Earnings call transcript Q1 2023

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Operator

Good day and thank you for standing by. Welcome to the Q1 2023 KVH, Inc. Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your speaker today, Roger Kuebel. ahead. go Please

Roger Kuebel

this Good us Gigi. which and you published thank included Thank for afternoon, KVH joining earlier we release today the results, Industries' for in you, earnings everyone, afternoon. first are quarter

usual Joining instead is Officer, Operating Bruun; time Executive company's call morning Brent are in calling this the of from me of Balog. is and at Brent having why call we on Bob the Chief are Officer, our actually Chief day Singapore, time frame. which the

Before in, couple quick of we a dive announcements.

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

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

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

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

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

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

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

Brent Bruun

afternoon, Good Roger. you, everyone. Thank

you with call mentioned, I'm Roger As the Singapore. today joining from

dealers service distributors, which the while sell is hardware providers, along installations and support includes strength with competitive marine our partner of regionally. airtime technical One network, and of managing our airtime who our advantages and electronic our

the XX-vessel from is competitive service L-band from converting a of of service a to Illustrating is network. this by HTS stems that success fleet network. win now airtime providers, a commitment health which recent our and global partner our one of Much our competing

a Over the I our last dealers X and partners months, met road worldwide. Madrid. during March, premium a in I've customers on our EMEA with lot with the multi-day event been In

During my Manila, Asia most to I'll to and Tokyo. Kong, our current reinforce Osaka me headquarters customers has our which, to Pacific trip sales. after I'll my travel meet brought relationships in Singapore, and -- global expand Hong predominant trip current to our evaluate opportunities and partners with

financial of our Moving to results. with million. on solid $XX.X was revenue QX

of items, of year we operating an this seasonality income and million guidance with expectations, for the our Although recorded was expense unchanged. loss in given various our is line the roughly $X.X and

Our was $XX XX% airtime million gross margin to with of up year-over-year XX%. revenue airtime

base more also than to our We increased total X,XXX. subscriber

Our no balance sheet is quarter-end and million cash debt. $XX strong of with

build that financial the months. we the foundation last maintaining are worked hard solid XX We over to have

Asia and Airtime our we our significant this, laser-focused last on on subscribers, remained trip. be providers expanding total providers steady remains month airtime service with of conversations EMEA my will a ARPU, driver approximately the primary service with Pac $X,XXX of are my our part that per with growth, during having month. sales I at and measured

incentives upgrade opportunities rolled airtime packages. to our we've We with airtime build for services larger That's now and value-added to why to are airtime upgrade out seeing customers

build, network with to antennas VSAT HTS quick, a makes program also at Intellian new VSAT as virtually convert work can can case to opening new leisure enables network. us subscribers both This support transfer customer to antenna once time. the the with the OEM we commercial delivery. it and reason services are initiative our on any the airtime builders up This by airtime companies new convenient and first to for non-KVH it also without This we hardware easy KVH's changes. for antennas airtime benefit Cobham our such and install approach yacht It's level and offers global or our made as their to

to our subscriber this base revenue current to hardware Our existing systems from new program our drive infrastructure, share. with -- hardware airtime of gain costs, full expand all advantage are markets, airtime with revenue competitor and and to take services convert of goals market our for no revenue and

global with already we're receiving from and are super example, airtime of antennas. more KVH training some yachts an and for mixed As deploy converting We've which of high-value fleets, XX inquiries solution through competing commercial our than sales completed packages. currently a halfway partners

leveraging new includes system increasingly also versatile XG entering by the an speed is That's solution cellular is valuable per emerging, and hybrid counter market. our technology to to XG typical it integrated as a be WiFi and as TracNet systems gigabit From LEO maritime solutions. speed We're offered LEO applications. existing Every X capability. X perspective, can than fast faster for maximum XXx second. the

the that rates on to we've to Starlink. actual of observed based download competitive systems second per are distance towers, underlying data the with cell vary costs While megabits TracNet will speeds reaching the XXX

Our XG when customers' while within same be include XX% miles XX recreational vessels available our that offshore These the their using indicate and At as and TracNet LTE now to time is typically ships XXX. self-service, countries, in coast. range analyses can the terminals. of far more is XG down service vessels time, which up moving and service as our our boaters the than XX XX% available of commercial our than in more spend

a service than like LTE However, are as a XG customers of activating -- like we'd the are services, lower our TracNet TracNet we'd percentage XG/LTE much customers percentage and of however, lower to see. much our activating

are intelligent X auto out on hybrid the of months design. launched why X, a data. we our result, That's we've a of activation missing advantages As with XG/LTE program new

service for is global TracNet VSAT we activated, activate our SIM the terminal also When any card.

solution, WiFi. we This VSAT, will believe program new customers our introduction more to user and and lead hybrid will superior a a connectivity XG cellular unique Our channel using switching intelligent experience. automatically risk-free their manage then offers subscriptions which hybrid the to

TracNet Next, first lighter It the make to and gain costly. offers antennas competing The steps for our is which and and we Ku-band-only than offers X-meter It's demand HXX. and HXX our makes X-meter and integrated advantages. many -- includes also system airtime easier significant installations less technology are our taking boost faster, accessibility efficiencies. cost hybrid and

deployments on terminal, believe of experience these unlimited-use ARPUs higher in those taking user reduce reduction customers generate advantage plans. rates steps data to subscriptions, the price our HXX sales costs. Together can AgilePlans and potentially data while and monthly airtime the with We're we efficiencies lifting airtime costs to lower by limits of any the enhancing through and the increase

and on support And deployed shipping the customers' services a speed Starlink terminals. hybrid value-add finally, StarLink best enterprise-grade expect. -- the availability requirements. will terminals and our configuration in commitments to we customers with our work are That's is without systems we and our when level now our agreements believe why Starlink service network and the best-efforts optimize

are Starlink with for existing systems new terminals tandem in as TracPhone selling only TracNet TracNet terminals. We or and an add-on

Starlink solution only they buzz the market, the generating orbit in in While a of market. non-geosynchronous aren't the is lot

offer LEO in past, we Starlink. work to and discussed a to have the maritime we multiple choose I've MEO with alternative to networks should As flexibility

with we these make coming to operator. discussions the wrap are later this summer. another of and We NGSO a an weeks up we later-stage by stage At time, the in negotiations on hope in start -- announcement are

start wrapping So believe I year. the a in position favorable up, we're for of the

which the organic deliver While year, strategic scale to ability ahead, our pursue are we new value-added to suite approaches. gain and of through be growth to there may objectives airtime our services, challenges through remain hardware-agnostic for subscribers our in expand confident to

that airtime which we year In revenue clearly or anticipate addition, we development of the path will new include releasing defined later streams, have several at new start a XXXX. for products this

and we Finally, other for growth avenues to evaluate investment. continue

achieve to All are of profitability. and sustained actions these healthy growth being taken

Roger it the turn financial details. Now I'll for to over

Roger Kuebel

Thanks, Brent.

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

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

margin compared quarter of with year. first first in profit the XX% gross the for last year XX% Our as this quarter of was

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

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

fees those for but temporarily include to airtime subscribers equipment well as continue who fees as minimum total pay a As their subscribers. primary reminder, maintenance suspended service have AgilePlans

XX.X%, slightly up Airtime from which last gross is was XX.X% margin year.

are with We those very pleased results.

we our for in not be the However, high to are XXs. airtime changing margins target

the first did a sales who last in see proportion sold a shutdown product Also year, A returned for was almost decline legacy to the XX of leisure market quarter last not factors. decrease decrease was result XX% QX AgilePlans, demand shipments product first total This sold VSAT of we a a a reduction The higher And a revenue decrease customers VSAT in due sales. in million finally, underlying went quarter $X.X in to or from network. in segment. of of the sales of was $X.X we Product $X.X several as in million, units. year. units of primarily the following million

purchase by by primarily to a first for the negative quarter inventory X the $XXX,XXX; and approximately of Product approximately factors: write-down approximately being bearing. gross was first $XXX,XXX the second margin $XXX,XXX. was being This due price of

the million. for expenses Operating were quarter $XX.X

rate impact last of mentioned to difficult expected is is year. year complexity last the million the took of charges on of the $XX.X run navigation million approximate than the inertial QX well call, comparison first quarter to $X.X business. year-over-year selling a the I That the we that the the we as is as in XXXX, isolating restructuring this due of but start As less

margins the $XXX,XXX. these changes in revenue, resulted of approximately income operating in and expenses from At loss operations operating a level,

the had when we Given income started be expense we expected about seasonality is and year. items, to of where just this the various

Going be forward, each at profitable we level the quarter. expect income operating to

$XX,XXX, XXXX. loss net compared than basically operation less loss $X.XX period compared loss per for net was the $X.XX a Our of with year's breakeven, from net last a in was of million. per to the quarter same of bottom share first $X.X loss EPS continuing of line net share

for million compared $X.X million adjusted was quarter positive EBITDA year. the last positive a with Our a $X.X

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

by $X.X Net cash was used operations million.

which year-end, total However, on the and now we had operating as call, reversed. returning used $XX.X in last a unusual at The increase I including cash. assets million level, in liabilities, AP payable is an to noted normal accounts of change

that would change, cash operations $X As approximately such, been have million. by without provided

the were for $X.X Capital million. expenditures quarter

So in $X.X million. million, Cash securities our $X almost CapEx flow, in resulting normalized operational was an capital, over ending was cash cash and cash approximately marketable by also $X than activities working of was balance Adjusted provided million. positive CapEx less X, EBITDA positive by and assuming financing by million. was used $XX other virtually investing activities

the forward year. to of remainder Looking the

continue million and million $XX million between $XXX between revenue $XX and expect We EBITDA to million. year and full $XXX adjusted

change to no guidance. our So

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

Operator

[Operator comes of line Space. Instructions] from the Quilty first Henry question Caleb Our from

Caleb Henry

me. A questions of couple from

a You to multiple date I missed Maybe for terminal KVH different this begin? that? use the does did start providers it, able give be program that program, but you network. where new mentioned VSAT When will

Brent Bruun

year launched It started first loosely officially May this it or quarter, X. but as of the in was

Caleb Henry

dedicated Okay. announced different orbit-specific? that to with Ku-band to that orbits? able you work being is that The satellite as networks Or is or HXX -- multiple terminal from Ku-band,

Brent Bruun

Cobham we provided VSAT not that reason reason as a VXX, -- and is WiFi orbit-specific, Ku-band the Ku-band to Ku-band it and the it's both -- historically, -- also It's in the we well by Yes, of just was it This The which Ku capabilities. Ku-band we it's geo. but only. that the called as we've is but why from XG call the only approach Intellian, as geosynchronous. has why And name integrated only. import And terminal out Ku-band systems to similar C-band. competing

Bob Balog

all that it on on, operating terminals Flex It's to other has Yes. our network access operate standard the constellation. of entire the so

Caleb Henry

something replace Okay. the that which tandem? that When your you is you'll pretty will capacity, you is being Starlink add close Or NGSO offer mentioned it anticipate offering? that you too, something in

Brent Bruun

as in alternative. it be but alternative, an necessarily as Well, an will offered not tandem

Caleb Henry

Right. Right.

mentioned you or last switching Okay. my customer And then your was that to a that L-band maritime L-band that now using an customer network. is -- question,

they to the not listening usually Ku their kind Ka, or L-band, being L-band X they main think like to of talk of base I protected, in add it. higher-throughput sort providers, about customer and usually replacing usually services, addition

if I'm vessels starting So if are in curious that, where shift services. or agree with higher-throughput a L-band that you're if you of more favor just to you with disagree ditch seeing

Brent Bruun

competitor our to conversions and regards the broadband, perspective years we're as Inmarsat. service over our degree, to Inmarsat to to Iridium, be backup. talking right, In very that's to anyway, as from specific, number a systems. been as with L-band, of our both system when fleet Well, systems well offering, talk there's providers, about their about or we a Iridium used X large

this solutions. another their just So yet is L-band of conversion

Operator

this I'm no back I to remarks. conference for [Operator now showing further to questions. like turn time, At Roger Instructions] closing the Kuebel over would

Roger Kuebel

all Well, I it. joining was join you that And it. able anytime. don't that's we U.S. everybody think thank these for afternoon Coast appreciate normally to East us. but who I time, do know in Appreciate

you announce So everyone and all to for we joining, when we'll talk thank again QX.

Operator

concludes for call. Thank This participating. today's conference you

may You now disconnect.

KVH Industries (KVHI) 4 May 232023 Q1 Earnings call transcript