KVH Industries Reports Third Quarter 2021 Results
KVH Industries (Nasdaq: KVHI) reported a 5% increase in total revenues for Q3 2021, reaching $43.0 million, compared to $41.1 million in Q3 2020. Revenue from the AgilePlans program surged over 54%, representing 47% of the mini-VSAT Broadband subscriber base. Net income was $4.0 million ($0.22 per share), rebounding from a net loss of $0.5 million last year. However, inertial navigation product sales declined 11% due to supply chain issues, impacting shipment volumes. Overall, KVH expects full-year revenue growth in the high single digits.
- Total revenues increased by 5% to $43.0 million.
- AgilePlans revenue surged over 54% year-over-year.
- Net income of $4.0 million compared to a loss of $0.5 million in Q3 2020.
- mini-VSAT Broadband airtime revenue increased by $2.9 million, or 13%.
- Inertial navigation product sales decreased by 11% to $8.4 million due to supply chain challenges.
- Non-GAAP net loss of $0.9 million compared to a net income of $1.1 million in Q3 2020.
- Operating expenses increased by $2.1 million to $18.4 million.
MIDDLETOWN, R.I., Nov. 04, 2021 (GLOBE NEWSWIRE) -- KVH Industries, Inc., (Nasdaq: KVHI), reported financial results for the quarter ended September 30, 2021 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.
Third Quarter 2021 Highlights
- Total revenues increased by
5% in the third quarter of 2021 to$43.0 million from$41.1 million in the third quarter of 2020. - Revenues for AgilePlans, our Connectivity as a Service program for the commercial maritime sector, were up more than
54% compared to the third quarter of 2020. AgilePlans now represent47% of our mini-VSAT Broadband subscriber base. - Our mini-VSAT Broadband airtime revenue increased
$2.9 million , to$24.6 million , or13% , in the third quarter of 2021 compared to the third quarter of 2020, driven primarily by a12% increase in active subscribers. Unit shipments were up53% compared to the third quarter of 2020. - Inertial navigation product sales, which were impacted by supply chain issues, were down
$1.0 million , or11% , to$8.4 million in the third quarter of 2021 compared to$9.4 million in the third quarter of 2020. - Net income in the third quarter of 2021 was
$4.0 million , or$0.22 per share, compared to a net loss of$0.5 million , or$0.03 per share, in the third quarter of 2020. Net income in the third quarter of 2021 reflects other income of$7.0 million resulting from the forgiveness of all principal and interest for the loan we received in May 2020 under the U.S. Small Business Administration’s Paycheck Protection Program. - Non-GAAP net loss in the third quarter of 2021 was
$0.9 million , or$0.05 per share, compared to a non-GAAP net income of$1.1 million , or$0.06 per share, in the third quarter of 2020. - Non-GAAP adjusted EBITDA in the third quarter of 2021 was
$1.5 million , compared to$3.4 million in the third quarter of 2020.
Commenting on the quarter, Martin Kits van Heyningen, KVH’s chief executive officer, said, “KVH recorded another strong quarter, reflecting our success in implementing our strategic priorities. Our VSAT product line set a record for units shipped in the third quarter of any year, driven largely by new AgilePlans subscriptions and our successful TracPhone V30 launch. Airtime revenue, a function of prior shipments, continued to grow at double-digit rates over last year, and gross margin remained stable as we added network capacity for our expanding mini-VSAT Broadband HTS subscriber base. On the cost side, we are working hard to transition the remaining of our legacy VSAT airtime subscribers to our HTS network as we prepare to exit our legacy network by year-end. This transition to an all-HTS network is important for maintaining the growth rate of our mini-VSAT Broadband service sales in 2022. In the inertial navigation segment, we are very excited about some recent design wins in the autonomous trucking market with our photonic chip-based IMUs. Hardware shipments in the quarter were impacted by supply chain issues which pushed some booked orders into Q4.”
“With respect to our outlook for the full year, we maintain our view that our full year revenues will increase by high single digits over 2020 revenue, and that our adjusted EBITDA will grow at a faster rate than revenue for the full year.”
The company operates in two segments, mobile connectivity and inertial navigation. In the third quarter of 2021, net sales for the mobile connectivity segment increased by
Financial Highlights (in millions, except per share data)
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| GAAP Results | ||||||||||||||||
| Revenue | $ | 43.0 | $ | 41.1 | $ | 128.6 | $ | 114.6 | ||||||||
| Net income (loss) | $ | 4.0 | $ | (0.5 | ) | $ | (5.7 | ) | $ | (10.3 | ) | |||||
| Net income (loss) per share | $ | 0.22 | $ | (0.03 | ) | $ | (0.31 | ) | $ | (0.58 | ) | |||||
| Non-GAAP Results | ||||||||||||||||
| Net (loss) income | $ | (0.9 | ) | $ | 1.1 | $ | (2.7 | ) | $ | (4.8 | ) | |||||
| Net (loss) income per share | $ | (0.05 | ) | $ | 0.06 | $ | (0.15 | ) | $ | (0.27 | ) | |||||
| Adjusted EBITDA | $ | 1.5 | $ | 3.4 | $ | 4.1 | $ | (0.3 | ) | |||||||
For more information regarding our non-GAAP financial measures, see the tables at the end of this release.
Third Quarter Financial Summary
Revenue was
Product revenues for the third quarter of 2021 were
Service revenues for the third quarter of 2021 were
Our operating expenses increased
Nine Months Ended September 30 Financial Summary
Revenue was
Product revenues for the nine months ended September 30, 2021 were
Service revenues for the nine months ended September 30, 2021 were
Our operating expenses increased
Other Recent Announcements
- KVH Receives
$7.9 Million Fiber Optic Gyro Order for Remote Weapons Systems. - KVH Provides AgilePlans VSAT Services for Briese Schiffahrt Vessels and Crew.
- KVH Provides Global VSAT Connectivity to A.M. Nomikos Vessels and Crew.
- KVH Wins Three Prestigious NMEA Product of Excellence Awards.
- KVH and Net Feasa Collaborate on IoT Solution for Global Container Tracking & Monitoring.
- KVH Watch Adds New Cloud Connect Service Bringing Data from Sensors to the Cloud for IoT Smart Shipping.
Please review the corresponding press releases for more details regarding these developments.
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, which may include constant-currency revenue, non-GAAP net income (loss), non-GAAP diluted EPS, and non-GAAP adjusted EBITDA, 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. Constant-currency revenue is calculated on the basis of local currency results, using foreign currency exchange rates applicable to the earlier comparative period, and management believes that presenting information on a constant-currency basis helps management and investors to isolate the impact of changes in those rates from other factors. 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, comparison to competitors’ operating results, and determination of management incentive compensation. 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 net income (loss), non-GAAP diluted EPS, and non-GAAP adjusted EBITDA, include the following:
- Non-GAAP net income (loss) and diluted EPS exclude, as applicable, amortization of intangibles, stock-based compensation expense, goodwill impairment charge, intangible asset impairment charge, transaction-related and other variable legal and advisory fees, variable inventory reserves, other variable costs, foreign exchange transaction gains and losses, income from loan forgiveness, the tax effect of the foregoing and certain discrete tax charges, including changes in our valuation allowance and other tax adjustments.
- Non-GAAP adjusted EBITDA represents net income (loss) before, as applicable, interest income, net, income taxes, depreciation, amortization, stock-based compensation expense, goodwill impairment charge, intangible asset impairment charge, transaction-related and other variable legal and advisory fees, variable inventory reserves, other variable costs and foreign exchange transaction gains and losses, and income from loan forgiveness.
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 inertial navigation systems, with innovative technology designed to enable a mobile world. A market leader in maritime VSAT, KVH designs, manufactures, and provides connectivity and content services globally. KVH is also a premier manufacturer of high-performance sensors and integrated inertial systems for defense and commercial applications. Founded in 1982, the company is based in Middletown, RI, with research, development, and manufacturing operations in Middletown, RI, and Tinley Park, IL, and more than a dozen offices around the globe.
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, the success of our new initiatives, our investment plans, our migration of legacy customers to our HTS network, our development goals, our anticipated revenue and earnings, and the impact of our future initiatives on revenue, competitive positioning, profitability, and product 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: the adverse impact of the COVID-19 pandemic, as well as governmental, business and other responses thereto and any resulting economic slowdown, on our revenues, results of operations and financial condition, which could continue to be material (particularly for our media and other travel-related businesses); challenges or delays in the transition of customers from our legacy network to our HTS network, which could result in a material loss of revenue; the reluctance or refusal of remaining legacy network customers to migrate to our HTS network; unanticipated changes or disruptions in our markets; increased competition, including as a result of industry consolidation and from companies offering networks with greater communication security options; 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 and expectation of continuing losses as we increase investments in various initiatives; continued fluctuations in quarterly results; the uncertain duration of the initial adverse impact on our overall revenues of our AgilePlans and KVH Watch, under which we recognize no revenue for product sales, either at the time of shipment or over the contract term; potential delays in the development of a market for our IoT services; the need to develop an ecosystem of applications for our new IoT services; higher costs arising from the HTS network; costs arising from the termination of our legacy network and the migration of legacy customers to the HTS network; the uncertain impact of federal budget deficits, Congressional deadlock and the change in administration; 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 photonic chip and other product and service development, cost engineering and manufacturing efforts; delays in anticipated orders for our products and services, including significant orders for TACNAV products, or the potential failure of such orders to occur; 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; continued substantial fluctuations in military sales, including to foreign customers; 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; 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 need to increase sales of the TracPhone V-HTS series products and related services to maintain and improve airtime gross margins; 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 TracPhone V-HTS series, including with respect to new pricing models; increased price and service competition in the mobile connectivity market; 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 July 30, 2021. 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, TracVision, TracPhone, TACNAV, KVH Watch, mini-VSAT Broadband, and AgilePlans. Other trademarks are the property of their respective companies.
| Contact: | KVH Industries, Inc. Roger Kuebel 401-608-8945 rkuebel@kvh.com | FTI Consulting Christine Mohrmann 212-850-5600 |
KVH INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts, unaudited)
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Sales: | ||||||||||||||||
| Product | $ | 15,239 | $ | 16,650 | $ | 50,940 | $ | 43,693 | ||||||||
| Service | 27,745 | 24,462 | 77,699 | 70,913 | ||||||||||||
| Net sales | 42,984 | 41,112 | 128,639 | 114,606 | ||||||||||||
| Costs and expenses: | ||||||||||||||||
| Costs of product sales | 10,945 | 10,422 | 34,059 | 29,612 | ||||||||||||
| Costs of service sales | 16,838 | 14,875 | 48,385 | 44,448 | ||||||||||||
| Research and development | 4,335 | 3,548 | 13,407 | 11,701 | ||||||||||||
| Sales, marketing and support | 7,429 | 6,931 | 22,912 | 22,426 | ||||||||||||
| General and administrative | 6,666 | 5,839 | 22,514 | 18,006 | ||||||||||||
| Total costs and expenses | 46,213 | 41,615 | 141,277 | 126,193 | ||||||||||||
| Loss from operations | (3,229 | ) | (503 | ) | (12,638 | ) | (11,587 | ) | ||||||||
| Interest income | 218 | 229 | 673 | 759 | ||||||||||||
| Interest expense | 20 | 2 | 52 | 9 | ||||||||||||
| Other income (expense), net | 7,065 | (370 | ) | 6,275 | 971 | |||||||||||
| Income (loss) before income tax expense (benefit) | 4,034 | (646 | ) | (5,742 | ) | (9,866 | ) | |||||||||
| Income tax expense (benefit) | 16 | (109 | ) | (59 | ) | 437 | ||||||||||
| Net income (loss) | $ | 4,018 | $ | (537 | ) | $ | (5,683 | ) | $ | (10,303 | ) | |||||
| Net income (loss) per common share | ||||||||||||||||
| Basic | $ | 0.22 | $ | (0.03 | ) | $ | (0.31 | ) | $ | (0.58 | ) | |||||
| Diluted | $ | 0.22 | $ | (0.03 | ) | $ | (0.31 | ) | $ | (0.58 | ) | |||||
| Weighted average number of common shares outstanding: | ||||||||||||||||
| Basic | 18,341 | 17,723 | 18,152 | 17,634 | ||||||||||||
| Diluted | 18,566 | 17,723 | 18,152 | 17,634 | ||||||||||||
KVH INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, unaudited)
| September 30, 2021 | December 31, 2020 | |||||||
| ASSETS | ||||||||
| Cash, cash equivalents and marketable securities | $ | 27,026 | $ | 37,719 | ||||
| Accounts receivable, net | 31,955 | 33,687 | ||||||
| Inventories, net | 24,639 | 24,674 | ||||||
| Other current assets and contract assets | 5,907 | 4,980 | ||||||
| Total current assets | 89,527 | 101,060 | ||||||
| Property and equipment, net | 59,964 | 56,273 | ||||||
| Goodwill | 6,562 | 6,592 | ||||||
| Intangible assets, net | 1,462 | 2,254 | ||||||
| Right of use assets | 3,609 | 6,893 | ||||||
| Other non-current assets and contract assets | 9,228 | 10,446 | ||||||
| Non-current deferred income taxes | 35 | 73 | ||||||
| Total assets | $ | 170,387 | $ | 183,591 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Accounts payable and accrued expenses | $ | 25,854 | $ | 27,525 | ||||
| Contract liabilities | 4,128 | 4,445 | ||||||
| Current portion of long-term debt | — | 4,992 | ||||||
| Current operating lease liability | 2,012 | 3,826 | ||||||
| Total current liabilities | 31,994 | 40,788 | ||||||
| Other long-term liabilities | 96 | 674 | ||||||
| Long-term operating lease liability | 1,700 | 3,204 | ||||||
| Long-term contract liabilities | 4,252 | 4,688 | ||||||
| Non-current deferred tax liability | 375 | 418 | ||||||
| Long-term debt, excluding current portion | — | 1,935 | ||||||
| Stockholders’ equity | 131,970 | 131,884 | ||||||
| Total liabilities and stockholders’ equity | $ | 170,387 | $ | 183,591 | ||||
KVH INDUSTRIES, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP NET INCOME (LOSS)
TO NON-GAAP NET (LOSS) INCOME
(in thousands, except per share amounts, unaudited)
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Net income (loss) - GAAP | $ | 4,018 | $ | (537 | ) | $ | (5,683 | ) | $ | (10,303 | ) | |||||
| Amortization of intangibles | 277 | 251 | 833 | 740 | ||||||||||||
| Stock-based compensation expense | 1,042 | 912 | 3,029 | 2,459 | ||||||||||||
| Transaction-related and other variable legal and advisory fees | — | — | 3,585 | 201 | ||||||||||||
| PPP loan forgiveness | (6,979 | ) | — | (6,979 | ) | — | ||||||||||
| Foreign exchange transaction (gain) loss | (197 | ) | 498 | 87 | (659 | ) | ||||||||||
| Tax effect on the foregoing | (258 | ) | (310 | ) | (1,588 | ) | (534 | ) | ||||||||
| Change in valuation allowance and other tax adjustments (a) | 1,182 | 313 | 4,029 | 3,287 | ||||||||||||
| Net (loss) income - Non-GAAP | $ | (915 | ) | $ | 1,127 | $ | (2,687 | ) | $ | (4,809 | ) | |||||
| Net (loss) income per common share - Non-GAAP | ||||||||||||||||
| Basic | $ | (0.05 | ) | $ | 0.06 | $ | (0.15 | ) | $ | (0.27 | ) | |||||
| Diluted | $ | (0.05 | ) | $ | 0.06 | $ | (0.15 | ) | $ | (0.27 | ) | |||||
| Weighted average number of common shares outstanding | ||||||||||||||||
| Basic | 18,341 | 17,723 | 18,152 | 17,634 | ||||||||||||
| Diluted | 18,341 | 17,799 | 18,152 | 17,634 | ||||||||||||
(a) Represents a change in the valuation allowance on current year United States net operating losses, research and development tax credits and uncertain tax position adjustments.
KVH INDUSTRIES, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP NET INCOME (LOSS) TO NON-GAAP
EBITDA AND NON-GAAP ADJUSTED EBITDA
(in thousands, unaudited)
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| GAAP net income (loss) | $ | 4,018 | $ | (537 | ) | $ | (5,683 | ) | $ | (10,303 | ) | |||||
| Income tax expense (benefit) | 16 | (109 | ) | (59 | ) | 437 | ||||||||||
| Interest income, net | (198 | ) | (227 | ) | (621 | ) | (750 | ) | ||||||||
| Depreciation and amortization | 3,809 | 2,875 | 10,772 | 8,277 | ||||||||||||
| Non-GAAP EBITDA | 7,645 | 2,002 | 4,409 | (2,339 | ) | |||||||||||
| Stock-based compensation expense | 1,042 | 912 | 3,029 | 2,459 | ||||||||||||
| Transaction-related and other variable legal and advisory fees | — | — | 3,585 | 201 | ||||||||||||
| PPP loan forgiveness | (6,979 | ) | — | (6,979 | ) | — | ||||||||||
| Foreign exchange transaction (gain) loss | (197 | ) | 498 | 87 | (659 | ) | ||||||||||
| Non-GAAP adjusted EBITDA | $ | 1,511 | $ | 3,412 | $ | 4,131 | $ | (338 | ) | |||||||
KVH INDUSTRIES, INC. AND SUBSIDIARIES
REVENUE AND OPERATING INCOME (LOSS) BY SEGMENT
(in millions except for percentages, unaudited)
| Segment Net Sales | Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Mobile connectivity sales | ||||||||||||||||
| Product | $ | 6.9 | $ | 7.2 | $ | 21.8 | $ | 20.5 | ||||||||
| Service | 27.5 | 24.2 | 76.9 | 69.0 | ||||||||||||
| Net sales | $ | 34.4 | $ | 31.4 | $ | 98.7 | $ | 89.5 | ||||||||
| Inertial navigation sales | ||||||||||||||||
| Product | $ | 8.4 | $ | 9.4 | $ | 29.2 | $ | 23.2 | ||||||||
| Service | 0.2 | 0.3 | 0.8 | 2.0 | ||||||||||||
| Net sales | $ | 8.6 | $ | 9.7 | $ | 30.0 | $ | 25.2 | ||||||||
| Operating Income (Loss) | Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Mobile connectivity | $ | 1.5 | $ | 2.3 | $ | 1.7 | $ | 0.6 | ||||||||
| Inertial navigation | 0.3 | 1.4 | 3.0 | 0.7 | ||||||||||||
| 1.8 | 3.7 | 4.7 | 1.3 | |||||||||||||
| Unallocated | (5.1 | ) | (4.2 | ) | (17.4 | ) | (12.9 | ) | ||||||||
| Loss from operations | $ | (3.3 | ) | $ | (0.5 | ) | $ | (12.7 | ) | $ | (11.6 | ) | ||||
| Three months ended September 30, | Nine months ended September 30, | |||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||
| (percentage of total revenue) | (percentage of total revenue) | |||||||||||
| Mobile Connectivity Revenue Components | ||||||||||||
| Product sales | 16 | % | 18 | % | 17 | % | 18 | % | ||||
| mini-VSAT Broadband airtime | 57 | % | 53 | % | 54 | % | 53 | % | ||||
| Content service | 5 | % | 4 | % | 4 | % | 5 | % | ||||
| Inertial Navigation Revenue Components | ||||||||||||
| FOG-based products | 16 | % | 18 | % | 16 | % | 16 | % | ||||
| Tactical navigation products | 3 | % | 4 | % | 6 | % | 3 | % | ||||
FAQ
What were KVHI's Q3 2021 revenues?
How did agile plans impact KVHI's revenue?
What was KVHI's net income in Q3 2021?
What challenges did KVHI face in Q3 2021?
What is KVHI's outlook for the full year 2021?
