KVHI - Earnings call transcript Q3 2024

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Operator

Good day, and thank you for standing by. Welcome to the KVH Industries Third Quarter 2024 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 first speaker today, Anthony Pike, Chief Financial Officer. Please go ahead.

Anthony Pike

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

call me is Joining the the Chief Brent Executive company's Bruun. Officer, on

into get few a numbers, standard the I Before statements.

are release be And to Firstly, of a would earnings today's copy via available would website. you listening call, of a you if please you ir@kvh.com. like to will on web, recording if our questions if submit the both feel like or the to listen free to

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

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

as as You to comparable will press our find release numbers. a in definition a reconciliation measure this well of GAAP

the made will filings be Factors directly today. review XXXX Investor available which in XX-Q, to Risk of the you company's website. section other Form our The cautionary Information our heading from SEC encourage in filings, filed those the statements are We QX under specifically SEC our later

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

Brent Bruun

Thank everyone. good morning, you, and Anthony,

me Let results. our begin with a of high-level overview

million, margins to million from our $X due of gross in base. was the down last Airtime versus declined slightly Third subscriber $XX.X quarter the revenue shift and airtime quarter XXXX. same a service year third period

is driven effect which Starlink data contribution versus on the through purchase into second agreement, However, The data July our airtime in sold from quarter. sequentially substantial X. margins margins bulk improvement by went subscriptions, now increased

revenue. to quarter. expectations was line quarter service continuing XX% million, and the results This shared the decline due was decrease last are from we for corresponding with a VSAT VSAT in the a These sales in year earlier. product revenue roughly Total $XX.X

service quarter. continue count build positive and consecutive We subscribing initiatives product increased to us momentum. Our new second vessel our the help for

record quarter, driven by communication We demand for our and shipped in of continued the a for antennas also number VSAT a increase terminals units. Starlink substantial third consecutive

In we for second Communications the quarter. consecutive CommBox our Gateway of Edge increased addition, shipments

discussed airtime activation VSAT as backlog a potential well call, of tend on and the leading building last units we quarter, and CommBox activations growth. carry subscription As Edge quarter's and over service robust for terminals establishing Starlink future as to indicator a next into of

leisure part Starlink our multichannel and offering worldwide. is commercial portfolio, exciting communications an subscribers of to outstanding

demand since offering the now for that than start mobile data and continue more X,XXX leisure have priority the see strong we We been year. of having service to to terminals commercial activated vessels,

with We market are expanding of use. addition now maritime the stationary beyond for plans priority the

land-based and terrestrial service latency countries. land-based the Colombia in States, and We communications. for applications service stationary United Starlink high-speed, may data ideal have areas are Argentina Starlink's seamless, in particular, for low solutions, high-speed to expand The for plans connectivity other the unsupported commenced by in offering

care. health remote Potential construction, currently by the terminals agriculture, Gateway. are all applications Edge and commercial CommBox portfolio Starlink community and our relief new These include operations, WiFi, our education, plans Communications disaster supported in

others designed users in next-generation third supports is with to connectivity even any quarter. several e-mail operational e-mail Windows-based maritime installation the MAILlink+ services introduced cellular or is onboard also unavailable. communications MAILlink+ stay computer. platform when on enables satellite via connected We new our easy connectivity compatible for and

entertainment linkHUB service over-the-air sports Link VSAT, network, or In our XG news, for any OneWeb award-winning to vessels expanded an virtually delivery and addition, The server. for daily including cellular. service with Starlink, the unicast option enables media options of with we onboard linkHUB KVH over-the-air delivery updates receive equipped

services. new move to continue of additional we changes, these with on development Along forward the

be will around OneWeb follows the out later world. a on tests We our vessels quarter, service series this officially of which rolling

capabilities in captive also cybersecurity crew and CommBox of the Edge expand coming expect months. to We portal

During and QX and planned in recent weeks, we also events, several responded not. to both

Guard deployments renewal. the We're airtime as guidance. First, and back U.S. their scaled our anticipated annual terminal of VSAT Coast part its including in reduction as expected, updated this

anomaly Secondly, XX, Ocean. the October by Africa, Intelsat experienced the satellite operated on IS-XXe of Europe, Asia resulted and service in loss an Indian that in

alternative rapidly Following the the customers, for of multilayered moved disruption of to customers service adjusted restored network. prioritization thanks our on data our those majority to IS-XXe, vast satellites We and HTS beams. we

now SKY Intelsat performance JSAT and with for to and We network our are working capacity customers. optimize Perfect to add

the of our performance the by responding in and in to proud customers issue region. our this and tremendously tech creativity and disruption engineers minimizing network shown initiative I'm to support teams any

together KVH, feel maritime continue impact to disruptions, the continues significant we adapt of changes. industry, to and the these the with technological rest of to

and operations. business expanding making reconfigure However, by to our decisions shift necessary products we technology, decisively have the our reacted portfolio this our and services fundamental to of desire, delivering customers new

our As deployments are a result, increasing. hybrid LEO/GEO

the meeting commercial leisure LEO demands and pipeline sophisticated a are growth services, technology establishing fleets activations. are We for for boaters we solid for ongoing value-added and and in service

laid Challenges path and toward have believe profitability. I out remain, growth a but we

I'd Now more back to like for hand detailed at Anthony look the it to a numbers.

Anthony Pike

Brent. Thank you,

or or I I our that our to clearly on QX, would to is published release I reminder, elaborates in that in that a like on clarifies will information the call the earnings not my note data. either will XX-Q. described data for As focus restate similar comments

quarter to gross to of with in financial the which airtime our earnings XX.X%, gross XX.X%. which our is quarter respect So margin up release, was reported results, not prior third margin, is compared

following mainly end As distribution LEO Starlink with Brent from signing agreement strong margins to the of of at a be increase airtime, the can data bulk attributed this QX. mentioned,

time, Starlink budget. the and data boaters However, compress select most new we to plan for each to fleet may for plans do options operators custom margins that anticipate airtime slightly over which of introduction suitable the vessel offer following and

QX just the negative was $X.X impairment for as X,XXX, manufacturing million down charge wind in manufacturing $X.X $XX.X following million were related $X.X below prior And announced assets operating from our QX of which sale gross the is held end quarter. include profit to up X% million a the at negative compared year. vessels million subscribing of approximately Total to QX on Reported last to reclassification facility previously QX February expenses of a U.S. XX. the of

a from this QX around operating XXXX charge, $X.X basis. were expenses, prior the or first of down from excluding million impairment quarter quarter or the $X.X on X% and like-for-like million XX%

expenditures Our of was compares $X.X has adjusted CapEx to and second adjusted million, with the quarter This quarter less adjusted quarter million. the our $X.X and also that. adjusted in EBITDA less less EBITDA million. million, of EBITDA CapEx X $X.X $X.X of release $X.X the million reconciliation of was for Capital were for CapEx earnings EBITDA usual the so

ending $XX.X Our of quarter. up balance was approximately million $X.X cash the of from million beginning the

to range are guidance million pressure margins. revenue and Guard slightly to to timing due year U.S. adjusted full $XX.X EBITDA. million approximately million a contractual general of Coast narrowing our as $XXX despite we value had as ARPUs the to the million are for of These for what XXXX for finally, And $XXX the and stronger-than-expected reductions, $X.X well anticipated, to on the changes we which differed

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

Operator

Chris with Our Quilty [Operator Space. Quilty comes question from first Instructions]

Christopher Quilty

I on the couple terms a seeing what sense? it a units. vessel seemed and I hundreds growth shift follow and you out between of us that that highlight just you're to total Is wanted we've sort looks VSAT or in have and to count, count the still of accurate strategy. I But release units. bundling vessel the assessment? a yesterday of press an boat mean you're up adding you noticed of net the shedding can got and like Starlink Starlink units VSAT ago hundreds give of days did but

Brent Bruun

of terminals get it's stand-alone details Starlink a isn't bundled with for I'll more onboard We're half than activating VSAT, our new let being activating the also commercial Starlinks. perspective, a many using that Anthony regard to Chris, but VSAT accurate. numbers, VSAT the more units are few. word the We're Brent. a shedding quite necessarily or with matter. From into

we in terminal. currently in remarks, Starlink with as continue tend I the They to VSATs. tandem ship be said just to So my

stand-alone and Starlink. VSAT VSATs But have stand-alone contraction contracting. yes, those with that we then, well. stand-alone course, are of many have hybrid a of perspective, from So And be a to as Starlinks shifted

Christopher Quilty

just changed the and you you And by Right. not now so terminal, it's by vessel way correct? report,

Brent Bruun

the we by And of a as terminal. We VSAT, We especially materiality fact a vessels are to of the vessels we terminals X prudent, onboard, is from installed both many used and be the now count the same that with do materiality it VSATs. a from it with Starlink a correct. handful X seeing had vessels. But just and just would perspective, vessels. number a was, matter of carried perspective base, it that to That's so thought

Anthony Pike

to on trend out, think accompanied shipped I are out, being disclosed being units of Chris, the vessel, call, the GEO we around that going being trend of and a previously the Starlink or has half added continued.

Christopher Quilty

than to you started you size see Starlink Is on mean say, And to the as traditional the continuing simply with market where see units, from year? Starlink, it where expanding Got you. of do should I the at taking to beginning those rather GEO pie pipeline or do regard grow? I the And of relative the the you share solutions? product

Brent Bruun

it Yes, to answer concisely.

terminals number shipped As a record indicated, quarter. of past I this we

up the sequentially, the from So terminal shipments second quarter. were

have a we robust So pipeline.

Starlink terminal to. expansion sell of low very bit the the as Secondly, cost number per due seeing well perspective, services the a we're of far the potentially as price we as cost on that to vessels the for as an connectivity,

Christopher Quilty

to potential you distribution channels that target nature your the weren't change are do zone? properly like in you. subscribers Or subscriber feel the your reaching Got changing base? of in do traditionally need And you your anything given current

Brent Bruun

to the we very is if service exercise. bit channel, Starlink with But it partners And channel, remove we do adjusting will, a them always but as the increased robust has well. more opposed short right? adding it's a you probably The as introduction. answer have And ongoing reducing, an we're

And I to with on obviously of And U.S. the And into new we remote via more we're market remote well in regions. like Argentina we're a that parts going expand call, as other stabilized and is Colombia solutions the very well, doing the parts Starlink. of world, which as land about talked may and the us far as for

service team Africa a have providers, located well. We with opportunities and sales along at looking we're in as there

Christopher Quilty

market what a the traditional prodded as mentioned, target which, the land KVH? you for move look And at is to not

Brent Bruun

billing and into to internal It's Well, using is the in an as established have we we're very already that market these an processes step place. market fact fact we in able the as easy adjacent which easily far the that activations have presence that get Starlink, into. to regions, basically

Christopher Quilty

think Great. pre-commitment mean up had to prepaid popped the follow it How years mentioned see the think runoff we I up, X of more. Starlink. on we that? you that covers should Also, about I previously just the or that from

Brent Bruun

said and off than previously exact. being But anticipate a that We good of more in of seeing it. XXXX, would a if year, running No. not I portion we're overly all not

Christopher Quilty

it have like Anthony, And trended that phenomenon? Can actually you year. you. the since Got start up inventories the the explain of looks

Anthony Pike

Yes. Sure.

I this final that remaining the of we're in in part on to announced is So required. we and bring think working materials as raw all QX, build-out,

the smaller a facility. have team We in

increase building bit really, little be the up actually, has just raw Starlink year. process a And of short this so bringing vast been the majority take physical And the build-out we've the primarily. $X.X example, longer, been and inventory brought million of increase we through where But we'll $X of the million, quarter-on-quarter. in those materials quarter, build-out the materials. is for But also in product will next

really. that really entire for increase, accounts So the

Christopher Quilty

this and Got of need for run you traditionally into X, look hardware? the software R&D side, quarterly R&D was or this of investments, you quarter, out Is a albeit a Or presumably, low that record on were be the to good side next on rate? a that previously more major you. contributing the maybe And likewise, a they on sort do would roundabout would sort be the year when the they businesses in that fair you've see than assumption? shed OpEx Is total.

Brent Bruun

sized R&D have an appropriately We team.

wouldn't see that. adding I So to

engineers. We have software engineers, mechanical applications electrical engineers, engineers,

have We bases our covered.

approximately not So increase And run was in rate, $XX spend. it, R&D any I anticipate would the right? million, what

Anthony Pike

you million strip the pretty When is out we're much where Yes. yes. impairment, at, $XX

Brent Bruun

Yes. We're a to focused yet there. on improvement bit trying find more

Christopher Quilty

in How you're on is And Great. final just last, that to customers you talk positioning it the pipeline moved with And for mentioned level has the high coming you for you. online that X around you months how relative maybe say, maybe question, can product? OneWeb Starlink? to finally X

Brent Bruun

and hybrid have Well, it's against Starlink. gate and mean on we're first couldn't now, won't fast-onboard going. It's days, network from service doing doesn't talk the positioned focused It VSAT. a And getting early alternative with offering. necessarily Starlink a We OneWeb be foremost. we right redundancy But about perspective, a of the out and a a service slow been solution. Starlink that with a little OneWeb that

we haven't a to in But yet get just launched. So service the we'll and year-end significant waiting more call. share really penetration of we've established pipeline the been because that

Christopher Quilty

pretty here. business It bold you say, guess looks I have like the a I in shift turn executed And Great. forgot to with congrats guys the strategy. on but results

work. the good keep So up

Brent Bruun

so, saying Chris. for you Thank

Operator

showing this This program. today's for the Thank Thank no at time. your participation questions concludes in you I'm you. further conference.

now may disconnect. You

KVH Industries (KVHI) 7 Nov 242024 Q3 Earnings call transcript