KVH Industries, Inc., (Nasdaq:KVHI) reported financial results for
the first quarter ended March 31, 2015 today. The company
will hold a conference call to discuss these results at 10:30 a.m.
ET today, which can be accessed at investors.kvh.com.
Following the call, a replay of the webcast will be available
through the company’s website.
Highlights
- Continued growth in mini-VSAT Broadbandsm Q1 airtime revenue,
up 12% year-over-year
- Including the impact of Videotel, strong year-over-year growth
in subscription-based service revenue, which represented 61% of
total revenue in Q1, up from 47% a year ago
- Gross profit margin of 43% compared to 39% a year ago
- Non-GAAP adjusted EBITDA in the first quarter of $2.8 million
up from $1.1 million in the comparable quarter last year
“Overall we are very pleased with our progress in the first
quarter. In particular, we are excited about the reception
given to our new IP-MobileCast™ service and are already seeing the
benefit of having an integrated service and content offering,” said
Martin Kits van Heyningen, KVH’s chief executive officer. “We
believe that the availability of IP-MobileCast played a major role
in our ability to win recent larger fleet deals for which we might
not have been as competitive in the past. Although the daily
usage on metered plans related to the offshore oil and gas services
was down significantly during the quarter, other sectors, like
commercial shipping and leisure, remain strong. Our VSAT
pipeline and backlog are robust.”
Financial Highlights (in millions, except per
share data)
|
Quarter Ended |
|
|
March 31, 2015 |
March 31, 2014 |
|
GAAP
Results |
|
|
|
Revenue |
$ |
41.3 |
|
$ |
37.0 |
|
|
Net loss |
$ |
(1.4 |
) |
$ |
(1.1 |
) |
|
Net loss per share |
$ |
(0.09 |
) |
$ |
(0.07 |
) |
|
Non-GAAP
Results |
|
|
|
Net income (loss) |
$ |
0.9 |
|
$ |
(0.0 |
) |
|
Net income (loss) per
share |
$ |
0.06 |
|
$ |
(0.00 |
) |
|
Adjusted EBITDA |
$ |
2.8 |
|
$ |
1.1 |
|
|
For more information regarding our non-GAAP financial measures,
see the tables at the end of this release.
First Quarter Financial Summary
Revenue was $41.3 million for the first quarter, an increase of
12% compared to the first quarter of 2014. First quarter
product revenues of $15.4 million were 15% lower than the prior
year quarter, primarily driven by a 31% year-over-year decline in
fiber optic gyro revenues. Service revenues in the first
quarter were $25.9 million, an increase of 37% compared to the
first quarter of 2014, and includes $5.9 million of revenues from
our July 2014 acquisition of Videotel™. Airtime service
revenues, which include mini-VSAT Broadband airtime revenues, were
up 12% year-over-year. Content and services revenues, which
include our entertainment and new e-Learning and safety content,
were up 112% in the first quarter of 2015 compared to the first
quarter of 2014, including Videotel revenues.
For the first quarter, net loss on a GAAP basis was $1.4
million, or $0.09 per share, while non-GAAP net income was $0.9
million or $0.06 per diluted share. During the same period
last year, the company reported a GAAP net loss of $1.1 million, or
$0.07 per share, and a non-GAAP net loss of $0.0 million, or $0.00
per diluted share.
Non-GAAP adjusted EBITDA was $2.8 million for the first quarter
of 2015 compared to $1.1 million in the prior year quarter.
Included in non-GAAP adjusted EBITDA was $1.4 million and $0.5
million related to the amortization of intangible assets for the
three months ended March 31, 2015 and 2014, respectively. The
acquisition of Videotel on July 2, 2014 generated the
year-over-year increase in intangibles amortization.
Second Quarter 2015 and Full Year 2015
Outlook
Overall KVH expects continued growth and improving profitability
as we progress throughout the year. We expect solid growth in
our marine VSAT business while we expect our defense business to
remain flat. A portion of our revenues and costs are
denominated in pounds sterling, and there have recently been
significant fluctuations in currency movements relative to the U.S.
dollar. Significant changes to currency exchange rates,
particularly between the U.S. dollar and pounds sterling, may have
a material impact on our earnings. For the full year, we are
reaffirming our previous guidance, as set out below:
- Revenue for the full year is projected to be $190 million to
$210 million.
- For the full year, net income is projected to be in the range
of $4.6 million to $6.2 million with GAAP EPS projected to be in
the range of $0.30-$0.40. Non-GAAP adjusted EBITDA is
projected to be $25.0 million to $27.5 million with non-GAAP
diluted EPS for the full year projected to be in the range of $0.81
to $0.91.
- Revenue for the second quarter is projected to be in the range
of $41 million to $45 million.
- For the second quarter, net loss is projected to be in the
range of $1.2 million to $0.5 million with GAAP net loss per share
to be in the range of $0.08 to $0.03. Non-GAAP adjusted
EBITDA is projected to be $3.0 million to $3.7 million with
non-GAAP diluted EPS for the second quarter projected to be in the
range of $0.05 to $0.10.
Other Recent Announcements
- We introduced our new TracVision® TV8 maritime satellite TV
antenna system, which is designed to provide tracking, reception
and extended coverage needs for yachts and merchant vessels.
- A new industry report by COMSYS, a market analysis firm,
concluded that KVH’s mini-VSAT Broadband service has nearly double
the number of vessels in service versus that of our nearest
competitor.
- We added additional capacity for our satellite network in the
Asia-Pacific region, the Pacific Northwest, the eastern coast of
Canada, and the U.S.
Please review the corresponding press releases for more details
regarding these developments.
Conference Call Details
KVH Industries will host a conference call today at 10:30 a.m.
ET through the company’s website. The conference call can be
accessed at investors.kvh.com and listeners are welcome to submit
questions pertaining to the earnings release and conference call to
ir@kvh.com. The audio archive and an MP3 podcast will also be
available on the company website within three hours of the
completion of the call.
Non-GAAP Financial Measures
Provided in this release is non-GAAP financial information,
including non-GAAP net income, non-GAAP diluted EPS, and non-GAAP
adjusted EBITDA, as a supplement to the condensed financial
statements, which are prepared in accordance with generally
accepted accounting principles (“GAAP”). Management uses
these non-GAAP financial measures internally in analyzing financial
results to assess operational performance and liquidity. The
presentation of this financial information is not intended to be
considered in isolation or as a substitute for the financial
information prepared in accordance with GAAP. KVH believes
that both management and investors benefit from referring to these
non-GAAP financial measures in assessing performance and when
planning, forecasting, and analyzing future periods. KVH
believes these non-GAAP financial measures are useful to investors
because they allow for greater transparency with respect to key
financial metrics used in making operating decisions and because
its investors and analysts use them to help assess the health of
its business.
Some limitations of non-GAAP adjusted EBITDA, non-GAAP net
income (loss), and non-GAAP diluted EPS, include the following:
- Non-GAAP adjusted EBITDA represents net (loss) income before
interest income, interest expense, taxes, depreciation,
amortization, stock-based compensation, acquisition-related
expenses, and adjustments resulting from the application of
purchase accounting in connection with acquisitions.
- Non-GAAP net income (loss) and diluted EPS exclude
acquisition-related expenses, adjustments resulting from the
application of purchase accounting in connection with acquisitions,
adjustments related to stock-based compensation and intangible
amortization, all net of tax, and also excludes any discrete tax
items.
Other companies, including companies in KVH’s industry, may
calculate these non-GAAP financial measures differently or not at
all, which will reduce their usefulness as a comparative
measure.
Because of these limitations, investors should consider these
non-GAAP financial measures together with other financial
performance measures, including net income, diluted net income
(loss) per share, and KVH’s other financial results presented in
accordance with GAAP. See the GAAP to non-GAAP
reconciliations below for further details.
About KVH Industries, Inc.
KVH Industries is a leading manufacturer of solutions that
provide global high-speed Internet, television, and voice services
via satellite to mobile users at sea and on land and is a leading
news, music, entertainment, and training content provider to many
industries including maritime, retail, and leisure. KVH
Industries is also a premier manufacturer of high-performance
sensors and integrated inertial systems for defense and commercial
guidance and stabilization applications. KVH is based in
Middletown, RI, with research, development, and manufacturing
operations in Middletown, RI, and Tinley Park, IL. The
company’s global presence includes offices in Belgium, Brazil,
Cyprus, Denmark, Hong Kong, Japan, the Netherlands, Norway,
Singapore, and the United Kingdom.
This press release contains forward-looking statements that
involve risks and uncertainties. For example, forward-looking
statements include statements regarding our financial goals for
future periods, our anticipated revenue sales pipeline, backlog,
competitive positioning, profitability, and product orders.
The actual results could differ materially from the statements made
in this press release. Factors that might cause these
differences include, but are not limited to: the impact of extended
economic weakness and high fuel prices on the sale and use of motor
vehicles and marine vessels; the need to increase sales of the
TracPhone® V-IP series products and related services to improve
airtime gross margins; the need for, or delays in, qualification of
products to customer or regulatory standards; unanticipated
declines or changes in customer demand, due to economic, seasonal,
and other factors, particularly with respect to the TracPhone V-IP
series, including with respect to new pricing models; recent
increases in airtime termination rates and lower unit sales in our
mobile business; increased price and service competition in the
mobile communications market; potential reduced sales to companies
in or dependent upon the oil industry as a result of declining oil
prices; exposure for potential intellectual property infringement;
continued substantial fluctuations in military sales, including to
foreign customers; unanticipated expenses associated with the
launch of the IP-MobileCast service; the unpredictability of
defense budget priorities as well as the order timing, purchasing
schedules, and priorities for defense products, including possible
order cancellations; the uncertain impact of potential budget cuts
by government customers; potential litigation expenses;
fluctuations in interest rates; potential changes in tax and
accounting requirements or assessments, including management’s
assessment of the probability and effect of future events; stock
price volatility; and currency fluctuations, export restrictions,
delays in procuring export licenses, and other international
risks. These and other factors are discussed in more detail
in KVH’s Annual Report on Form 10-K filed with the Securities and
Exchange Commission on March 17, 2015. Copies are available
through its Investor Relations department and website,
http://investors.kvh.com. KVH does not assume any obligation
to update its forward-looking statements to reflect new information
and developments.
KVH Industries, Inc., has used, registered, or applied to
register its trademarks in the USA and other countries around the
world, including the following marks: KVH, KVH logo, Azimuth,
TracVision, TracPhone, Tri-Americas, CommBox, TACNAV,
IP-MobileCast, Videotel, Sailcomp, mini-VSAT Broadband and the
mini-VSAT Broadband logo, E•Core, Crewtoo, Muzo, and the banded,
dome-shaped housing of its satellite antennas. Other
trademarks are the property of their respective companies.
KVH INDUSTRIES, INC. AND
SUBSIDIARIES |
|
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS |
|
(in thousands, except per share amounts,
unaudited) |
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
March 31, |
|
|
|
2015 |
|
2014 |
|
Sales: |
|
|
|
|
|
|
|
Product |
|
$ |
|
15,386 |
|
|
$ |
|
18,007 |
|
|
Service |
|
|
|
25,919 |
|
|
|
|
18,978 |
|
|
Net sales |
|
|
|
41,305 |
|
|
|
|
36,985 |
|
|
|
|
|
|
|
|
|
|
Costs and
expenses: |
|
|
|
|
|
|
|
Costs of product
sales |
|
|
|
10,485 |
|
|
|
|
11,332 |
|
|
Costs of service
sales |
|
|
|
13,260 |
|
|
|
|
11,060 |
|
|
Research and
development |
|
|
|
3,750 |
|
|
|
|
3,667 |
|
|
Sales, marketing
and support |
|
|
|
8,080 |
|
|
|
|
7,470 |
|
|
General and
administrative |
|
|
|
7,638 |
|
|
|
|
5,150 |
|
|
Total costs and
expenses |
|
|
|
43,213 |
|
|
|
|
38,679 |
|
|
|
|
|
|
|
|
|
|
Loss from operations |
|
|
|
(1,908 |
) |
|
|
|
(1,694 |
) |
|
|
|
|
|
|
|
|
|
Interest income |
|
|
|
148 |
|
|
|
|
210 |
|
|
Interest expense |
|
|
|
368 |
|
|
|
|
191 |
|
|
Other income, net |
|
|
|
413 |
|
|
|
|
107 |
|
|
|
|
|
|
|
|
|
|
Loss before income tax benefit |
|
|
|
(1,715 |
) |
|
|
|
(1,568 |
) |
|
Income tax benefit |
|
|
|
(293 |
) |
|
|
|
(445 |
) |
|
Net loss |
|
$ |
|
(1,422 |
) |
|
$ |
|
(1,123 |
) |
|
|
|
|
|
|
|
|
|
Net loss per
common share: |
|
|
|
|
|
|
|
Basic and diluted |
|
$ |
|
(0.09 |
) |
|
$ |
|
(0.07 |
) |
|
|
|
|
|
|
|
|
|
Weighted average number of common shares
outstanding: |
|
|
|
|
|
|
Basic and diluted |
|
|
|
15,538 |
|
|
|
|
15,313 |
|
|
|
|
|
|
|
|
|
|
KVH Industries, Inc. and
Subsidiaries |
|
CONDENSED
CONSOLIDATED BALANCE
SHEETS |
|
(in thousands,
unaudited) |
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
December 31, |
|
|
|
2015 |
|
2014 |
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash, cash equivalents and marketable securities |
$ |
49,423 |
|
$ |
49,802 |
|
Accounts
receivable, net |
|
|
33,787 |
|
|
39,936 |
|
Inventories |
|
|
18,648 |
|
|
17,424 |
|
Other
current assets |
|
|
4,214 |
|
|
2,953 |
|
Deferred
income taxes |
|
|
2,790 |
|
|
2,772 |
|
Total current assets |
|
|
108,862 |
|
|
112,887 |
|
|
|
|
|
|
|
|
|
Property
and equipment, net |
|
|
41,279 |
|
|
41,696 |
|
Goodwill |
|
|
36,735 |
|
|
40,454 |
|
Intangible assets, net |
|
|
30,820 |
|
|
33,641 |
|
Non-current deferred tax asset |
|
|
2,733 |
|
|
2,690 |
|
Other
non-current assets |
|
|
4,692 |
|
|
4,469 |
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
225,121 |
|
$ |
235,837 |
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
Accounts
payable and accrued expenses |
|
$ |
30,375 |
|
$ |
33,708 |
|
Deferred
revenue |
|
|
7,774 |
|
|
7,791 |
|
Current
portion of long-term debt |
|
|
6,198 |
|
|
6,188 |
|
Total current liabilities |
|
|
44,347 |
|
|
47,687 |
|
|
|
|
|
|
|
|
|
Other
long-term liabilities |
|
|
1,350 |
|
|
1,459 |
|
Non-current deferred tax liability |
|
|
5,197 |
|
|
5,464 |
|
Long-term
debt, excluding current portion |
|
|
63,135 |
|
|
64,687 |
|
Stockholders' equity |
|
|
111,092 |
|
|
116,540 |
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders'
equity |
$ |
225,121 |
|
$ |
235,837 |
|
|
|
|
|
|
|
|
|
KVH INDUSTRIES, INC. AND
SUBSIDIARIES |
RECONCILIATION OF GAAP NET LOSS TO NON-GAAP
NET INCOME (LOSS) |
(in thousands,
unaudited) |
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
March 31, |
|
|
|
2015 |
|
2014 |
|
Net
loss - GAAP |
$ |
|
(1,422 |
) |
|
$ |
|
(1,123 |
) |
|
|
|
|
|
|
|
|
|
|
Discrete tax expense,
net (a) |
|
|
50 |
|
|
|
|
- |
|
|
|
Stock-based
compensation expense, net of tax |
|
|
632 |
|
|
|
|
662 |
|
|
|
Acquisition-related
compensation |
|
|
189 |
|
|
|
|
- |
|
|
|
Amortization of
intangibles |
|
|
1,442 |
|
|
|
|
460 |
|
|
|
|
|
|
|
|
|
|
Net
income (loss) - Non-GAAP |
$ |
|
891 |
|
|
$ |
|
(1 |
) |
|
|
|
|
|
|
|
|
|
Net
income (loss) per common share - Non-GAAP: |
|
|
|
|
|
|
|
Basic and diluted |
$ |
|
0.06 |
|
|
$ |
|
(0.00 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note - The impact of the change in the deferred income tax
asset valuation allowance on the number of diluted shares
outstanding did not alter the diluted net income per common share
result presented for both periods. As a result, the inconsequential
impact to the diluted share number has not been
included. |
|
|
|
|
|
|
|
|
(a) Represents a change in the valuation allowance on a state
research and development tax credit, and uncertain tax position
adjustments. |
|
|
|
|
|
|
|
|
KVH INDUSTRIES, INC. AND
SUBSIDIARIES |
RECONCILIATION OF GAAP NET LOSS TO
NON-GAAP |
EBITDA AND NON-GAAP ADJUSTED
EBITDA |
(in thousands,
unaudited) |
|
|
|
|
|
|
|
Three Months Ended |
|
March 31, |
|
|
|
2015 |
|
|
|
|
2014 |
|
GAAP net loss |
$ |
|
(1,422 |
) |
|
$ |
|
(1,123 |
) |
Income tax benefit |
|
|
(293 |
) |
|
|
|
(445 |
) |
Interest expense
(income), net |
|
|
220 |
|
|
|
|
(19 |
) |
Depreciation and
amortization (a) |
|
|
3,129 |
|
|
|
|
1,693 |
|
|
|
|
|
|
|
Non-GAAP EBITDA |
|
|
1,634 |
|
|
|
|
106 |
|
Stock-based
compensation expense |
|
|
958 |
|
|
|
|
1,003 |
|
Acquisition-related
compensation |
|
|
189 |
|
|
|
|
- |
|
|
|
|
|
|
|
Non-GAAP adjusted
EBITDA |
$ |
|
2,781 |
|
|
$ |
|
1,109 |
|
|
|
|
|
|
|
(a) Includes amortization of intangible assets resulting from
acquisitions. |
KVH INDUSTRIES, INC. AND
SUBSIDIARIES |
NON-GAAP ADJUSTED EBITDA
GUIDANCE |
(in millions,
unaudited) |
|
|
|
|
|
Second Quarter |
|
Full Year |
|
Fiscal 2015 (Projected) |
|
Fiscal 2015 (Projected) |
|
|
|
|
GAAP net (loss)
income |
$(1.2) - $(0.5) |
|
$4.6 - $6.2 |
|
|
|
|
Estimated income tax
(benefit) expense |
|
$ |
|
|
(0.2 |
) |
|
|
|
|
$2.6 - $3.5 |
Estimated interest
expense (income), net |
|
$ |
|
|
0.2 |
|
|
|
|
|
|
|
$ |
1.0 |
|
|
|
Estimated depreciation
and amortization (a) |
|
$ |
|
|
3.3 |
|
|
|
|
|
|
|
$ |
13.2 |
|
|
|
Estimated stock-based
compensation expense |
|
$ |
|
|
0.9 |
|
|
|
|
|
|
|
$ |
3.6 |
|
|
|
|
|
|
|
Non-GAAP adjusted
EBITDA |
$3.0 - $3.7 |
|
$25.0 - $27.5 |
|
|
|
|
|
|
|
|
(a) Reflects amortization of intangible assets resulting from
acquisitions and depreciation of fixed assets. |
|
|
|
|
|
|
|
|
KVH INDUSTRIES, INC. AND
SUBSIDIARIES |
NON-GAAP EPS GUIDANCE |
(unaudited) |
|
|
|
|
|
|
|
|
|
Second Quarter |
|
Full Year |
|
Fiscal 2015 (Projected) |
|
Fiscal 2015 (Projected) |
|
|
|
|
Net (loss) income per
common share |
$(0.08) - $(0.03) |
|
$0.30 - $0.40 |
|
|
|
|
Estimated amortization
(a) |
|
$ |
0.09 |
|
|
|
|
$ |
0.36 |
|
|
Estimated stock-based
compensation expense, net of tax |
|
$ |
0.04 |
|
|
|
|
$ |
0.15 |
|
|
|
|
|
|
Non-GAAP net income per
common share |
$0.05 - $0.10 |
|
$0.81 - $0.91 |
|
|
|
|
|
|
|
|
(a) Reflects amortization of intangible assets resulting from
acquisitions. |
|
|
|
|
KVH Industries, Inc.
Peter Rendall
401-847-3327
prendall@kvh.com
FTI Consulting
Christine Mohrmann
212-850-5600
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From Jul 2023 to Jul 2024