- Record full year 2013 revenues; $162.3
million
- mini-VSAT Broadband business continues to grow strongly
with Q4 airtime revenue up 33% year-over-year
KVH Industries, Inc., (Nasdaq:KVHI) today reported financial
results for the fourth quarter ended December 31, 2013. Revenue for
the fourth quarter of 2013 was $38.9 million, down 2% from the
quarter ended December 31, 2012. A net loss for the period of $0.4
million, or $0.02 per share was reported. During the same period
last year the company reported net income of $2.8 million, or $0.18
per diluted share, with revenues of $39.5 million.
For the year ended December 31, 2013, revenue was $162.3
million, up 18% from the $137.1 million reported for the year ended
December 31, 2012. KVH reported net income of $4.5 million, or
$0.30 on a per share basis for the full year 2013. During the same
period last year, the company reported net income of $3.6 million,
or $0.24 on a per diluted share basis.
"The fourth quarter was highlighted with solid growth in our
satellite services business where our broadband airtime service
revenues were up 33% year-over-year," said Martin Kits van
Heyningen, KVH's chief executive officer. "We recently announced
that we have shipped our 4,000th VSAT TracPhone® antenna, a
milestone that solidifies our leadership position in the maritime
broadband market. We have also made excellent progress developing
our new IP-MobileCast™ content delivery service and are about to
commence trials with customers. In addition, we have secured the
rights to a variety of entertainment, news and sports content,
including the rights to provide satellite coverage of the FIFA
World Cup™ to our maritime customers."
KVH's mobile communications revenue, including satellite
television products and KVH Media's operations, was $29.0 million
for the fourth quarter of 2013, a 35% increase year-over-year.
Combined, mini-VSAT Broadbandsm airtime and TracPhone product
revenues in the fourth quarter amounted to $18.6 million, up 28%
compared to the same period last year. Maritime satellite TV sales
were flat year-over-year. KVH Media's revenue (previously known as
Headland Media) was $3.6 million in the fourth quarter compared to
$3.3 million in the third quarter. "Although we remain cautious
about the European marine markets, we were pleased that our fourth
quarter maritime product revenues of our EMEA business increased
12% when compared to the third quarter," continued Mr. Kits van
Heyningen.
KVH's guidance and stabilization revenue, which relates to our
fiber optic gyro (FOG) solutions, TACNAV® military navigation
systems, and related services, was $9.9 million in the fourth
quarter of 2013, down 45% year-over-year. As anticipated, fourth
quarter revenue from TACNAV product and services was 51% lower than
the same period last year, primarily related to the Saudi Arabian
National Guard program. During the fourth quarter, sales of
our FOGs were down 39%, at $4.6 million, compared to the same
period last year. For the full year 2013, FOG revenues of
$24.5 million were 5% higher than 2012.
"We saw a sharp decline in FOG revenues in the fourth quarter,
which was unexpected and was the most significant contributor to
our earnings shortfall compared to our previous guidance,"
explained Mr. Kits van Heyningen. "Although we have been able
to diversify our revenues across a wider customer base, during the
fourth quarter we expected the majority of our FOG sales to come
from two principal customers. Late in the quarter, one of
those two customers deferred significant orders into 2014 that we
had included in our earnings estimates."
Speaking about the company's financial performance, Peter
Rendall, KVH's chief financial officer, said, "While we were
disappointed with our FOG revenues in the fourth quarter, we were
pleased with the overall financial performance of both the mobile
communications and guidance and stabilization businesses in 2013.
Service revenues reported in the fourth quarter, the majority of
which were subscription-based, represented 52% of total revenues
compared to 29% in the prior year period. For 2013, service
revenues were 44% of total revenues compared to 34% in
2012. As it relates to our largest contract ever, the Saudi
Arabian National Guard TACNAV program, we expect the final vehicle
installations to occur in the first quarter of 2014."
Mr. Rendall added, "Coupled with the impressive growth in
mini-VSAT Broadband airtime revenues, the significant increase in
service gross profit 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 62% higher in the current
quarter, while the gross margin percentage increased from 30% to
37%. Operating expenses were higher than anticipated in the fourth
quarter of 2013 as we incurred some one-time restructuring costs in
Europe and additional costs related to the development of the
IP-MobileCast service offering."
"Planning for 2014, we expect our mini-VSAT Broadband business
to continue to show strong year-over-year growth. We are encouraged
with the pipeline of TACNAV opportunities coming into 2014, but
remain very cautious as to the timing for these programs to close
and in particular expect to have very low TACNAV revenues in the
first quarter of 2014. Although we experienced a decline in
FOG sales in the fourth quarter, our 1750 IMU is doing well in
customer trials and continues to be designed into prototypes for a
variety of emerging commercial and military applications. As
it relates to the CROWS program, we carried minimal backlog into
2014 and therefore are not projecting the run-rate in sales we have
seen in recent years. With this context, and mindful of factors
that remain outside of our control, our full year revenue guidance
for 2014 is in the range of $165 million to $185 million. We expect
to achieve a full year operating margin in the range of
approximately 4% to 6%. We are projecting that our annual effective
tax rate will be approximately 40%, subject to the effect of
unforeseen discrete items. Our EPS for the full year is expected to
be in the range of $0.30 to $0.40 per share.
For the first quarter of 2014, we expect revenue to be in the
range of $36 million to $40 million, reflecting strong
year-over-year growth from our mini-VSAT Broadband business and a
marked decline in sales of TACNAV products, which we expect will be
approximately $1 million, down from almost $8 million a year
ago. As a result of this, we expect to record a net loss for
the first quarter in the range of $0.04 to $0.07 per
share. With the exception of a net loss in the first quarter,
we expect to be profitable for the remainder of the year and
overall we expect that our income from operations for 2014 will
exceed that recorded in 2013."
Mr. Kits van Heyningen concluded, "We were very pleased with our
overall progress in 2013 and, with the introduction of
IP-MobileCast service in the first quarter of 2014, we believe we
will be able to bring exciting new content and applications to the
market and fundamentally change the value proposition in the mobile
maritime satellite market. Despite the lumpy nature of our
defense business in the short-term, we have a robust sales pipeline
and we are confident in the medium-term opportunities in this part
of our business as well."
Recent Operational Highlights:
02/18/2014 |
KVH Supports U.S. Customs and Border
Protection Programs with SATCOM Order from Global Technical
Systems |
02/05/2014 |
KVH Ships 4,000th TracPhone System for
mini-VSAT Broadband Network |
01/15/2014 |
KVH Doubles Capacity of Global C-band Beams
for Maritime VSAT Network |
01/09/2014 |
KVH mini-VSAT Broadband Systems Installed as
Connectivity Solution on more than 100 U.S. Coast Guard
Vessels |
12/11/2013 |
BW Selects KVH mini-VSAT Broadband for LNG
and LPG Fleet |
12/03/2013 |
KVH Expands Capacity of mini-VSAT Broadband
Network in Key Asia-Pacific Region |
11/13/2013 |
KVH Provides Free Satellite Calls to
Philippines for Maritime Customers |
10/31/2013 |
KVH Industries Named Media Sponsor for
Seafarers' Welfare Awards |
KVH is webcasting its fourth quarter/year-end 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 as
well as a leading provider of commercially-licensed news, sports,
music, movies and training videos to the merchant marine market.
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 facilities in Illinois, Denmark, Norway, the
U.K., Singapore, the Philippines, Belgium, Cyprus, 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, 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 high fuel prices on the sale and use of marine
vessels, particularly in Europe and Asia; potential unanticipated
technical or legal impediments that could delay or impede new
service rollout plans or 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
competitive, economic, seasonal, and other factors, particularly
with respect to the TracPhone V-IP series products; potential
further declines and unpredictability in military sales, including
to foreign customers; 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 actual and 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; and currency
fluctuations, export restrictions, delays in procuring export
licenses, and other international risks. These and other risk
factors are discussed in more detail in our most recent Form 10-Q
filed with the SEC on November 8, 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,
IP-MobileCast, 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 BALANCE SHEETS |
(in thousands,
unaudited) |
|
|
|
|
December 31, |
December 31, |
|
2013 |
2012 |
ASSETS |
|
|
|
|
|
Cash, cash equivalents and marketable
securities |
$ 55,744 |
$ 38,285 |
Accounts receivable, net |
27,549 |
27,654 |
Inventories |
18,255 |
16,203 |
Deferred income taxes |
1,855 |
1,146 |
Other current assets |
3,905 |
3,264 |
Total current
assets |
107,308 |
86,552 |
|
|
|
Property and equipment, net |
37,142 |
36,733 |
Deferred income taxes |
51 |
3,524 |
Goodwill |
18,281 |
4,712 |
Intangible assets, net |
14,987 |
1,684 |
Other non-current assets |
5,047 |
4,363 |
|
|
|
Total assets |
$ 182,816 |
$ 137,568 |
|
|
|
LIABILITIES AND STOCKHOLDERS'
EQUITY |
|
|
Accounts payable and accrued
expenses |
$ 22,921 |
$ 19,280 |
Deferred revenue |
4,858 |
1,892 |
Current portion of long-term debt |
1,272 |
138 |
Total current
liabilities |
29,051 |
21,310 |
|
|
|
Other long-term liabilities |
204 |
140 |
Long-term debt, excluding current
portion |
7,094 |
3,414 |
Line of credit |
30,000 |
7,000 |
Stockholders' equity |
116,467 |
105,704 |
|
|
|
Total liabilities and
stockholders' equity |
$ 182,816 |
$ 137,568 |
|
KVH Industries, Inc.
and Subsidiaries |
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS |
(in thousands, except
per share amounts, unaudited) |
|
|
|
|
|
|
Three Months
Ended |
Year
Ended |
|
December
31, |
December
31, |
|
2013 |
2012 |
2013 |
2012 |
Sales: |
|
|
|
|
Product |
$ 18,862 |
$ 28,024 |
$ 90,295 |
$ 90,677 |
Service |
20,086 |
11,519 |
71,993 |
46,435 |
Net sales |
38,948 |
39,543 |
162,288 |
137,112 |
|
|
|
|
|
Costs and expenses: |
|
|
|
|
Costs of product sales |
11,519 |
14,749 |
51,518 |
51,775 |
Costs of service sales |
12,039 |
7,704 |
45,058 |
30,363 |
Research and development |
3,453 |
2,999 |
12,987 |
12,147 |
Sales, marketing and support |
7,964 |
6,830 |
28,792 |
24,069 |
General and administrative |
4,680 |
3,282 |
17,764 |
12,188 |
Total costs and
expenses |
39,655 |
35,564 |
156,119 |
130,542 |
|
|
|
|
|
(Loss) income from
operations |
(707) |
3,979 |
6,169 |
6,570 |
|
|
|
|
|
Interest income |
85 |
151 |
657 |
510 |
Interest expense |
187 |
80 |
637 |
323 |
Other income (expense),
net |
204 |
(13) |
494 |
86 |
|
|
|
|
|
(Loss) income before income tax
(benefit) expense |
(605) |
4,037 |
6,683 |
6,843 |
Income tax (benefit) expense |
(240) |
1,280 |
2,150 |
3,263 |
Net (loss) income |
$ (365) |
$ 2,757 |
$ 4,533 |
$ 3,580 |
|
|
|
|
|
Net (loss) income per common
share: |
|
|
|
|
Basic |
$ (0.02) |
$ 0.19 |
$ 0.30 |
$ 0.24 |
Diluted |
$ (0.02) |
$ 0.18 |
$ 0.30 |
$ 0.24 |
|
|
|
|
|
Weighted average number
of common shares outstanding: |
|
|
|
Basic |
15,245 |
14,879 |
15,144 |
14,777 |
Diluted |
15,245 |
15,088 |
15,341 |
15,019 |
CONTACT: KVH Industries, Inc.
Peter Rendall
401-847-3327
prendall@kvh.com
FTI Consulting
Christine Mohrmann
212-850-5600
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