KVH Industries Reports Fourth Quarter and Full Year 2023 Results
- Significant milestones achieved in core mobile connectivity business in 2023.
- New agreements with OneWeb, Kognitive Networks, and reseller agreement with Starlink.
- Annual airtime revenue increased by 4% to $107 million year-over-year.
- Transitioning from a hardware-focused business to a solution-oriented organization.
- Anticipating revenue of $125-135 million and adjusted EBITDA of $11-17 million for 2024.
- Total revenues decreased by 13% in Q4 2023.
- Net loss of $12.2 million in Q4 2023 compared to a net income of $0.8 million in Q4 2022.
- Non-GAAP adjusted EBITDA decreased to $2.3 million in Q4 2023 compared to $4.5 million in Q4 2022.
- Decline in hardware sales impacting profitability goals.
- Operating expenses increased by $1.1 million in Q4 2023.
Insights
The reported decline in KVH Industries' total revenues by 13% in Q4 2023 compared to the same period in 2022 is a significant indicator of the company's current market position. The decrease in VSAT airtime revenue and the substantial inventory write-down suggest an oversupply issue and a potential overestimation of demand for the company's hardware products. The staged wind-down of manufacturing activities in Rhode Island reflects a strategic pivot towards cost-saving measures and an attempt to streamline operations in response to the evolving market.
From a market perspective, KVH's transition from a capital-intensive model to a more nimble, solution-oriented organization is indicative of broader trends within the telecommunications sector where companies are seeking to leverage partnerships and integrate services with emerging technologies such as low earth orbit satellite services. KVH's partnerships with OneWeb and Kognitive Networks, as well as the reseller agreement with Starlink, represent strategic moves to adapt to a market that is increasingly favoring multi-orbit hybrid networks for maritime connectivity.
The anticipated revenue range for 2024 and the projected adjusted EBITDA suggest cautious optimism but also reflect the uncertainty and competitive pressures within the industry. Investors should consider the company's strategic realignment and the potential for cost savings against the backdrop of an industry experiencing rapid technological change and competitive dynamics.
Analyzing KVH's financial performance, the shift from a net income in Q4 2022 to a net loss in Q4 2023 is a red flag that warrants close scrutiny. The net loss per share widening from $0.04 to $0.63 signals a substantial negative impact on shareholder value in the short term. However, the increase in annual airtime revenue by 4% year-over-year shows some resilience in the company's service segment, which may be pivotal for future growth.
When dissecting the operational costs, the increase in disposal of discontinued projects and the provision for credit losses suggest a period of operational cleanup and risk reassessment. The decrease in operating expenses year-on-year, excluding the impairment charges, could be seen as a positive outcome of the company's restructuring efforts. These efforts are aimed at realigning the business model to focus more on service revenues, which appear to be more stable compared to the volatile hardware sales.
Investors should weigh the potential benefits of reduced operating expenses against the risks associated with the company's ability to execute its strategic transition effectively. The impairment charges and charges for excess purchase order obligations reflect adjustments to the changing demand landscape but also raise questions about the company's past investment decisions and market forecasting accuracy.
The overall economic context in which KVH Industries is operating cannot be overlooked. The company's performance is occurring within a broader environment characterized by increased competition from low earth orbit satellite service providers, which is disrupting traditional business models in the satellite communications market. KVH's decision to wind down manufacturing operations may be a strategic response to these macroeconomic pressures, as well as an attempt to mitigate the risks associated with a capital-heavy structure in a rapidly evolving industry.
The decline in product revenues, particularly in the TracVision and VSAT broadband product sales, can be seen as a microcosm of the larger shifts in consumer preferences and technological advancements. The increase in Starlink product sales, on the other hand, highlights the growing consumer appetite for new satellite technologies. KVH's financial forecasts for 2024 reflect an environment of cautious optimism, tempered by the understanding that the satellite communications industry is subject to unpredictable shifts in both technology adoption and competitive landscapes.
From an economic standpoint, KVH's restructuring and reorganization efforts may be necessary to maintain competitiveness and financial viability in the long term. Stakeholders should consider the company's strategic foresight in navigating these industry transitions and the potential for KVH to leverage its service segment to stabilize revenue streams amidst market volatility.
MIDDLETOWN, R.I., March 15, 2024 (GLOBE NEWSWIRE) -- KVH Industries, Inc., (Nasdaq: KVHI), reported financial results for the quarter and full year ended December 31, 2023 today. The company will hold a conference call to discuss these results at 9:00 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.
Fourth Quarter 2023 Highlights
- Total revenues from continuing operations decreased by
13% in the fourth quarter of 2023 to$31.5 million from$36.0 million in the fourth quarter of 2022. - VSAT airtime revenue decreased by
$1.0 million , to$25.9 million , or4% in the fourth quarter of 2023 compared to the fourth quarter of 2022. - We recorded a
$5.2 million inventory write-down and a$3.6 million charge for excess purchase order obligations related to reduced demand for our hardware products, which has led to the staged wind-down of our manufacturing activities in our facility in Middletown, Rhode Island in the first half of 2024. - Net loss from continuing operations in the fourth quarter of 2023 was
$12.2 million , or$0.63 per share, compared to a net income of$0.8 million , or$0.04 per share, in the fourth quarter of 2022. - Non-GAAP adjusted EBITDA from continuing operations was
$2.3 million in the fourth quarter of 2023, compared to$4.5 million in the fourth quarter of 2022.
Commenting on the company’s fourth quarter results, Brent Bruun, KVH’s Chief Executive Officer, said, “We achieved significant milestones in our core mobile connectivity business in 2023 with new agreements with OneWeb and Kognitive Networks, as well as our reseller agreement with Starlink. Our annual airtime revenue was up
Financial Highlights - From Continuing Operations (in millions, except per share data)
| Three Months Ended | Year Ended | ||||||||||||||
| December 31, | December 31, | ||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||
| GAAP Results | |||||||||||||||
| Revenue | $ | 31.5 | $ | 36.0 | $ | 132.4 | $ | 138.8 | |||||||
| (Loss) income from operations | $ | (12.2 | ) | $ | 0.8 | $ | (17.3 | ) | $ | (5.7 | ) | ||||
| Net (loss) income | $ | (12.2 | ) | $ | 0.8 | $ | (15.4 | ) | $ | (4.0 | ) | ||||
| Net (loss) income per share | $ | (0.63 | ) | $ | 0.04 | $ | (0.81 | ) | $ | (0.21 | ) | ||||
| Non-GAAP Adjusted EBITDA | $ | 2.3 | $ | 4.5 | $ | 14.3 | $ | 13.2 | |||||||
Results from continuing operations exclude prior year amounts associated with the divested inertial navigation segment. Inertial navigation is treated as discontinued operations. For more information regarding our non-GAAP adjusted EBITDA, see the tables at the end of this release.
Fourth Quarter Financial Summary
Revenue was
Service revenues for the fourth quarter of 2023 were
Product revenues for the fourth quarter of 2023 were
Our operating expenses increased
Full Year Financial Summary
Revenue was
Service revenues for the year ended December 31, 2023, were
Product revenues for the year ended December 31, 2023, were
Our operating expenses decreased
Other Recent Announcements
- March 11, 2024 – KVH Introduces CommBox Edge Advanced Maritime Network Optimization and Management
- February 13, 2024 – KVH Announces Transformative Initiatives
- January 9, 2024 – KVH Expands Multi-orbit Hybrid Network with Eutelsat OneWeb High-speed, Low-latency Service
- November 20, 2023 – Fleets Facing Need to Improve Crew Morale and Wellbeing Turn to KVH for Content Services
- November 15, 2023 – KVH Crew Wellbeing Solutions Honored with 2023 CAREER4SEA Europort Award
Conference Call Details
KVH Industries will host a conference call today at 9:00 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 will be available on the company website within three hours of the completion of the call.
Non-GAAP Financial Measures
This release provides non-GAAP financial information as a supplement to our condensed consolidated 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. 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. The non-GAAP financial measures used in this press release adjust for specified items that can be highly variable or difficult to predict. Management generally uses these non-GAAP financial measures to facilitate financial and operational decision-making, including evaluation of our historical operating results and comparison to competitors’ operating results. These non-GAAP financial measures reflect an additional way of viewing aspects of our operations that, when viewed with GAAP results and the reconciliations to corresponding GAAP financial measures, may provide a more complete understanding of factors and trends affecting our business.
Some limitations of non-GAAP adjusted EBITDA include the following: non-GAAP adjusted EBITDA represents net income (loss) from continuing operations before, as applicable, interest income, net, income tax expense (benefit), depreciation, amortization, stock-based compensation expense, goodwill impairment charge, long-lived assets impairment charge, charges for disposal of a discontinued project, loss on an unfavorable future contract, employee termination and other variable costs, executive separation costs, transaction-related and other variable legal and advisory fees, irregular inventory write-down, excess purchase order obligations, gains and losses on sale of subsidiaries, and foreign exchange transaction gains and losses.
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 non-GAAP financial measures exclude the effect of items that increase or decrease our reported results of operations, management strongly encourages investors to review our consolidated financial statements and publicly filed reports in their entirety. Reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures are included in the tables accompanying this release.
About KVH Industries, Inc.
KVH Industries, Inc. is a global leader in mobile connectivity and maritime VSAT delivered via the KVH ONE network. The company, founded in 1982, is based in Middletown, RI, with research, development, and manufacturing operations in Middletown, RI, and more than a dozen offices around the globe. KVH provides connectivity solutions for commercial maritime, leisure marine, military/government, and land mobile applications on vessels and vehicles, including the TracNet, TracPhone, and TracVision product lines, the KVH ONE OpenNet Program for non-KVH antennas, AgilePlans Connectivity as a Service (CaaS), and the KVH Link crew wellbeing content service.
This press release contains forward-looking statements that involve risks and uncertainties. For example, forward-looking statements include statements regarding projected financial results, the anticipated benefits of our new initiatives, anticipated cost savings, our investment plans, our development goals, and the potential impact of our future initiatives on revenue, competitive positioning, profitability, and orders. Actual results could differ materially from the results projected in or implied by the forward-looking statements made in this press release. Factors that might cause these differences include, but are not limited to: increased competition, particularly from lower-cost providers and low earth orbit satellite systems, especially in the global leisure market; unanticipated obstacles to implementation of our manufacturing wind-down, unanticipated costs and expenses arising from the wind-down, unanticipated effects of the wind-down on our ongoing business; the risks associated with increased customer reliance on third-party hardware; the lack of future product differentiation, new service offerings from hardware providers, potential customer delays in selecting our services; the uncertain impact of continuing industry consolidation; the risk that our new OpenNet program will lead to further reductions in sales of our satellite products; the risk that our reseller arrangement with Starlink will not provide material benefits; uncertainty regarding customer responses to new product and service introductions; challenges and potential additional expenses in retaining our employees, particularly in the current competitive labor market characterized by rising wages; uncertainties created by our new business strategy, which may impact customer recruitment and retention; the uncertain impact of ongoing disruptions in our supply chain and associated increases in our costs; the uncertain impact of inflation, particularly with respect to fuel costs, and fears of recession; the uncertain impact of the wars in Ukraine and the Middle East; unanticipated changes or disruptions in our markets; technological breakthroughs by competitors; changes in customer priorities or preferences; potential customer terminations; unanticipated liabilities; the potential that competitors will design around or invalidate our intellectual property rights; a history of losses; continued fluctuations in quarterly results; the uncertain impact of federal budget deficits, Congressional deadlock and the federal debt ceiling; the uncertain impact of changes in trade policy, including actual and potential new or higher tariffs and trade barriers, as well as trade wars with other countries; unanticipated obstacles in our product and service development, cost engineering and manufacturing efforts; adverse impacts of currency fluctuations; our ability to successfully commercialize our new initiatives without unanticipated additional expenses or delays; potential reduced sales to companies in or dependent upon the turbulent oil and gas industry; the impact of extended economic weakness on the sale and use of marine vessels and recreational vehicles; the potential inability to increase or maintain our market share in the market for airtime services; the risk that declining sales of the TracNet H-series and TracPhone V-HTS series products and related services will reduce airtime gross margins; the risk that reduced product sales will continue to erode product gross margins and lead to increased losses; the need for, or delays in, qualification of products to customer or regulatory standards; potential declines or changes in customer demand, due to economic, weather-related, seasonal, and other factors, particularly with respect to the TracNet H-series and TracPhone V-HTS series; exposure for potential intellectual property infringement; changes in tax and accounting requirements or assessments; and export restrictions, delays in procuring export licenses, and other international risks. These and other factors are discussed in more detail in our Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 9, 2023. Copies are available through our Investor Relations department and website, investors.kvh.com. We do not assume any obligation to update our 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 but not limited to the following marks: KVH, KVH ONE, TracPhone, TracVision, AgilePlans, CommBox, and TracNet. 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 December 31, | Year ended December 31, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Sales: | ||||||||||||||||
| Product | $ | 3,716 | $ | 7,148 | $ | 17,757 | $ | 26,842 | ||||||||
| Service | 27,739 | 28,843 | 114,622 | 111,908 | ||||||||||||
| Net sales | 31,455 | 35,991 | 132,379 | 138,750 | ||||||||||||
| Costs and expenses: | ||||||||||||||||
| Costs of product sales | 13,107 | 7,657 | 29,149 | 25,158 | ||||||||||||
| Costs of service sales | 17,514 | 15,589 | 65,362 | 61,094 | ||||||||||||
| Research and development | 2,020 | 1,989 | 9,399 | 10,369 | ||||||||||||
| Sales, marketing and support | 5,252 | 4,863 | 20,925 | 23,198 | ||||||||||||
| General and administrative | 5,760 | 5,124 | 18,899 | 24,656 | ||||||||||||
| Goodwill impairment charge | — | — | 5,333 | — | ||||||||||||
| Intangible asset impairment charge | — | — | 657 | — | ||||||||||||
| Total costs and expenses | 43,653 | 35,222 | 149,724 | 144,475 | ||||||||||||
| (Loss) income from operations | (12,198 | ) | 769 | (17,345 | ) | (5,725 | ) | |||||||||
| Interest income | 986 | 709 | 3,646 | 1,507 | ||||||||||||
| Interest expense | 1 | — | 1 | 3 | ||||||||||||
| Other (expense) income, net | (821 | ) | (789 | ) | (1,404 | ) | 772 | |||||||||
| (Loss) income from continuing operations before income tax expense (benefit) | (12,034 | ) | 689 | (15,104 | ) | (3,449 | ) | |||||||||
| Income tax expense (benefit) from continuing operations | 159 | (99 | ) | 318 | 546 | |||||||||||
| Net (loss) income from continuing operations | $ | (12,193 | ) | $ | 788 | $ | (15,422 | ) | $ | (3,995 | ) | |||||
| Net (loss) income from discontinued operations, net of tax | — | (36 | ) | — | 28,025 | |||||||||||
| Net (loss) income | $ | (12,193 | ) | $ | 752 | $ | (15,422 | ) | $ | 24,030 | ||||||
| Net (loss) income from continuing operations per common share | ||||||||||||||||
| Basic | $ | (0.63 | ) | $ | 0.04 | $ | (0.81 | ) | $ | (0.21 | ) | |||||
| Diluted | $ | (0.63 | ) | $ | 0.04 | $ | (0.81 | ) | $ | (0.21 | ) | |||||
| Net income from discontinued operations per common share | ||||||||||||||||
| Basic | $ | — | $ | — | $ | — | $ | 1.50 | ||||||||
| Diluted | $ | — | $ | — | $ | — | $ | 1.50 | ||||||||
| Net (loss) income per common share | ||||||||||||||||
| Basic | $ | (0.63 | ) | $ | 0.04 | $ | (0.81 | ) | $ | 1.29 | ||||||
| Diluted | $ | (0.63 | ) | $ | 0.04 | $ | (0.81 | ) | $ | 1.29 | ||||||
| Weighted average number of common shares outstanding: | ||||||||||||||||
| Basic | 19,250 | 18,805 | 19,130 | 18,632 | ||||||||||||
| Diluted | 19,250 | 18,982 | 19,130 | 18,632 | ||||||||||||
| KVH INDUSTRIES, INC. AND SUBSIDIARIES | ||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||
| (in thousands, unaudited) | ||||||
| December 31, 2023 | December 31, 2022 | |||||
| ASSETS | ||||||
| Cash, cash equivalents and marketable securities | $ | 69,771 | 76,736 | |||
| Accounts receivable, net | 25,670 | 27,427 | ||||
| Inventories, net | 19,046 | 22,730 | ||||
| Other current assets and contract assets | 4,331 | 3,067 | ||||
| Total current assets | 118,818 | 129,960 | ||||
| Property and equipment, net | 47,680 | 53,118 | ||||
| Goodwill | — | 5,308 | ||||
| Intangible assets, net | 1,194 | 404 | ||||
| Right of use assets | 1,068 | 2,168 | ||||
| Other non-current assets and contract assets | 3,618 | 5,037 | ||||
| Non-current deferred income tax asset | 256 | 259 | ||||
| Total assets | $ | 172,634 | $ | 196,254 | ||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||
| Accounts payable and accrued expenses | $ | 22,412 | 34,228 | |||
| Deferred revenue | 1,774 | 1,365 | ||||
| Current operating lease liability | 786 | 1,532 | ||||
| Total current liabilities | 24,972 | 37,125 | ||||
| Long-term operating lease liability | 289 | 636 | ||||
| Non-current deferred income tax liability | 1 | 55 | ||||
| Stockholders’ equity | 147,372 | 158,438 | ||||
| Total liabilities and stockholders’ equity | $ | 172,634 | $ | 196,254 | ||
| KVH INDUSTRIES, INC. AND SUBSIDIARIES | ||||||||||||||||
| RECONCILIATION OF GAAP NET (LOSS) INCOME FROM CONTINUING OPERATIONS TO NON-GAAP EBITDA AND NON-GAAP ADJUSTED EBITDA FROM CONTINUING OPERATIONS | ||||||||||||||||
| (in thousands, unaudited) | ||||||||||||||||
| Three months ended December 31, | Year ended December 31, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Net (loss) income from continuing operations - GAAP | $ | (12,193 | ) | $ | 788 | $ | (15,422 | ) | $ | (3,995 | ) | |||||
| Income tax expense (benefit) | 159 | (99 | ) | 318 | 546 | |||||||||||
| Interest income, net | (985 | ) | (709 | ) | (3,645 | ) | (1,504 | ) | ||||||||
| Depreciation and amortization | 3,319 | 3,408 | 13,438 | 13,408 | ||||||||||||
| Non-GAAP EBITDA from continuing operations | (9,700 | ) | 3,388 | (5,311 | ) | 8,455 | ||||||||||
| Stock-based compensation expense | 645 | 729 | 2,078 | 2,949 | ||||||||||||
| Goodwill impairment charge | — | — | 5,333 | — | ||||||||||||
| Long-lived assets impairment charge | — | — | 657 | — | ||||||||||||
| Disposal of a discontinued project | 2,099 | — | 2,099 | — | ||||||||||||
| Loss on an unfavorable future contract | 337 | — | 337 | — | ||||||||||||
| Employee termination and other variable costs | — | (62 | ) | — | 1,931 | |||||||||||
| Executive separation costs | — | — | — | 539 | ||||||||||||
| Transaction-related and other variable legal and advisory fees | 41 | — | 275 | 484 | ||||||||||||
| Irregular inventory write-down | 5,225 | — | 5,225 | — | ||||||||||||
| Excess purchase order obligations | 3,569 | — | 3,569 | — | ||||||||||||
| Loss (gain) on sale of a subsidiary | 53 | (51 | ) | 53 | (682 | ) | ||||||||||
| Foreign exchange transaction loss (gain) | 15 | 492 | 33 | (517 | ) | |||||||||||
| Non-GAAP adjusted EBITDA from continuing operations | $ | 2,284 | $ | 4,496 | $ | 14,348 | $ | 13,159 | ||||||||
| Contact: | KVH Industries, Inc. Roger Kuebel 401-608-8945 rkuebel@kvh.com |
FAQ
What was the percentage decrease in total revenues from continuing operations in Q4 2023 for KVH Industries, Inc.?
What was the net loss from continuing operations in Q4 2023 for KVH Industries, Inc.?
What was the non-GAAP adjusted EBITDA from continuing operations in Q4 2023 for KVH Industries, Inc.?
What is KVH Industries, Inc. anticipating for revenue in 2024?
What is the adjusted EBITDA range anticipated by KVH Industries, Inc. for 2024?
