Earnings call transcript Q2 2023

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Operator

Good day and thank you for standing by. Welcome to the KVH Industries Second Quarter Earnings Conference. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded.

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

Roger Kuebel

included operator. you, joining Industries’ which we for for everyone morning. this us KVH earnings are published results, earlier quarter Thank second morning, today Good and the release in thank you

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

dive announcements. quick a of couple in, Before we

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

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

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

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

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

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

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

Brent Bruun

Thanks, joining today. Good us Roger. everyone. Thank morning, for you

starters, In in QX airtime particular, results. are with with growth pleased our our For our revenue. we relatively

down X% last which resulted $X XXXX. million antenna shipments of from VSAT the the in a second short a recorded from in $XX.X note, year. improvement and income positive On expectations, the revenue period television operating was substantial of our leisure loss However, of same a quarter quarterly roughly $XXX,XXX, million fell

gross margin into to deeper million, of service associated bit metrics, year-over-year XX%. X% the $XX.X revenue with was a up an key dig To airtime

We base subscriber – we to total subs. subscriber our excuse than to total our than base me, X,XXX more increased also increased more X,XXX also

Our balance and no quarter-end cash balance $XX $X sheet is solid, million, with million up a sequentially debt. of

we we I’ll our – levels we to shortly. resource on touch aligned and size that and possessed dynamics While to competition. business, the market are grow, with the on are of the adapt that current continue that believe and to changing we heighten talent appropriately

stream revenue our months shipments. a OpenNet, not we new In May, our we hardware program suite global network non-KVH on robust a which launched take built of and leisure of and also is introduced vessels for commercial join or created antennas markets. OpenNet, reliant the service enables migrations With services. that sales In OpenNet since OpenNet three pipeline with across we’ve our the advantage we to VSAT value-added

from market of increasingly migrations share in take installations Each demand VSAT these an in our competitive. competitors environment stand-alone where will for

With we to the collaboration service. existing KVH FleetBroadband terminals convert and of to our systems partners, Inmarsat continue VSAT successfully service

by offerings steady need crew for we services. see demand for addition, a welfare driven content In subscription the

our our secured and advantage taking we Intelsat. plans refining goal the with of contract airtime offering are of capacity of process we Additionally, pricing, we additional simplifying way with our are – This the attractive. our making one is in have extension successful the initiative more rate following

subscribers coming backbone represent network the the secures years. Network. the The users mutually for the is Intelsat HTS majority both our multi-orbit, of FlexMaritime on partnership companies, KVH-Intelsat beneficial the The multichannel for our as of global extension

past, the the in flexibility discussed lower multiple with to I’ve earth we orbit networks. enjoy work and medium As –

TracNet TracPhone a products. as system our and to companion continue We terminals offer Starlink to

these worldwide the LEO discussions hybrid multiple up them from airtime one hope the and of with negotiations goal late-stage in of our or future. wrap more terminals also are in operators to We with network. near adding We

experiencing leisure sales. to and VSAT corresponding transition and satellite streaming We content TV reduction rather a headwinds by are, than A and however, and driven leisure terminal market, services. LEO in new competitive satellite TV

market for competitive our the environments, changing tempering we year. guidance Given are full and the

of now to million million, EBITDA We in along adjusted services growth between million continued our and an $XXX anticipate with million. $XX $XX and revenue $XXX revenue subscribers, with

value-added While which good at gain set the services, the the are to through organic changing growth scale suite reflect these new and made of to agnostic pursue adjustments objectives on approaches. airtime our expand we’ve response hardware year, growth start we market, to the progress our strategic of subscriber through to

report We presently to a I has to of want to operate continue Directors concluded of On stand-alone its separate review a company. intend that our Board alternatives. note, strategic as

any transactions actively to reviewing material we the of usual our they We are may continue as at plan arise. opportunities but moment, considering not practice

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

Roger Kuebel

Thanks, Brent.

continuing note specifically was otherwise, to First, relate our Navigation unless with I would stated, Inertial one QX ago operations, of our the that, exclude business, today. year which to like results to my year of last which sold comments respect

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

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

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

Starlink million due of $XX.X up antennas, to million, This sales by revenue in just receive-only decrease quarter which $X.X XX.X%, decrease last an from XX.X% $X.X VSAT year. grew for we revenue somewhat the offering a second second of last products, of revenue the product was decrease the TV primarily XX% million of revenue was million from in margin quarter. in quarter began $X.X gross year. quarter second or XXXX. second was Airtime Product the to a or over and offset approximately increase in X% Airtime

receiving rather satellite receive-only not affecting had our it From other to than entire the with As providers, is significant KVH. video industry, appears indicated, antennas. TV has streaming had on through Brent of this that discussions impact sales just we’ve the content TV transition a

are realization to costs for gross including of focus, improvement. alternatives Product intense a volumes, quarter higher be costs, an from margin by purchase due between approximately This to evaluating $X.X we from continues for overhead the second of QX factors a variances and was of exceed unit absorption services. re-class costs products was This to caused million. number manufacturing negative area and price component standard to and due lower lower that

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

to we and changes and to This quarter compared resulted a in year’s a number benefited run rate of margins one-time million. approximately operating $X expect $XX in reserve last income quarterly loss normal between from revenue, the level, the of about from to At $XX.X million operating be these $XXX,XXX adjustments, continue million. profit of and expenses operations

of net second line from profit And XXXX. per bottom $X.XX $XXX,XXX. share in same Our period was with the net the compared per income share of continuing of quarter $X.XX loss a was EPS net a operations for

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

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

of approximately approximately $X.X cash the was resulting cash $XXX,XXX last ending operations was Cash provided an $X.X were increase CapEx, approximately quarter expenditures provided million and and less over adjusted $XX in versus year. million Net of in positive was Capital $X.X for by million, balance financing million by an activities million. by EBITDA, $X.X million. cash $X.X

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

Operator

ahead. you. & question-and-answer from Koontz session. time, the we question will this Thank Instructions] Please first Your Co. [Operator Needham At Ryan of conduct comes go

Ryan Koontz

is the It morning. you go-to-market It the maybe products market good sounds Can different really capacity like – yours? kind model helpful. disrupting is how the from here. be differentiation Thank sales their you. of and Starlink the in would about speak Hi,

Brent Bruun

Starlink, to high-speed, offer CIR, offer they do service. They do Yeah. a information in committed I low-latency mean, a rate. regard not

well. as value-added So well our when to a rate support, service and field incredibly information offer it committed cybersecurity. we go works a units services, tech works, But which of number phone as the your with we XX/X repair service service, through

more and companion plan. connectivity. you So just about we’re And works is offering it we’re than on combination well, as we with focused talked you the quite frankly, very know the that’s why what know companion plan, in Starlink

They we’ve number sales to selling and You service continued commercial both of includes airtime. know providers to using sell regard go-to-market competitors regard are direct their in to go-to-market, which – with strategy, historic in through a our market. our

significant in well. that much all selling go-to-market So doing, portion I’m sales sure they resellers through what that are not A that of through as resellers are strategy differs our their from we’re majority.

Ryan Koontz

know going cost And reduce to you of Got with down disruption ability you the you have bandwidth to go know to capacity? your, cost with partner your it. of then back the on, the coming do

Brent Bruun

Yeah.

I of airtime but more we’re And we at not a remarks, about did Intelsat, are in our enter extension a adjusting bit capacity, quite we as into down alluded our talk We’re bringing liberty capacity. to cost just prepared our plans. to contract with

Ryan Koontz

going of there adjust you’re much reverse and that a kind is of as margin hoping and impact share obviously, to forward? your such So airtime plans, kind loss gross of you –

Brent Bruun

is in quarter haven’t and we do where high maintaining quarter it. Your we call, first airtime it about know and know slight XX% we’re but And this our accurate, – where margins continue you and our anticipate plus. necessarily contraction said subscriber for to statement to you the this on talking were last XXs a grow airtime, anticipate base we

Ryan Koontz

before. that little about talked a you’ve think bit I

one with XXs of sell high different know cetera? fishing, vertical is or of you So you – leisure whether into, right. or are All the area contraction. challenges to et particular kind verticals in it’s commercial And segments another, the the regard

Brent Bruun

most light impacted. and the have Leisure been commercial

So know we light you commercial. would fishing and as view

all not been as do haven’t either, much. which significantly tankers, don’t far your not market as have. we water impacted. concern seen That’s one sell the do into commercial, – As understand And we blue cruise carriers, we car has I carriers, your we

Ryan Koontz

in the by other Got the it. space And market – in that’s terms of cruise players served

Brent Bruun

Yes –

Ryan Koontz

like this? guys and Inmarsat

Brent Bruun

you it’s significant didn’t mean focus there, have I Yeah. others but do. Inmarsat a –

Ryan Koontz

the I taking all Thanks for That’s Okay. questions. had.

Brent Bruun

Thanks, Ryan.

Operator

question next Space. Your Instructions] Chris Quilty Quilty [Operator of from comes you. Thank

ahead. go may You

Chris Quilty

Thank you. In are plan you you margins on impact be do in do them words, we to for to price wait know former, and these and pretty discover. to customers? QX, want that? on little what In the to? other the where other changes the those if Guys, you airtime seems you’re immediate to a to you on maybe would you’re bit follow-up guiding push of sort Or of a see automatic that how direction down implement just plans words, on going

Brent Bruun

I Chris. wouldn’t significant going to in XQ, margins say, you’re any see impact on

people So, know to it’s plans, know bandwidth-thirsty. – you airtime regards but have more become the in you

matter of to So, it’s is on providing more looking really align end more speed basis a our with what go-forward raw and for. user a consumption

Chris Quilty

not giving what changing words, a really higher to the which bandwidth, So you’re other pricing, has is more doing in you. just you’re quality

Brent Bruun

renegotiation, It I now, a as just But said, capacity down we’re pulling more could. bit right potentially a Intelsat. we entered from into

So it I we gross we think maintain it’s reasonable – a can that profit so level. have

not slight we high repeat but contraction it’s You I’ll know once to XXs, anticipate do again, the significant.

Chris Quilty

either which is know the to provide? costs prognosis legacy you. distant lower has taking side. services where price you product the a a over are a Obviously, gap there? consumer it relative a What’s you antenna sort mean, products Got to looks Starlink like hard pretty recoverable situation I capabilities Switching hit. you pretty know this the of you the between increment or

Brent Bruun

good Yeah. forefront that’s and as in activities. you well regard question That’s and a their our very and the know something daily minds – of

the process the what impact is. in We’re that overall of assessing

dynamics changing that necessarily can the we at outcome market what as market. we is be on disclose are since position our order set to to in basis do going we’re liberty that to where dynamics adjust and go-forward effectively as market middle the not in of ourselves the to these understand We’re of to plan the But in a is it.

Chris Quilty

issues be How half to volume. Got that it. think about And Roger, were some margins product on just one-time was to year? And in into in second specifically expected them their way seem indicate we the the more there addition margins, but the you looking should product I to down, down. of mean,

Roger Kuebel

will to Well, the be – second happens if highly take been happen I breakeven you of sort items, with it the of quarter of for can right know what’s kind volume. the going quarter, out say that and where would one-time dependent around for the kind what you have on

now of a period of uncertainty. in a lot right We’re

whether in It’s dramatic you a of whether some tell are so things things you to know whether change. occurrence little the changes to know hard on We’re going going kind seeing there’s – are market. unusual

really be sort just would Right know So now, breakeven. expecting is tough midpoint of to I estimate it’s we say. I say, you were would around if

Chris Quilty

like other developments, Okay. some That was areas you second terms investments? there good. in make that are or of KVH new half the And to know things of you wanted the of other just that pricing in product have coming you year or the Watch other developments plans,

Brent Bruun

still that very to You products robust know, we developing having department. vest, stuff R&D when R&D, in it comes department, keep but to engineering close we’re our

in could some – And year. very basis. here So stuff know the you they in later stay out daily busy the on well coming a have

Chris Quilty

And question. me, you. question, another, final is which Starlink Got forgive

think of challenges service with the You is, the at no partnering there’s margin one I know for providers. them

it’s lot existing through. of own competitors that also? your you do that to it new adding do market system? opportunity Or created obviously, you So Is albeit customers? bundle, see a offer with it of by basically deploying, know bundle bundle doing pass most see as you now your because product your a that Where it all you’re

Brent Bruun

other basically service change, for down most but with path to the going that current if offering. went associated Yeah. – market up we due we’ll to the open I focus that it’s part, definitely, speeds mean, our the isn’t opportunities completely,

Chris Quilty

All Got Well gentlemen. thank right. you, you.

Brent Bruun

Okay. Thanks, Chris.

Roger Kuebel

Yeah. Thanks, Chris.

Operator

the remarks. Thank I for would it Executive closing like Officer, Chief Brent now to to you. over Bruun, turn

Brent Bruun

the Okay. you Well, of us very you thank today, joining the Thank enjoy you very much for week. and rest much. today and

Roger Kuebel

Thanks, everyone.

Operator

for your the you Thank This today’s in conclude participation program. conference. does

now may disconnect. You

KVH Industries (KVHI) 9 Aug 232023 Q2 Earnings call transcript