Earnings call transcript Q4 2022

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Operator

Hello, and welcome to the Quarter Four Year 2022 Earnings Conference Call. My name is Caroline, and I will be your coordinator for today's event. [Operator Instructions]

I will now hand over the call to your host, Mr. Roger Kuebel, to begin today's conference. you. Thank

Roger Kuebel

we Good KVH thank which Industries' in earnings Caroline. us for are everyone, the for morning. today fourth release morning, you, you and joining included Thank this published quarter results,

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

couple quick dive we Before of in, a announcements.

you it Investor our on from our is Relations would website a of copy like if available First, the release, team. earnings and

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

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

undertake call certain materially obligation numerous differ cause revise or Further, will this these to subject that actual are our statements from to those conference update and may no uncertainties of contain We any forward-looking expressed to that statements. in results assumptions statements. these

also We financial EBITDA, adjusted will non-GAAP a measure. discuss

filed directly in third cautionary of Information as review We of definition the a file a find under specifically in the heading December to those this encourage The comparable our our reconciliation other well afternoon. sometime XX-Q Risk You'll are press numbers. expect XXXX on which Investor Form quarter our this X, XXXX, to filings SEC Factors company's statements SEC from our Form GAAP measure release XX-K, the filings, in as available and to we website. made you our section

the I'll to over highlights walk quarter, our Brent. turn call Now you the through to fourth of

Brent Bruun

March to set reshape our do plans we be we Thank remarkable and discuss you forward. needed to to goals. needed To you, pursue In today our we Roger. tell I'm tremendously you, morning, with KVH. of excited out to everyone. knew Good so, got we several I turnaround -- to XXXX, going and

to company subscriber sustained with and road our line focus to fourth, First, profitability. three, our put company and grow core second, in to bring our operating on and the base airtime on expenses our revenue; the businesses; to increasing revenue;

We pleased the extremely years. to our and we radio inform earlier navigation more first have goals. hybrid every We our value-added efforts new solution that the services and quarter, successful and our including In services, delivered mobile all of achieved on fourth in connectivity this launch year. you our enhance connectivity customer and on vital those X that inertial profit of I'm experience. their we than focus unique X needs divested one meet of businesses operating

of X% and an fourth operating Our versus quarter a was in was the fourth of income quarter $XXX,XXX million, operating $XX $X.X loss our increase year-over-year, the million quarter revenue for XXXX.

mentioned I first moments in profit a As few years. more that's our than X ago, operating

EBITDA $X.X in our the was of quarter Additionally, versus fourth adjusted $XXX,XXX million XXXX.

quarter the XX.X%. margin increased for revenue gross million an XX% with associated of profit to airtime Our $XX.X

on airtime subscribers, to users X,XXX continue We XXXX add network. also with ending our roughly

We us. currently expansion our receive exciting systems our India, shipping TracNet shift continued we approvals. but our regulatory into legacy when we We're an H-series new will into market VX-HTS for India, TracPhone

recently received recent also TracNet's Award. [SMARTXSEA] user performance We the superior critical recognition We're design, of and the benefits. Communications thrilled innovative by

While Editor's customers. from the the positive the from named named Marine our Choice We Electronics Choice and and in channel yachting, Best Best recognition cruising TracNet this award. the partners boating and leaders fisherman, Editor's me, industry Electronics-- editors in world, demand excuse feedback TracNet Marine saltwater their of appreciate the and

VSAT made enable launching Intellian will like new initiative on a companies Cobham to our antennas convert network. work that us significant VSAT We're and to by

super transitioning a do to currently approximately no able be customers hardware quick, conversions changes, now XX from integrator. process this will with yacht new the in convenient We're and network making of We easy.

hardware These $X.X potentially million revenue any annual in add changes. without can third-party antennas airtime new of all vessels, which use

our airtime the of industry Additionally, onboard offer a simple we months. expanding a coming are program commercial for to with to We In service receiving begin data sole our driver can't a list more forward this We converting far several growth. growing in than look terminals providers competitors, services number airtime be an vessels. from requests of pipe.

a in full we are services the value-added vital Our as solution. differentiator end-to-end market future provide

We Fortinet. enterprise-grade launched X recently industry management, cybersecurity our by firewall new for enhanced powered services, an managed network all leaders and

only development flexibility Our upsell services will enable new crew cloud and for to e-mail to to crew and our subscriber an the security plan This and customers. of of expanded TracNet strategic integral for services. terminals. and sales. airtime opportunity We to grow retain focus increase appeal and partnerships. our add KVH base Internet for the services on through solution, is and in-house additions which making the offers start H-Series new These value-added fleets more by success us our and our existing operations services customers so are new even Doing our

features lower actions] We use day. not speeds benefits regards NGSO taking mPOWER services are Starlink, pipes and to none that face are are and [matters]. and OneWeb, performance beginning Non-geostationary as however, they commercial the orbit every our and leisure latency offer in coverage are to with and the fact data challenges services and service or higher also seafarers They But already to the [our of that horizon. they vital deliver recognize, such that like place in others or actions on

TracNet solved hybrid we our of TracNet marine high-performance VSAT, solutions. WiFi LEO and companion Starlink together beginning a integrated now by Those to services be offer for a resell to as companion MEO enable design to a why terminals multichannel with hybrid new hybrid and integrated challenges us our with solution systems. TracPhone The hub systems. using XG, will our are affordable, robust, That's can offers fully terminals combination TracNet multi-orbit terminals,

terminals have service to TracPhone be activation only or sales VSAT active must intelligent selling We Subscribers handled advanced existing hybrid TracNet directly while Starlink switching, for access Starlink. are KVH and tandem will data TracNet these new systems. with an in plan our by

tools, with information rates MEO will for launch benefits to for And value-added e-services multi-orbit positioned signal and blockage that our overcome We These suite services and The network approach performance, connectivity speeds, deliver and loss. well deliver committed adding will include or future offer own. partners future that. believe a and agreements and of what their as onboard be for sophisticated are single guaranteed new beyond the data multiple reliable services. service. to on benefits above service level management is end-user satellites expanding multichannel hybrid solution NGSO We're channels and we anticipating not LEO a

through our long-term have through of drive hardware-agnostic expand Looking airtime to Among aggressive and ahead set base value our are increase new suite to shareholders. services these organic growth to goals for growth, subscriber gain approaches. XXXX, value-added subscriber our we pursue and to build to growth scale

wise support focus service vision of and obtaining on growth strategic sustained and revenue a these our All to of superior through a and consistent overarching profitability commitment investments. innovation,

made the our commitment future. KVH our global that sustain putting the to and of challenging we to to last and So subscriber drive profitability. their their was launch tremendous We've XXXX add immensely financially, success wrap in we investors I'm the turning up, new proud promises achieved growth, and March. around team, has will efforts year it exciting to company but future the us, for services prospects and focused delivered and a for revenue which one excited that progress. on I'm road made on of our products to

And turn the to now I'll over the for financial Roger call details.

Roger Kuebel

Thanks, Brent.

was business, like that of which the exclude would our specifically I X to last otherwise, navigation results relate stated to First, continuing inertial comments August year. of our sold note unless my operations, which on

quarter revenue million, the fourth With $XX.X that, increasing the fourth as recorded $XX.X came our million quarter XXXX. in earlier, million Brent from $X.X of mentioned at in

with in prior for the year. margin fourth as quarter compared profit the XX% the quarter Our fourth gross was XX% of

the year. X% broadband in the Service increase in increase primarily of content $X.X million $XX.X mini-VSAT by which was a the April fourth XXXX. was of for last $XX.X fourth $X.X increase This service our revenue business million, was sales, primarily offset due million quarter due revenue, quarter radio a largely million of or of $X.X from million to our in to in sale airtime decrease an

fourth to subscribers over total $XX.X As airtime million the and XXXX, or X,XXX. of revenue Brent almost grew quarter noted, reached approximately XX%

end total is from is up which reminder, shutdown prior This the airtime who Airtime due service those continue growth temporarily fees. have was factors, and legacy their points at percentage pay XXXX. base margin include the primary to primarily of suspended network increase a year. XX.X%, to minimum subscriber combination in the gross of our X of but subscribers gross As a revenue the -- our

are pleased these results. We with very

quarter the prior be XXs. was decrease for the in year. we a million in product $X.X sales due as in migrating I million expect that VSAT We units million Product sales $X.X going sales for was the The QX unit the million, the million receive-only offset revenue XX% these our fourth of in mentioned fourth sales margins to high to last in from product our decrease network. prior level forward, of airtime sold of almost by due $X.X HTS XXXX. $X.X a quarter was in call, high the or the will of on $X.X This our target However, decline customers primarily a XXX increase to VSAT decrease product in in sales. year TV customers to to

of down quarter million $X.X XX% the XXXX. the million, Operating quarter expenses for or were fourth $XX from

like $XX for a would items run rate year, few QX million of favorable unusual normalized a $XX the there be run rate more the While exiting were that a imply million to seem would million. $XX such

took sale of are reset shared into level. us business very September I businesses. and significant to and difficult actions expenses estimates savings comparisons to account, between OpEx a that in as were that to note the with X make of Even year-over-year navigation allocation have we the the the March have on an led should taken also appropriate the that inertial prior required

time a in level, these from This operating profit expenses was has and of third quarter in of At XXXX the the that operating KVH $XXX,XXX. first revenue, operating approximately had operations resulted the margins changes profit. quarterly since a income

accomplishment, content was even. cannot be we this While with breaking merely a major

is grow to we task profitability return earn Our on that the capital appropriate so we an using. now are

to line million. Our bottom $X.X of prior year's million net income $X.X continuing was compared loss net from operations

share with of EPS in per for was profit fourth net per a XXXX. compared net loss $X.XX quarter the share of a $X.XX

You measure have given less we reporting metric required are will to we all longer is it no come non-GAAP or EPS, assumptions the that income to subjective note believe it. that reliable a as

in Our the adjusted quarter a million compared million a of with quarter $X.X fourth positive the XXXX. was EBITDA for $X.X positive

earlier reconciliation For refer was adjusted a earnings published to this that morning. of release please EBITDA, the complete

Net cash provided by million. operations was $XX.X

in increase that were Without accounts payable that adding to of $X.X provided need expenditures for to cash changes been due million. ops capital, caveat an working by million I over million working $X.X capital $X in quarter in from million. unusual the year-end. that change at would still However, the Capital to $X have

from working $X even the was capital, So our million. flow, without operational over benefit by including positive cash CapEx,

million, activities was financing Cash of CapEx million. used than cash $X.X million, cash $XX an activities in was ending approximately by and balance investing other in provided $X.X resulting

We expect level. normal to quarter that payable in a as first the our down come accounts returns to

I'd of a profit, year. moment new the to problems which the $XX When operating XXXX, breaking of $XX March set we persist. and up of reflect an announced prior operating a followed the direction even to half company goal the XXXX, supply XXXX, wrapping In in what Before been chain didn't we on that loss loss the a has in take of had million year assuming accomplished. for like strategic million, second restructuring

did. Unfortunately, they

QX up windfall. we in any However, short came and despite profit $XXX,XXX big turned without an that, only we operating

hard a earlier, said was was breaking amazing agree hope to I we dedicated team the even. this due a content pretty turnaround, by just as all and and leadership While, with that employees. I amazing be can't you it work

please of operator This to the Q&A. morning's concludes and proceed I Caroline, to the turn Q&A the over remarks, prepared call. call this for portion with open will our now the line

Operator

take question Instructions] from will Chris [Operator We the Quilty. first

Chris Quilty

year the for Congratulations, ahead. impressive guys, and guidance going EBITDA

you are of additional actions? same better understood there margins talk the that revenue we run can if have sort has but Because on the Or been to maybe, the found expected? rate you're assumptions, than Roger, still I through, the Just correctly, guiding level. if know obviously, you cost-cutting OpEx just

Roger Kuebel

Yes.

It's more the conservative I I pretty was and it were actually said think guidance think we million. were it when back did back -- to $XX the think be and a gave million. a like I to I to out we response was question, announcement, to the I maybe like expecting up million $X turned when $X March we closer

restructuring been that's don't forward. any So see of good. going sort We

changes make any did now right feel now -- move of good in Obviously, business, We the after would the position. we Brent reserve we of to respect with like sort forward normal some in cost. we we sold business a team just like But the terms to business as structuring position. within some We've we're the work and we we're vivid in September got talked a but initiatives the place, feel that changes inertial we're nav, in with going about. right the in to

Chris Quilty

Got you.

ways bit probably they're of just and enterprise gears the working for channel. the -- biggest me, more And to and And shifting partners, little Starlink have their satellite so give the high model a of excuse been profitability level rollout. there's to them I'm not the very obviously, maybe they lot one has and with that topics bigger at a now, here over a aggressive show of

out As you bundled services for guide the service? that your with see reported with we associated broader and year, margins? do does offer the Starlink you you next look ways to expectations adoption Starlink the overall that the offset to degree Or see that impact

Brent Bruun

of primarily a Brent. margin can being for of it. service. airtime that latter. hopeful we're And the conservative as It's the bundled Yes. that provide reason anticipation we the have feature we margins, avoid It's we that as might main we're to. bit in full but is far Chris, as It's the it's alluded conservativeness Roger bit a erosion, the services

Chris Quilty

Got you.

talking other big with in costs steel the they're with panel announcement out trend Amazon think typically I of units of and to the of whereas here terms their coming purchase and dollars, flat figures, new largest antennas So future the type or used. going evolution pricing those. in we're electronically antenna see was side terminals, antennas on implying X technology VSAT do hundreds Where the right, you in both and the

ships wiring you where the and work challenges market going day, they're the flat those every given to more are deal maritime the the angle. always around it lot antennas is actually can a enough a move panel of with that simply with in But flat a guys panel there's engineering a lot environment blanket you're that live just from or you've cheap antenna and roll-off marginal [XX so over long or term? you XX] think perspective a look got that reasonable in all mean flat I there ship, is of a Or be way? a technology panels will maritime

Brent Bruun

But the I'll I question. let the summarized answer Bob think you situation. detailed correctly

a you If to you have from and could the where if probably switch you one, that can probably have off, have mitigate you a one can quite multiple you space you roll have lot bit. of other,

to Bob But I'll it pass to...

Bob Balog

probably you X solution multiple our do those that we're I reason is Yes into the -- you're integration really to pitch vessel, But behind There's of -- blockage mean, there's and your a hybrid just it's well. a could your about at like behind coverage, part roll. system really is limitations cover geographic now in the and on of But into really pitch as minimum, systems. panels right talking a and not the And panels with antennas limitations roll. right?

make to or going application, be reliability you're situation to you're going connectivity. for to where have So sure in for commercial a a want high always a you

into solutions we're provide we're to that's integrate to most best, solution. So reliable panels have to already. going the continue comfortable those going pretty And the we that

Chris Quilty

and I signals are here of demand the you -- Great. And mean macro ending maritime shipping the you sort China, picking environment seeing demand with where [indiscernible] side? signals on COVID about up. think in when strength the is just

targeting operational the [Kuiper]service? do something of leisure terms there. a the market market, be you think, panels, challenge you've good where you've leisure, or a performance like or RV again, for position, consumer the might terms in metric in to flat successful a had the matters And But Starlink in where is clearly I enterprise consumer market broader certainly the see of some in consumer more a market seen different

Brent Bruun

question, services. from over to is would to your I market that's perspective our that of say moving the I answer that say, exposed most new would some the last to

You opportunity. with to do to a we new had question begin see where market as

L-band, As tremendous huge into is VSAT an I Ku-band out a L-band communication to and number terminals enabled better alluded recently number systems. talking that just a where still of we to, there's a transitioning market, India of it's And on, been market there years. for they've that are about market move as still L-band

Chris Quilty

there... Is

Brent Bruun

questions. another Took

X -- that or You questions. X very set long was -- had a

Chris Quilty

there But know a I to operators if market. questions. of follow-on there services I'll is historically, ISRO Ku because bit a actually shorter to been provider, do just for maybe capacity of final lot challenge sufficient in India, sole question capacity capacity a get the on there's the provide that

Brent Bruun

partnership as our Through completely buttoned yes. Yes, far is capacity Intelsat, concerned. as with up we're

Chris Quilty

you. prospect can coming that growth new that you some actually the capacity online in future in is drive for there Got And a incremental market?

Brent Bruun

There others. coming from comes capacity Intelsat is to going online, new it whether or be

see many whether are under how NGSO. construction geo satellites You and or it's

don't concern. capacity a is I So think

Chris Quilty

the And for Okay. Great. thank you feedback.

Operator

Needham. question take will Koontz the next Ryan We from from

Ryan Koontz

clarification. quick Real

You you EBITDA from that $X the becoming adjustments was talked million. million made. That $X million cost the about $XX to

Roger Kuebel

a No, nav. when savings, was last the it was last -- reduction is inertial that OpEx, I little the in still year early year rather, early or we made comment which had on

had with -- the... we've even So

Ryan Koontz

Got it.

Roger Kuebel

Yes.

So its OpEx.

Ryan Koontz

Does it bit? for this fits the versus little Starlink cost kind product, Can OpEx, value of Starlink then is the VSAT the partnership? on there coverage? thanks. you lower provide Starlink a in additional And if clarify run you proposition it a how value of the per OpEx kind your of down rate. prop jump bit It's for me

Brent Bruun

per lower lower you have jitter. can it's cost in in a packet dropouts I It's Yes. a bit. latency, mean loss bit but

geo to integrated WiFi some [CIR combined Do our you that service back-end combined the tools, other our a robust all So together through of we service our VSAT an of offer and everything with with offering. what LTE/XG service. and want that, coming I with a you component And and give SLAs] about talked already we'll add... comes that's

Bob Balog

XG because Series performance. it's and there we're throughput better to services delivering or to user our over WiFis. available also concept Yes. the And VSAT little H end LTE right? when products. on services And with We're mean when behind available, kind I give follow the to bridge of products, a those that we'll available Marina will latching from

if that the you make value that concept, about think you working best experience be. not worry to this about really, to -- has that all that way available, And Marina, is if use In the a this that in end give the to one and is real why no about one or have we what's can it, why we're not monitor have we so add that connections it happen this opportunity. users of actively switching the possibly has we and the switch user seamlessly available. it's Starlink think the it. make sure just We of No or actively

Ryan Koontz

Got it.

So helpful. that's -- really and

Starlink Starlink you subscription handle also billing... So the and

Brent Bruun

No.

the user terminal remarks, and will the the Sterling As activation in [indiscernible] Sterling my end handled directly. be for between

Ryan Koontz

-- bringing what clarify Can Got that's segments you of kind terms to going helpful. that you market as will new about well kind you what of products it. And of market. sort development talked in That's partners to in. help of some applications

Brent Bruun

details in make this lot go It's course. at we more we but can't time, will the And operations to in value-added efficient. into point of due really a services onboard

Bob Balog

what in security, say. that We're network. they best. I mentioned that's to And few mean commercial do large-scale do looking probably We've they people. sufficient firewalling, at on a it times, [Fort] it's

we just applications developed of sort the So delivering appliances, them being to it utilizing rather make a we're that of technology want and to exactly specialization sort needs what and bring of cases lot for best-in-class that then of sort adds a marine sure some value broader and of really look are of for market on to we're develop adapted. do be to stuff own. than and trying There's where our something

Ryan Koontz

really got Sure. caliber, kind the all work the really of days. That's That's enterprise Congrats helpful. operating on you. I That's great questions profit, had.

Operator

no Thank question further time. There's you. this at

Roger Kuebel

thank Okay. you, All everyone. right. Thank you, operator. Well,

no is who have good questions, everyone's Given that call a the I and thank day. are there on. appreciate joining And you,

Brent Bruun

Thank you.

Roger Kuebel

Thanks, everyone.

Operator

Thank joining today's call. you for

disconnect. now may You

KVH Industries (KVHI) 16 Mar 232022 Q4 Earnings call transcript