- GAAP EPS $0.10 and record Q2 revenue of $43.2M, up
35%
- Non-GAAP EPS (excluding Headland Media
acquisition-related costs) $0.15
- mini-VSAT Broadband Q2 airtime revenue up 35%
year-over-year
KVH Industries, Inc., (Nasdaq:KVHI) today reported financial
results for the second quarter ended June 30, 2013. The company
reported second quarter revenue of $43.2 million, net income on a
generally accepted accounting principles (GAAP) basis of $1.5
million or $0.10 per diluted share, and non-GAAP net income of $2.3
million or $0.15 per diluted share. The non-GAAP net income
excludes one-time costs, net of tax benefit, associated with the
Headland Media acquisition which closed on May 11, 2013. During the
same period last year the company reported net income of $0.5
million, or $0.03 per diluted share, on revenues of $32.0
million.
"The acquisition of Headland Media midway through the quarter
was an important strategic move to expand our broadband
communications product offerings with new media content, including
the latest movies, TV shows, daily newspapers, and music. Even
excluding revenue contributed by Headland Media, our core business
recorded our fourth sequential record revenue quarter," said Martin
Kits van Heyningen, KVH's chief executive officer. "Our maritime
VSAT business continues to enjoy solid growth and we are excited
that we are getting a favorable reception from customers regarding
the new content offerings which we plan to roll out towards the end
of the year."
For the six months ended June 30, 2013, revenue was $83.1
million, up 42% compared to $58.7 million for the six months ended
June 30, 2012. KVH reported a GAAP net income of $3.5 million for
the first six months of 2013, or $0.23 per diluted share. Excluding
the Headland Media acquisition-related costs, the company recorded
a non-GAAP net income of $4.2 million or $0.28 per diluted share.
During the same period last year, the company reported a GAAP net
loss of $0.9 million, or a $0.06 loss per share.
A reconciliation between net income on a GAAP basis and net
income on a non-GAAP is provided below.
KVH's mobile communications revenue, including revenue from
Headland Media operations, was $27.3 million for the second quarter
of 2013, a 13% year-over-year increase. Combined, mini-VSAT
Broadband airtime and TracPhone product revenues in the second
quarter amounted to $17.2 million, up 17% compared to the same
period last year. Maritime satellite TV sales were up slightly in
the U.S. but down 4% year-over-year globally, due to general
softness in the European marine market and an unseasonably cold
spring in both North America and Europe.
KVH's guidance and stabilization revenue, which relates to fiber
optic gyro (FOG) solutions, TACNAV military navigation systems, and
related services, was $15.9 million in the second quarter of 2013,
up 100% year-over-year. Sales of TACNAV and related services for
the previously announced Saudi Arabian National Guard contract were
approximately $5.9 million, primarily comprising product sales,
installation services and project management services. During the
second quarter, sales of our FOG solutions were up 43%, at $8.0
million, compared to the same period last year.
Speaking about the company's financial performance, Peter
Rendall, KVH's chief financial officer, said, "With four successive
record revenue quarters, we are pleased with the financial
performance of both the mobile communications and guidance and
stabilization businesses. Our gross profit margin for the second
quarter of 42% was 280 basis points higher than the second quarter
last year."
"Our mini-VSAT Broadband airtime service gross margin for the
quarter continued to demonstrate the leverage of our business
model. Compared to the same period last year, gross profit dollars
from our mini-VSAT Broadband airtime were approximately 47% higher
in the current second quarter, while the gross margin percentage
increased from 32% to 35%. Sales of our FOG products to commercial
customers continue to exceed those to our defense customers.
Operating expenses were higher than the second quarter of 2012, but
excluding the impact of the Headland Media acquisition, were in
line with our expectations. The $4.2 million increase in operating
expenses was largely the result of incremental Headland Media
operating expenses, Headland Media acquisition-related expenses,
and sales-related commissions on increased shipments of our
military tactical navigation products."
"Planning for the remainder of 2013, we expect our mini-VSAT
Broadband business to show strong year-over-year growth. Although
we have seen indications of a slowdown in future U.S. defense sales
resulting from the implementation of sequestration measures, our
FOG business is expected to continue to benefit from new commercial
applications throughout the rest of the year. We remain cautious
with respect to expectations for growth in leisure markets, due to
ongoing challenges in global economies. We also have factored in
the anticipated decline in TACNAV product sales in the second half
of 2013 as hardware shipments under the Saudi Arabian National
Guard program were completed in the second quarter. We also expect
the Headland Media business to be accretive for 2013. With this
context, we have increased our full-year revenue guidance to be in
the range of $160 million to $165 million in revenue. We expect to
achieve a full-year operating margin in the range of approximately
4% to 7%. We are projecting that our annual effective tax rate will
be 35% or higher, subject to the effect of unforeseen discrete
items. The net result is that, including the Headland Media
acquisition-related costs (which equate to $0.05 per share), our
GAAP EPS guidance for the full year is now expected to be in the
range of $0.38 to $0.46 per share. Excluding the Headland Media
acquisition-related costs, we are effectively raising both our low-
and high-end of the full-year EPS range from previous
guidance."
"For the third quarter of 2013, we expect revenue to be in the
range of $38 million to $42 million, reflecting strong
year-over-year growth from our mini-VSAT Broadband business and a
marked decline in sales of TACNAV products. We expect net income in
the range of $0.08 to $0.12 per share."
Mr. Kits van Heyningen concluded, "We are very pleased with our
overall progress so far this year and, with the acquisition of
Headland Media, we are sharpening our focus, enabling us to move
faster to better capitalize on the long-term growth opportunities
that we see around the world. We recently announced several new
value added services that we expect to deliver to customers with
our IP-MobileCast Content Delivery Service towards the end of the
year. I am excited about the future we have as a company as we
enter the next chapter of our next-generation connectivity and
content delivery services journey."
Recent Operational Highlights:
7/29/2013 |
KVH announces that it has more than doubled
the mini-VSAT Broadband network capacity in the Asia-Pacific
region |
|
|
7/18/2013 |
KVH announces that Crewtoo, which focuses on
seafarers, gains 60,000 members in 12 months |
|
|
6/4/2013 |
KVH introduces plans for new IP-MobileCast
service for mini-VSAT Broadband network |
|
|
6/4/2013 |
KVH announces the introduction of a new
TracPhone V-IP series product line for the mini-VSAT Broadband
network |
|
|
6/4/2013 |
KVH announces TracPhone V-IP series satellite
terminals to support Jeppesen OpenENC PAYS subscribers |
|
|
6/4/2013 |
KVH announces its plans to support Jeppesen
chart subscribers with new IP-MobileCast content delivery
service |
|
|
5/11/2013 |
KVH closes the acquisition of Headland
Media |
Please review the corresponding press releases for more details
regarding these developments.
KVH is webcasting its second quarter conference call live at
10:30 a.m. Eastern time today 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.
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, on land, and in the
air. KVH's Headland Media group is a leading provider of
commercially-licensed news, sports, music, and movies, as well as
the Walport Training video series. KVH is based in
Middletown, RI, with facilities in Illinois, Denmark, Norway, the
UK, Singapore, the Philippines, and Japan.
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, and our anticipated revenue growth, market share,
competitive positioning, profitability, and product
orders. 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
impact of extended economic weakness and increasing fuel prices on
the sale and use of motor vehicles and marine vessels; potential
unanticipated technical or legal impediments related to new service
rollout plans and expected strategic relationships; 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 products; potential declines in military
sales, including to foreign customers, such as the anticipated
decline in sales of TACNAV to the Saudi Arabian National Guard; the
unpredictability of defense budget priorities as well as the order
timing, purchasing schedules, and priorities for our defense
products, including possible order cancellations; the uncertain
impact of potential budget cuts by government customers, including
the effects of sequestration; potential reductions in our overall
gross margins in the event of a shift in product mix; unanticipated
increases in media costs or loss of distribution rights;
unanticipated challenges in integrating the operations of Headland
Media; and currency fluctuations, export restrictions, delays in
procuring export licenses, and other international
risks. These and other factors are discussed in more detail in
our Annual Report on Form 10-K filed with the Securities and
Exchange Commission on April 2, 2013. Copies are available
through our Investor Relations department and website,
http://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 the following marks: KVH, KVH logo, Azimuth,
TracVision, TracPhone, Tri-Americas, CommBox, TACNAV, 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.
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|
|
KVH Industries, Inc.
and Subsidiaries |
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS |
(in thousands, except
per share amounts, unaudited) |
|
|
|
|
|
|
Three Months
Ended |
Six Months
Ended |
|
June
30, |
June
30, |
|
2013 |
2012 |
2013 |
2012 |
Sales: |
|
|
|
|
Product |
$ 25,886 |
$ 21,041 |
$ 51,102 |
$ 38,124 |
Service |
17,311 |
10,978 |
32,022 |
20,623 |
Net
sales |
43,197 |
32,019 |
83,124 |
58,747 |
|
|
|
|
|
Costs and expenses: |
|
|
|
|
Costs of product sales |
14,310 |
12,746 |
28,219 |
23,729 |
Costs of service sales |
10,860 |
6,822 |
21,110 |
12,624 |
Research and development |
3,250 |
3,059 |
6,200 |
6,199 |
Sales, marketing and support |
7,541 |
5,547 |
14,484 |
10,879 |
General and administrative |
4,936 |
2,918 |
8,310 |
5,866 |
Total costs and
expenses |
40,897 |
31,092 |
78,323 |
59,297 |
|
|
|
|
|
Income (loss) from
operations |
2,300 |
927 |
4,801 |
(550) |
|
|
|
|
|
Interest
income |
204 |
109 |
373 |
212 |
Interest
expense |
186 |
85 |
261 |
167 |
Other income,
net |
54 |
39 |
78 |
76 |
|
|
|
|
|
Income (loss)
before income tax expense |
2,372 |
990 |
4,991 |
(429) |
Income tax expense |
824 |
537 |
1,479 |
493 |
Net income
(loss) |
$ 1,548 |
$ 453 |
$ 3,512 |
$ (922) |
|
|
|
|
|
Net income (loss) per common
share: |
|
|
|
|
Basic |
$ 0.10 |
$ 0.03 |
$ 0.23 |
$ (0.06) |
Diluted |
$ 0.10 |
$ 0.03 |
$ 0.23 |
$ (0.06) |
|
|
|
|
|
Weighted average number of common
shares outstanding: |
|
|
|
|
Basic |
15,137 |
14,776 |
15,063 |
14,691 |
Diluted |
15,235 |
14,887 |
15,253 |
14,691 |
|
|
|
|
|
|
|
|
KVH Industries, Inc.
and Subsidiaries |
CONDENSED
CONSOLIDATED BALANCE SHEETS |
(in thousands,
unaudited) |
|
|
|
|
June 30, |
December 31, |
|
2013 |
2012 |
ASSETS |
|
|
|
|
|
Cash, cash equivalents and marketable
securities |
$ 54,323 |
$ 38,285 |
Accounts receivable, net |
26,982 |
27,654 |
Inventories |
17,355 |
16,203 |
Deferred income taxes |
817 |
1,146 |
Other current assets |
4,756 |
3,264 |
Total current
assets |
104,233 |
86,552 |
|
|
|
Property and equipment, net |
36,283 |
36,733 |
Deferred income taxes |
566 |
3,524 |
Goodwill |
16,966 |
4,712 |
Intangible assets, net |
14,802 |
1,684 |
Other non-current assets |
5,205 |
4,363 |
|
|
|
Total
assets |
$ 178,055 |
$ 137,568 |
|
|
|
LIABILITIES AND STOCKHOLDERS'
EQUITY |
|
|
Accounts payable and accrued
expenses |
$ 20,782 |
$ 19,280 |
Deferred revenue |
7,037 |
1,892 |
Current portion of long-term debt |
1,109 |
138 |
Total current
liabilities |
28,928 |
21,310 |
|
|
|
Other long-term liabilities |
1,312 |
140 |
Long-term debt, excluding current
portion |
6,671 |
3,414 |
Line of credit |
30,000 |
7,000 |
Stockholders' equity |
111,144 |
105,704 |
|
|
|
Total liabilities
and stockholders' equity |
$ 178,055 |
$ 137,568 |
|
|
|
|
|
|
KVH Industries, Inc.
and Subsidiaries |
RECONCILIATION OF NET
INCOME TO ADJUSTED NET INCOME |
Net Income Excluding
Transaction Costs and Income Tax Benefit Related to Business
Acquisition |
(in thousands,
unaudited) |
|
|
|
|
Three Months |
Six Months |
|
Ended |
Ended |
|
June 30, 2013 |
June 30, 2013 |
|
|
|
Net Income - GAAP |
$ 1,548 |
$ 3,512 |
|
|
|
Transaction costs related to business
acquisition of Headland Media |
865 |
865 |
Tax benefit from transaction costs
related to business acquisition of Headland Media |
(152) |
(152) |
|
|
|
Net Income - Non-GAAP |
$ 2,261 |
$ 4,225 |
|
|
|
Net income per common share -
Non-GAAP: |
|
|
Basic |
$ 0.15 |
$ 0.28 |
Diluted |
$ 0.15 |
$ 0.28 |
|
|
|
Adjusted net income excluding the transaction costs related to
the acquisition of Headland Media for the three and six months
ended June 30, 2013 is presented in the table above. This is
a non-GAAP financial measure and should not be considered a
replacement for GAAP results. We believe the adjusted
information is useful to investors because it is reflective of
underlying operational trends, as it excludes significant
non-recurring or otherwise unusual transactions as described
above. Our criteria for adjusted net income may differ from
models used by other companies and should not be considered as an
alternative to net income prepared in accordance with US GAAP as an
indicator of our operating performance.
CONTACT: KVH Industries, Inc.
Peter Rendall
401-847-3327
prendall@kvh.com
FTI Consulting
Christine Mohrmann
212-850-5600
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