KVH Industries, Inc., (Nasdaq: KVHI) -- Quarterly Revenue of $16.7
Million, Up 22% Year over Year -- Profit of $0.05 Per Diluted Share
KVH Industries, Inc., (Nasdaq: KVHI), a leading provider of mobile
satellite products and defense navigation and guidance systems,
today reported its results for the third quarter ended September
30, 2005. Revenue for the period was $16.7 million, up 22% from
$13.8 million for the third quarter ended September 30, 2004. Net
profit for the period was $0.7 million, or $0.05 per diluted share.
By comparison, KVH recorded a net loss of ($1.6) million, or
($0.11) per share for the same period last year. For the nine
months ended September 30, 2005, revenue increased 15% to $53.4
million from $46.3 million for the nine months ended September 30,
2004. KVH reported a net profit of $1.9 million or $0.13 per
diluted share for the 2005 period, versus a net loss of ($6.4)
million or ($0.46) per share in the year ago period. "Solid results
from military, marine, automotive, and fiber optic product sales
offset the weakness in the recreational vehicle market to produce
22% revenue growth and our fourth consecutive profitable quarter,"
said Martin Kits van Heyningen, KVH's president and chief executive
officer. Third quarter and year-to-date sales of the company's
mobile satellite products increased 4% compared to the respective
periods in 2004. "Strong marine sales led the way with a 30%
increase over last year's third quarter, with excellent growth in
both our North American and European markets," explained Mr. Kits
van Heyningen. "Sales of our TracVision(R) A5 automotive satellite
TV system were up strongly both on a sequential and year-over-year
basis as we continue to build momentum in the automotive market.
Despite this, sales in the land market declined 21% over the third
quarter of last year as our RV sales felt the effect of increased
competition among mobile satellite TV products, higher fuel prices,
and a substantial reduction in sales of Class A recreational
vehicles, which has had a corresponding effect on our sales of
TracVision systems to RV manufacturers." For the third quarter of
2005, defense-related sales, including those for KVH's TACNAV(R)
military navigation systems and fiber optic gyro (FOG) solutions,
were up a combined 79% on a year-over-year basis. Year to date,
defense revenue was up 63% compared to the first nine months of
2004. "Overall, our defense backlog remained steady compared to the
end of the second quarter of 2005 thanks to new orders for both our
TACNAV vehicle navigation system and our fiber optic gyro
products," Mr. Kits van Heyningen said. "Significantly, we
announced a multi-year order from Raytheon for our TG-6000 inertial
measurement unit, which is an integral component in the guidance
system of the MK54 torpedo. The value of the initial production
order is roughly $3.2 million. If all of the additional options are
exercised, the total order is potentially worth more than $15
million between now and 2009, potentially making it the single
largest order for any product in our company's history." "Our
operational improvement program continues to show results,"
remarked Patrick Spratt, KVH's chief financial officer. "We've
achieved tighter spending management, reductions in product costs,
higher productivity, and efficiency improvements in many areas of
the company. For the third quarter of 2005, gross margin was 42%,
an 8-percentage point improvement on a year-over-year basis
resulting in a 51% year-over-year increase in gross profit. Our
asset management continued to improve, led by accounts receivable
days sales outstanding at 49, a decline of 1 day from the second
quarter and 2 days from the prior year. Although our net inventory
level was $0.2 million below the June level, inventory turns
declined slightly to 4.9 on an annualized basis due to the
sequential decline in cost of goods sold. Together, all of these
factors contributed to strong third quarter positive cash flow from
operations of $2.7 million." Commenting on the company's expected
performance during the remainder of the year, Mr. Spratt noted, "We
expect that fourth quarter revenue will continue to show solid
year-over-year growth, in the range of 10 to 15 percent. We also
expect to achieve profitable results in the fourth quarter with
earnings per share roughly in line with or slightly better than our
third quarter results. We also have a number of exciting new
products in the pipeline and we plan to begin introducing them over
the course of the fourth quarter." "I am very pleased with our
overall results for the third quarter," concluded Mr. Kits van
Heyningen. "Our defense business has been growing, spurred on by
several long-term program opportunities that resulted in multi-year
contracts. We have continued to build momentum in the automotive
market and marine satellite sales have remained strong. I believe
that our ongoing cost improvement and new product efforts will help
us maintain our leadership position in each of our key business
areas, including the RV market. We are well positioned to achieve
our goals for the fourth quarter and the year as a whole." Recent
Highlights: -- October 8, 2005 - Two autonomous vehicles developed
by Carnegie Mellon University's Red Team and each equipped with KVH
DSP fiber optic gyros, finished second and third in the Defense
Advanced Research Projects Agency (DARPA) Grand Challenge. --
September 14, 2005 - Raytheon Integrated Defense Systems placed a
$3.2 million production order for KVH's fiber optic gyro-based
TG-6000 precision inertial measurement unit. The TG-6000 IMU will
serve as a key component within the guidance system of the U.S.
Navy's next-generation MK54 lightweight torpedoes. -- August 11,
2005 - KVH received three new orders for its TACNAV vehicle
navigation systems and T-FOG(TM) fiber optic gyro upgrade.
Together, the orders are valued at more than $2.4 million. KVH is
webcasting its third quarter conference call live at 10:30 a.m.
Eastern Time today through the company's web site. The conference
call can be accessed via the company's web site at
http://www.kvh.com/InvRelations. The audio archive and an MP3
podcast will also be available on the company web site within three
hours of the completion of the call. KVH Industries, Inc., designs
and manufactures products that enable mobile communication,
navigation, and precision pointing through the use of its
proprietary mobile satellite antenna and fiber optic technologies.
The company is developing next-generation systems with greater
precision, durability, and versatility for communications,
navigation, and industrial applications. An ISO 9001-certified
company, KVH has headquarters in Middletown, Rhode Island, with a
fiber optic and military navigation product manufacturing facility
in Tinley Park, Illinois, and a European sales, marketing, and
support office in Kokkedal, Denmark. -0- *T KVH INDUSTRIES, INC.
AND SUBSIDIARY SELECTED FINANCIAL INFORMATION CONSOLIDATED
CONDENSED STATEMENTS OF OPERATIONS Three Months Ended Nine Months
Ended September 30, September 30, -------------------------
----------------- 2005 2004 2005 2004 ------------ ------------
-------- -------- Net sales $16,742 $13,762 $53,442 $46,291
TracVision A5 inventory and firm purchase commitment revaluation
charge - - - 2,413 Cost of goods sold 9,642 9,072 31,454 30,044
------------ ------------ -------- -------- Gross profit 7,100
4,690 21,988 13,834 Operating expenses: Research and development
1,783 1,356 5,659 4,975 Sales and marketing 3,377 3,957 10,347
11,620 General and administrative 1,556 1,222 4,322 3,849
------------ ------------ -------- -------- Operating income 384
(1,845) 1,660 (6,610) Other income (expense), net 303 184 513 267
Income tax benefit (expense) (13) 64 (246) (74) ------------
------------ -------- -------- Net earnings $ 674 $(1,597) $ 1,927
$(6,417) ============ ============ ======== ======== Net earnings
per common share Basic and diluted $ 0.05 $ (0.11) $ 0.13 $ (0.46)
============ ============ ======== ======== Weighted average common
shares outstanding Basic 14,596 14,454 14,555 13,983 ============
============ ======== ======== Diluted 14,765 14,454 14,740 13,983
============ ============ ======== ======== KVH INDUSTRIES, INC.
AND SUBSIDIARY SELECTED FINANCIAL INFORMATION CONSOLIDATED
CONDENSED BALANCE SHEETS (in thousands, unaudited) September 30,
December 31, 2005 2004 --------------- -------------- ASSETS Cash,
cash equivalents and marketable securities $ 49,427 $ 45,728
Accounts receivable, net 9,057 9,577 Inventories 7,793 7,251
Deferred income taxes 440 645 Other assets 1,981 1,233 ----------
----------- Total current assets 68,698 64,434 Property and
equipment, net 8,282 8,218 Deferred income taxes 3,014 3,014 Other
non-current assets 199 248 --------------- -------------- Total
assets $ 80,193 $ 75,914 =============== ============== LIABILITIES
AND STOCKHOLDERS' EQUITY Accounts payable and accrued expenses $
7,465 $ 5,678 Current portion of deferred revenue 10 - Current
portion of debt obligations 111 107 ---------- ----------- Total
current liabilities 7,586 5,785 Deferred revenue 111 - Debt
obligations 2,311 2,397 Stockholders' equity 70,185 67,732
--------------- -------------- Total liabilities and stockholders'
equity $ 80,193 $ 75,914 =============== ============== *T This
press release contains forward-looking statements that involve
risks and uncertainties. For example, forward-looking statements
include statements regarding our financial and product development
goals for 2005, anticipated revenue growth, anticipated
profitability, anticipated orders for our satellite communications
and military products, and anticipated improvements in our product
margins and competitive position. The actual results we achieve
could differ materially from the statements made in this press
release. Factors that might cause these differences include, but
are not limited to: the unpredictability of the new and emerging
market for mobile satellite communications products in automobiles;
failure to develop and market products suitable for automotive
manufacturer use; failure to gain the acceptance of or orders from
automotive manufacturers for the TracVision A5; widespread consumer
demand for satellite TV service in cars may fail to develop; the
appeal and acceptance of satellite TV-equipped rental vehicles to
consumers may be lacking; potential difficulties in achieving
additional significant cost reductions for the TracVision A5;
seasonal declines in demand for our mobile satellite communication
and television products; the unpredictability and financial impact
of purchasing schedules and priorities of the relatively small
number of customers for our defense products; the risk of order
cancellations, particularly for longer-term orders; the risk that
contract options may never be exercised, depriving us of potential
revenue; the potential termination of the multi-year SRWS or MK54
torpedo programs; the impact of lengthy export license processes on
the timing of our international military product shipments;
potential reductions in our overall gross margins associated with a
general shift in product mix toward our mobile satellite
communications products; weather conditions that could disrupt
regional sales efforts, including the impact of recent hurricanes;
our dependence on single production lines for our products; our
dependence on sole or limited source suppliers; our dependence on
third-party satellite networks for programming and satellite
services; challenges in managing anticipated growth; the impact of
continuing increases in fuel prices on the sale and use of motor
vehicles and marine vessels; poor or delayed research and
development results; currency fluctuations, export restrictions and
other international risks; potential product liability claims; the
difficulty in protecting our proprietary technology; potential
claims of intellectual property infringement; and expenses
associated with new corporate governance requirements. 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
August 9, 2005. Copies are available through our Investor Relations
department and web site, www.kvh.com. We assume no obligation to
update our forward-looking statements to reflect new information
and developments.
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