last quarter As of XX, decrease our million or network grew X% despite subscribers to

up those temporarily Total subscribers, was which includes suspended, who X%. are

customers using As boats aren't who typically subscribers during their the a suspended months. colder reminder, recreational are

While they pay which have we for as them minute. they refer suspended, the still voice all services access to to by

also KVH vessels. customers owns is their Agile pay suspend that fee on modest monthly addition, that the for a equipment who In

from but is factors was is of margin X which gross This of up shutdown driven the the XX%, ago. year increase combination points by a percentage Airtime primarily to a due network. legacy is

network. large network from year quarter of the revenue was VSAT to a XX% the second to million, due year. Product decline million to to the $X.X decreased for of mobile due primarily partially By XX%, from migrating or decrease number quarter by $X.X product was legacy sales. our second of connectivity million segment, a new decrease units our shipped HTS last This $XX.X customers or in million prior $XX.X in a

to chain products. However, a and that customers in last entirely million decreased FOG saw in was to sales, demand decline as as to new we was softening revenue $X.X shipments million compared This which constraints, driven navigation saw or we by approximately year. product also some XX%. $X.X a TACNAV drop Inertial $X.X in very other the high well due supply million

down Operating $XX.X year. were quarter last the million million, the quarter $X.X of expenses from for second

we our increase had this last, related year members. year, and in Last for and proxy both amount in new related quarter. searches million a we significant Board to expenses had $X.X a a total second and costs However, of this million the the our nonrecurring contest, and of force had to reduction year, in we a CEO $X.X legal

was of basis, year. $X.X quarter As such, the recurring last less quarter even on than this second a million

$X.X I compared reserve level, of recorded $X.X mentioned a margins $X.X which of income revenue, operating for operations second loss changes operating a This the inventory. includes just million as resulted as loss the an well quarter At the million, loss a XXXX. of was with improvement from $X.X in expenses OpEx nonrecurring million the in million in in $X.X million and

items without As quarter, adjust any large those you or all recurring if profitable and nonrecurring was TACNAV a that that had items, we sales. such, find -- have you'll would for

Looking at our individual segments.

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

$X.X year's million was million. last to unallocated Our $X.X loss compared

and and of income net tax million costs, $X.X effects of On second last termination loss adjustments, loss the cost and excludes gains $X.X allowance foreign recorded as a exchange which in tax stock-based million we compared intangibles, changes a losses, unusual million of employee separation, $X.X For other net million had our same in compensation, year. was quarter adjustments, after transaction CEO last valuation related $X.X non-GAAP those with our the fees, the quarter, a net amortization compared of nonrecurring with loss nonoperating another net basis, year. such

the per share for net loss was year. EPS year. last a net compared of $X.XX share non-GAAP $X.XX the same second per a of per share a $X.XX in loss second loss with period quarter quarter to share EPS $X.XX the Non-GAAP per for was EPS compared of last

Our million the the with non-GAAP positive adjusted for in a last was second quarter positive million compared $X.X quarter $X.X of EBITDA a year.

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

financing quarter of of radio Net cash in of million. $X.X million for from $X.X cash second $XX proceeds sale Cash was balance the operations cash by by the expenditures quarter and $X.X to year. business million ending million, was in Capital an provided was last operations $XX,XXX, used compared resulting $X.X million. provided the activities the in were

inertial sale that Looking of growth mobile breakeven radio Even and the a pro on business a still to significantly we the and progress navigation our connectivity, and for the sale between operating million $XX and between don't X% year reduced worsen. being upper loss the we are supply EBITDA the after adjusted second the expecting expect towards million, forma revenue range expectation a continued the the chain of connectivity of of assuming for focus basis issues half for and X% scenario. with $XX on business, profitability with ahead company be our adjusted mobile

will prepared the to Lisa? remarks. Q&A the turn I to operator portion the now over This call. the of open line concludes for our call the

Operator

from comes Rick question first Raymond with Your Instructions] of Prentiss line James. the [Operator

Ric Prentiss

want through I a to things. of walk couple

was $XX like If about it? the previous sounds think some total that you're effect. for $XX If we end million about assuming and $XX million to the to way the still million I to guidance business, I about for very selling there. at EBITDA remember it mobile million, got the think $XX I inert right think not much and company, corporate. right, connectivity just Is 'XX the

Roger Kuebel

Correct.

X it. year, Now include of just recall that navigation for the inertial does in months full it

Brent Bruun

And we've and margin. this airtime business some profit in the XX% good had uptick

Ric Prentiss

All contribute XXXX and there way apart was? EBITDA? the ballpark a right. how did to pull number of Is in actual of adjusted Is reference to frame of there say much kind a what inertial business that

Roger Kuebel

-- come if to had -- question, back to you me look have yes, and I'll else, for that you something if you're while I let another got that.

Ric Prentiss

got where the well? whole business over to is We've business, is as is say So going autonomous over EMCORE? that segment nav The that, when then going inertial IP plenty. you the that with vehicle the piece of was

Brent Bruun

that's Yes, correct. Yes.

Ric Prentiss

sale? your $XX the proceeds be to And are some get to Okay. what million was what understand net Or basis what gain way on into after-tax be the the would sale? there the on is you expecting to

Brent Bruun

we do to it. of have for think we to need calculations, bit fair a of roll amount I but do a credits

Roger Kuebel

Yes.

as far it. we that operating level, to research that so have, get given there's we -- the credits at have, that think foreign gone we are trying haven't the you're federal carryforwards we at we there's credits through -- have, loss also tax tax that implications, As the if we net and

filed is yet, level, minimal. think we federal but to very impact haven't be tax at the We the going

Ric Prentiss

level... will there then some And state be

Roger Kuebel

to the expecting first $X.X your out be of other inertial not But we're question, related, I -- which back don't that look sort take back around I'm but think It million. not that are margin something we at item but if -- to the as be huge it's probably was expenses that either. X depreciation, you gross state, a X could directly nav, expenses are was EBITDA, huge the inertial to nav, adding range. for the for half in at to get

Ric Prentiss

think they're which the least to helpful. That's that closer use at Okay. pretty you [ proceeds, -- when about ] XX. those The at of or up time significantly

well to because a as you've standpoint million sheet. alternatives from that strategic -- are mentioned think $XX said What of thinking you You the on you Maybe $XX plus. cash shareholders. alternative balance interesting you're million return bringing as might be got possibility strategic I

want the closer almost to balance is be to to million we that which share. looking So a have about you're might going how to sheet, you on But at cash maybe use $XX should of cash think $X.XX what for?

Brent Bruun

sponsoring and time. what not to we Board we're Directors determining advisers. provide be more now, will And Yes. [ our Right best this we're at ] assessment forward. the think with of path position We're in details a

Ric Prentiss

be when will out to you that about be it? Okay. a Understand. process? X-quarter Is what that do something figure guys with think mean process? out? it Is as able the how to that we communicate you you're timeframe what when want I versus like you able lay Street you'd far to as to to a that with do able should think X-year to you'll Is

Brent Bruun

-- for that but know less be sure. X-quarter than That's will it a I think process, don't a year. I would if it's

towards more probably fourth quarter. So the

Ric Prentiss

come back I'll some questions. give I floor I'll now. if more Great. the have

Operator

Okay.

Needham Company. Your of the from next question Ryan comes with line & Koontz

Ryan Koontz

Financial questions.

business On the how sale, there, the should on think impact we navigation OpEx Roger? about

Roger Kuebel

sale. someone of function over. number with are They and the folks the I inertial the here a from are majority side. a for mobile navigation staying, and who the finance in not marketing the office is that's the on connectivity is in the R&D that the sales over of are are But G&A back There going sort are majority. are There someone the sort who think who business. transitioning as people as complicated of primarily standpoint from of

don't that. something that provide a specifically that's sort I We're can are. of we're that guidance comment And I so EBITDA I on what think have Brent's around confident to our have going I still But comments any good that -- you my targets think or year.

Ryan Koontz

You about reach? subscriber different the kind there of or on And mostly that growth Great. airtime should Is you at talked looking expand that down of you're how to of -- area we you can in kind this revenue. areas X% geographic the double think X% strategic there any about growth trends? as are Okay. -- your initiatives on kind

Brent Bruun

pretty revenue distributed now ARPUs the Americas and with Asia more and a growth we pretty of EMEA, between all far heavily we growth the we We're as the saw anticipate the growth perspective marine little loaded true -- uptick probably evenly region, why we're between network. commercial growth, airtime in And on But more a up then from that Asia in seeing good of our subscribers As -- growth. maritime year-over-year HTS that subscriber bit have a the network Pacific robust sync leisure Pac. seeing also now hence we're have without one we subscriber we're business. and

Operator

from comes Henry the Analytics. Caleb line question of next Your with Quilty

Caleb Henry

from me. questions Two

First, there or past the the or on but kind you handle or Wondering supply think, it's costs? I get costs chain issues? tame that trying being be taken to to those of is has are could probably realize control are those your perhaps steps anything do taken that to come I up are any of a kind control, few on, there calls. guys out of if

Roger Kuebel

look a -- we one I around things. things. we at of we we do these redesigning mean is things Well, the -- of of do some variety we obviously

make that So become are of for is what that of become particularly will to products rebuild we redesign sort work. that are to that unavailable, chips but chip work, to at this have there certain we chips the related. our alternatives kind the are other There -- But and look extent software -- unavailable. --

of sources at thing a of lot of kind still it's probably So those things. we doing. people supply, We're a We're things. look alternate same but are looking lot doing The of at it's And tough. lot lot similar these a -- companies. also, of a suppliers. probably not We're huge a from buyer boat. of from you're hearing I just a in And this think we're

it getting are that preferential So of situations, not it in to of it company. XXX kind treatment -- tough when sort Fortune makes XX is when tight things these of or kind Fortune makes any you're a -- tough

Caleb Henry

your And question just a understand. satellite of the on I future Yes, then network.

then rollouts moving about additional thinking as just you are HTS to there especially and subscribers network? multi-orbit of the in in to plans how near LEO given the any mentioned infrastructure? the having add over anytime a or other network. term constellations capacity that And your to Are MEO, You of part NGSO additional capacity

Brent Bruun

and first Well, foremost, as required. add we regular basis on a capacity is

that's as that area. deeper footprint. something particular number So of far we good we a robust we footprint as And anticipated have very need in it go just any and as subscribers

which demonstrated of we're our gone now although our legacy it As through is some network, the degree, networks network-agnostic network, change HTS And success network. somewhat that on to our a there. HTS ArcLight, effort we've having takes we're launch to we're operating and from good

We're eyes regard keeping wide NGSO. our open to with

haven't order competitive. what definitive the in next to on future, of our in in -- And forefront market. that forward remain in is, opportunities plans order we different to we're sure what make the changes are market the go be we'll any be as move any but made We to -- assessing to into the

Caleb Henry

OneWeb big consolidation consolidation does And question There's I ViaSat impact SES. KVH? Or There's the and Intelsat just amongst what What, and and add mean if consolidation fair Inmarsat. and Okay. if been There's deal satellite operators. this Eutelsat one of it possibly a then and for can have? actually, does any, more rumored on.

Brent Bruun

paying attention need we're as value. competitive. that's very we we results, our market, need everything we're the what remaining figure best and most with but going to out demonstrated in to shareholder to path recent the is to forward on maximize how -- Right now, But

know and as right details Ric, I we can't basis, alternatives holds. what So on, strategic an I we going moves made feel don't the is to that business the go-forward particular on we divesting through now, which, said of a in future some of inertial assessment a process. of for we're navigation lot go into the looking

Operator

line the of Prentiss Your Ric next question comes with James. Raymond from

Ric Prentiss

back a with of couple come I extras.

take that connectivity Roger, we mobile [ I -- think, revenue ] forma quarter the had pro $X.X radio X% very you should million that then that growth, I sale mentioned for big in was to kind sale. the revenue And in -- X% out difference was for about of for Was think XQ? adjusting QX? the you a

Roger Kuebel

Radio, yes. revenue. Radio about $X.X a year million in was

Brent Bruun

Yes.

roughly you but I So if quarter, didn't Yes, said. that's hear $XXX,XXX his number. a what

Ric Prentiss

on going so those good Good. to Okay. help to appreciate the how metrics subscribers. unpunished. you're then customers understand subscribers be Are to that you on can going monitor deed And goes that. many in kind Agile like report continue front? to It are No I sounds of able of what's us we going

Brent Bruun

readily don't I have number the available.

-- can give okay. a as You it

Roger Kuebel

was As I of subscribers as mean, end the at a a percentage XX%. over Agile percentage, bit a QX total of

Ric Prentiss

Okay. And last year, that's similar kind of percent number?

Roger Kuebel

year it a less of than As XX%. ago, was

Ric Prentiss

of Okay. think question, to percent and that a the new the R&D, -- products think develop revenue that obviously we that some lot obviously, how a you it's kind the services. you continue remaining How business? value rate had the connectivity previous of in spend, of there's about whether should And to revenue spending? mobile correct probably on a needs as on new a or we but value inert about or side want following R&D Because dollar run should

Roger Kuebel

And to to an as and think to I strategy, about and got shareholders. something at are what's right I think want value forward, NGSO look Well, are up we think one way. we've create what came questions the of going that for was that look we the that's the projects

what be, do something think... to need how of So understand what is the we is -- the what we sort of to future need R&D to what -- in terms we we big going

Brent Bruun

a that anticipate a further. pulled We a was But and But keeping went ] the that individually, pulling business. report number. bit. is of we employees. we we -- navigation, in do perspective, fast, of engineering have available. And know down R&D report that our inertial restructuring holds. a this an number when separately. happening future all the team out if And with R&D so have rate that we the that place. see our splitting don't as with wouldn't And We that [ you'll it bit part of run we it which I as far anticipate we certain break mobile down What readily out that connectivity

Ric Prentiss

Yes. That deal makes And obviously, and sense. the today. signed -- closed closed

need other On What kind for kind Do are the can it? you so needed. low-latency MGOs. customers question service ears then your want latency think there anticipating your low customers is night, of asking for you last low require that what services much that you was on on But our latency? On we just of might how network call services open? ViaSat debate are keep actually that a needs

Brent Bruun

for have really, people mean board -- on Teams, A that, And or chatting, hearing. XXX you're of of still right? talking, example, much. biggest X-way I that's doing What Yes. does vessels. it's Zoom are the but not latency impact that a video And that we on really I'm lot are bit about the thing milliseconds... an

Unknown Executive

a would Not decision... make average that would so really much. like It's not person a buying -- the changer, game

Brent Bruun

cheaper rate it latency a And aside, the from our cost think more of a down bit GSO comes higher at if per can lot I perspective. we speeds, do delivered, the and of it's to right? focus

Ric Prentiss

one for final me. And

What together? how affecting think time. consolidations, long large you several that see a mergers, finally getting combinations you space just just you clearing do What do attribute satellite driving the the in industry rather is been maybe that? logjam and do And at have the guys than KVH? You

Brent Bruun

Ric. -- yourself, can industry closely That's the study a good I question. you pretty almost

think the So what answer is? do you

Ric Prentiss

think which I We'll look you take offline. that transaction But at. depends it one clearly,

people cash have Some cow.

Some people cash. need

Some out people figure pivot get how to growth. trying to business are to the to

people business, of And we lot how business. kind trying take a out probably is you some you How see you manage costs out. growth and that, pay declining like are TV the do figure with do positioned do how for what get it's a to of people,

Brent Bruun

to reported and traditional media Yes. the TV at look business, and in quite you their you SES their FSS which business, if obviously, their I businesses down just mean the decline increase X% come at bit. in operators look X% business a network have a that media a contraction need pay a they in synergies, think on create might some what's merger the If a basis, something pushing in I they that some be and a have And between that's year-over-year maybe them. means revenue. stimulating more decrease of revenue that's them. talks might

Ric Prentiss

Good it's to They to sure make realize finally finally. the that business. people returns. earn it their logjam to see got how Good high-cost see a to happening where

Brent Bruun

Right.

Operator

there And questions. are at further this time, no

Brent Bruun

Okay. Thank you, operator. all. Thank good you Have a evening.

Operator

This concludes today's conference.

You now disconnect. may

KVH Industries (KVHI) 9 Aug 222022 Q2 Earnings call transcript