KVH Industries, Inc., (Nasdaq:KVHI) reported financial results for
the first quarter ended March 31, 2016 today. The company
will hold a conference call to discuss these results at 10:30 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.
Highlights
- Shipped an initial TACNAV® order from BAE Systems to support
the U.S. Army’s new AMPV program
- Won a new VSAT fleet deal for up to 53 vessels
- Overall gross profit margins of 41% for the quarter and VSAT
margins remain strong at 36% compared to 35% in the prior year
period
“Overall, given the headwinds in the commercial maritime sector,
we were pleased with our results in the first quarter,” said Martin
Kits van Heyningen, KVH’s chief executive officer. “We had a
solid quarter for both VSAT and marine TV hardware sales, and are
confident that we continue to gain market share. We did see a
small decline in the average revenue per user (ARPU) for our VSAT
airtime subscribers, particularly those operating in the offshore
oil and gas sector which resulted in VSAT airtime being down 1%
year-over-year. Our new mini-VSAT Broadbandsm 2.0 service is
proving very popular with our customers and is generating higher
average ARPUs and improved margins. Our overall VSAT airtime
gross profit margin, at 36% was up 47 basis points from a year
ago.”
Financial Highlights (in millions, except per
share data)
|
Quarter Ended |
|
|
March 31, 2016 |
March 31, 2015 |
|
GAAP
Results |
|
|
|
Revenue |
$ |
40.4 |
|
$ |
41.3 |
|
|
Net loss |
$ |
(2.8 |
) |
$ |
(1.4 |
) |
|
Net loss per share |
$ |
(0.18 |
) |
$ |
(0.09 |
) |
|
Non-GAAP Results |
|
|
|
Net income (loss) |
$ |
(0.6 |
) |
$ |
0.9 |
|
|
Net income (loss) per
share |
$ |
(0.04 |
) |
$ |
0.06 |
|
|
Adjusted EBITDA |
$ |
1.0 |
|
$ |
2.8 |
|
|
For more information regarding our non-GAAP financial measures,
see the tables at the end of this release.
First Quarter Financial Summary
Revenue was $40.4 million for the first quarter, a decrease of
2% compared to the first quarter of 2015. First quarter
product revenues of $15.4 million were flat with the prior year
quarter. Service revenues in the first quarter were $25.0
million, a decrease of 4% compared to the first quarter of 2015,
primarily driven by the UK pound sterling currency weaknesses.
Airtime service revenues of $15.2 million, which include
mini-VSAT Broadband airtime revenues, were down 3% year-over-year,
primarily driven by a 38% decrease in Inmarsat FleetBroadband
revenues which resulted from a higher subscriber termination
rate. Content and services revenues of $9.8 million, which
include our entertainment, e-Learning, and safety content, were
down 4% in the first quarter of 2016 compared to the first quarter
of 2015.
For the first quarter, net loss on a GAAP basis was $2.8
million, or $0.18 per share, while non-GAAP net loss was $0.6
million or $0.04 per share. During the same period last year,
the company reported a GAAP net loss of $1.4 million, or $0.09 per
share, and non-GAAP net income of $0.9 million, or $0.06 per
diluted share.
Non-GAAP adjusted EBITDA was $1.0 million for the first quarter
of 2016 compared to $2.8 million in the prior year quarter.
Included in non-GAAP adjusted EBITDA was $1.3 million and $1.4
million related to the amortization of intangible assets for the
three months ended March 31, 2016 and 2015, respectively.
Second Quarter 2016 and Full Year 2016
Outlook
Overall, KVH expects continued growth and improving
profitability as we progress throughout the year. We expect
to see year-over-year growth in our marine VSAT business and our
defense business. A portion of our revenues and costs are
denominated in pounds sterling, and there have recently been
significant fluctuations in currency movements relative to the U.S.
dollar. Significant changes to currency exchange rates,
particularly between the U.S. dollar and pounds sterling, may have
a material impact on our earnings. For the full year, we are
reaffirming our previous guidance, as set out below:
- Revenue for the full year is projected to be in the range of
$190 million to $210 million.
- For the full year, net income is projected to be in the range
of $2.0 million to $6.7 million with GAAP diluted EPS projected to
be in the range of $0.12 to $0.42, with non-GAAP diluted EPS for
the full year projected to be in the range of $0.66 to $0.96.
Non-GAAP adjusted EBITDA is projected to be in the range of $21.0
million to $28.0 million.
- Revenue for the second quarter is projected to be in the range
of $45 million to $47 million.
- For the second quarter, net loss is projected to be in the
range of $0.6 million to $1.5 million with GAAP net loss per share
to be in the range of $0.04 to $0.10. Non-GAAP adjusted
EBITDA is projected to be in the range of $2.5 million to $3.7
million with non-GAAP diluted EPS for the second quarter projected
to be in the range of $0.04 to $0.10.
Other Recent Announcements
- KVH received an initial order for tactical navigation systems
to support prototype vehicles for a program to produce a new fleet
of U.S. Army Armored Multi-Purpose Vehicles led by BAE
Systems.
- KVH unveiled plans for a low-cost inertial sensor for
self-driving cars.
- KVH’s Videotel™ training programs will receive credit towards
maritime science degrees as part of an agreement with Marine
Learning Alliance.
- KVH announced that it had shipped more than 6,000 TracPhone®
systems for its mini-VSAT Broadband network.
Please review the corresponding press releases for more details
regarding these developments.
Conference Call Details
KVH Industries will host a conference call today at 10:30 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 also be available on the
company website within three hours of the completion of the
call.
Non-GAAP Financial Measures
KVH provides non-GAAP financial information, including non-GAAP
net income (loss), non-GAAP diluted net income (loss) per share,
and non-GAAP adjusted EBITDA, as a supplement to the condensed
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 and
liquidity. 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.
KVH believes that both management and investors benefit from
referring to these non-GAAP financial measures in assessing
performance and when planning, forecasting, and analyzing future
periods. KVH believes these non-GAAP financial measures are
useful to investors because they allow for greater transparency
with respect to key financial metrics used in making operating
decisions and because its investors and analysts use them to help
assess the health of its business.
Some limitations of non-GAAP adjusted EBITDA, non-GAAP net
income (loss), and non-GAAP diluted net income (loss) per share
include the following:
- Non-GAAP adjusted EBITDA represents net income (loss) before
interest income, interest expense, taxes, depreciation,
amortization, stock-based compensation, legal settlement costs, and
acquisition-related compensation expenses.
- Non-GAAP net income (loss) and diluted net income (loss) per
share exclude adjustments related to acquisition-related
compensation expenses, stock-based compensation and intangible
amortization, all net of tax, and also excludes any discrete tax
items.
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 of these limitations, investors should consider these
non-GAAP financial measures together with other financial
performance measures, including net income (loss), diluted net
income (loss) per share, and KVH’s other financial results
presented in accordance with GAAP. See the GAAP to non-GAAP
reconciliations below for further details.
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 and on land and is a leading
news, music, entertainment, and training content provider to many
industries including maritime, retail, and leisure. 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 research, development, and manufacturing
operations in Middletown, RI, and Tinley Park, IL. The
company’s global presence includes offices in Belgium, Brazil,
Cyprus, Denmark, Hong Kong, Japan, the Netherlands, Norway,
Singapore, and the United Kingdom.
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, our anticipated revenue sales pipeline, backlog,
competitive positioning, profitability, and product orders.
The actual results could differ materially from the statements made
in this press release. Factors that might cause these
differences include, but are not limited to: 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; continued adverse impacts of currency
fluctuations; the impact of extended economic weakness on the sale
and use of motor vehicles and marine vessels; 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, including with respect to new pricing
models; recent increases in airtime termination rates and lower
unit sales in our mobile business; increased price and service
competition in the mobile communications market; exposure for
potential intellectual property infringement; potential additional
litigation expenses; fluctuations in interest rates; potential
changes in tax and accounting requirements or assessments,
including management’s assessment of the probability and effect of
future events; stock price volatility; and export restrictions,
delays in procuring export licenses, and other international
risks. These and other factors are discussed in more detail
in KVH’s Annual Report on Form 10-K filed with the Securities and
Exchange Commission on March 14, 2016. Copies are available
through its Investor Relations department and website,
http://investors.kvh.com. KVH does not assume any obligation
to update its 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, Videotel, 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 STATEMENTS OF
OPERATIONS |
(in thousands, except per share amounts,
unaudited) |
|
|
|
|
|
|
Three
Months Ended |
|
March
31, |
|
2016 |
2015 |
Sales: |
|
|
|
|
Product |
$ |
|
15,382 |
|
$ |
|
15,386 |
|
Service |
|
|
24,998 |
|
|
|
25,919 |
|
Net sales |
|
|
40,380 |
|
|
|
41,305 |
|
|
|
|
|
|
Costs and
expenses: |
|
|
|
|
Costs of product sales |
|
|
10,670 |
|
|
|
10,485 |
|
Costs of service sales |
|
|
12,991 |
|
|
|
13,260 |
|
Research and development |
|
|
3,783 |
|
|
|
3,750 |
|
Sales, marketing and support |
|
|
8,658 |
|
|
|
8,080 |
|
General and administrative |
|
|
7,652 |
|
|
|
7,638 |
|
Total costs and
expenses |
|
|
43,754 |
|
|
|
43,213 |
|
|
|
|
|
|
Loss from
operations |
|
|
(3,374 |
) |
|
|
(1,908 |
) |
|
|
|
|
|
Interest income |
|
|
105 |
|
|
|
148 |
|
Interest expense |
|
|
375 |
|
|
|
368 |
|
Other (expense) income, net |
|
|
(77 |
) |
|
|
413 |
|
|
|
|
|
|
Loss before
income tax benefit |
|
(3,721 |
) |
|
|
(1,715 |
) |
Income tax benefit |
|
|
(930 |
) |
|
|
(293 |
) |
Net loss |
$ |
|
(2,791 |
) |
$ |
|
(1,422 |
) |
|
|
|
|
|
Net loss per
common share: |
|
|
|
|
Basic and diluted |
$ |
|
(0.18 |
) |
$ |
|
(0.09 |
) |
|
|
|
|
|
Weighted average number of common shares
outstanding: |
|
|
Basic and diluted |
|
|
15,723 |
|
|
|
15,538 |
|
|
KVH INDUSTRIES, INC. AND
SUBSIDIARIES |
|
CONDENSED
CONSOLIDATED BALANCE
SHEETS |
|
(in thousands, unaudited) |
|
|
|
|
|
|
|
|
March 31, |
December 31, |
|
|
2016 |
2015 |
|
ASSETS |
|
|
|
|
|
Cash, cash equivalents and
marketable securities |
$ |
50,836 |
$ |
45,338 |
|
Accounts receivable, net |
|
31,705 |
|
43,895 |
|
Inventories |
|
23,154 |
|
21,589 |
|
Other current assets |
|
5,805 |
|
4,271 |
|
Total current
assets |
|
111,500 |
|
115,093 |
|
|
|
|
|
|
|
Property and equipment, net |
|
38,861 |
|
39,900 |
|
Goodwill |
|
35,780 |
|
36,747 |
|
Intangible assets, net |
|
24,698 |
|
26,755 |
|
Other non-current assets |
|
3,387 |
|
3,096 |
|
Non-current deferred income
taxes |
|
3,795 |
|
4,686 |
|
Total assets |
$ |
218,021 |
$ |
226,277 |
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY |
|
|
|
|
|
Accounts payable and accrued
expenses |
$ |
27,010 |
$ |
30,959 |
|
Deferred revenue |
|
6,777 |
|
5,962 |
|
Current portion of long-term
debt |
|
7,055 |
|
6,638 |
|
Total current
liabilities |
|
40,842 |
|
43,559 |
|
|
|
|
|
|
|
Other long-term liabilities |
|
1,317 |
|
1,391 |
|
Non-current deferred tax
liability |
|
4,922 |
|
5,097 |
|
Long-term debt, excluding current
portion |
|
56,083 |
|
58,054 |
|
Stockholders' equity |
|
114,857 |
|
118,176 |
|
Total liabilities and
stockholders' equity |
$ |
218,021 |
$ |
226,277 |
|
|
|
|
|
|
|
KVH INDUSTRIES, INC. AND
SUBSIDIARIES |
|
RECONCILIATION OF NET LOSS TO NON-GAAP NET
(LOSS) INCOME |
|
(in thousands, unaudited) |
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
March 31, |
|
|
2016 |
2015 |
|
Net loss -
GAAP |
$ |
|
(2,791 |
) |
$ |
|
(1,422 |
) |
|
|
|
|
|
|
|
Amortization of intangibles |
|
|
1,283 |
|
|
|
1,442 |
|
|
Stock-based compensation expense,
net of tax |
|
|
695 |
|
|
|
632 |
|
|
Discrete tax expense, net (a) |
|
|
9 |
|
|
|
50 |
|
|
Acquisition-related
compensation |
|
|
179 |
|
|
|
189 |
|
|
|
|
|
|
|
|
Net (loss)
income - Non-GAAP |
$ |
|
(625 |
) |
$ |
|
891 |
|
|
|
|
|
|
|
|
Net (loss)
income per common share - Non-GAAP: |
|
|
|
|
|
Basic and diluted |
$ |
|
(0.04 |
) |
$ |
|
0.06 |
|
|
|
|
|
|
|
|
Note - The impact of the change in the deferred income tax asset
valuation allowance on the number of diluted shares outstanding did
not alter the diluted net income per common share result presented
for both periods. As a result, the inconsequential impact to
the diluted share number has not been included.
(a) Represents a change in the valuation allowance on a state
research and development tax credit and uncertain tax position
adjustments.
|
|
KVH INDUSTRIES, INC. AND
SUBSIDIARIES |
|
RECONCILIATION OF GAAP NET LOSS TO
NON-GAAP |
|
EBITDA AND NON-GAAP ADJUSTED
EBITDA |
|
(in thousands, unaudited) |
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
March 31, |
|
|
2016 |
2015 |
|
GAAP net
loss |
$ |
|
(2,791 |
) |
$ |
|
(1,422 |
) |
|
Income tax benefit |
|
|
(930 |
) |
|
|
(293 |
) |
|
Interest expense, net |
|
|
270 |
|
|
|
220 |
|
|
Depreciation and amortization
(a) |
|
|
3,189 |
|
|
|
3,129 |
|
|
|
|
|
|
|
|
Non-GAAP
EBITDA |
|
|
(262 |
) |
|
|
1,634 |
|
|
Stock-based compensation
expense |
|
|
1,052 |
|
|
|
958 |
|
|
Acquisition-related
compensation |
|
|
179 |
|
|
|
189 |
|
|
|
|
|
|
|
|
Non-GAAP
adjusted EBITDA |
$ |
|
969 |
|
$ |
|
2,781 |
|
|
|
|
|
|
|
|
(a) Includes amortization of intangible assets resulting from
acquisitions.
|
|
|
|
|
|
|
KVH INDUSTRIES, INC AND
SUBSIDIARIES |
|
|
|
NON-GAAP ADJUSTED EBITDA GUIDANCE |
|
|
|
(in millions, unaudited) |
|
|
|
|
|
|
|
|
|
|
|
Second Quarter |
|
Full Year |
|
|
|
|
Fiscal 2016 (Projected) |
|
Fiscal 2016 (Projected) |
|
|
|
|
|
|
|
|
|
|
GAAP net income
(loss) |
$(1.5) - $(0.6) |
|
$2.0 - $6.7 |
|
|
|
|
|
|
|
|
|
|
Estimated income tax
(benefit) expense |
$(0.5) - $(0.2) |
|
$1.1 - $3.4 |
|
|
|
Estimated interest
expense (income), net |
$ |
0.2 |
|
|
$ |
0.8 |
|
|
|
|
Estimated depreciation
and amortization (a) |
$ |
3.2 |
|
|
$ |
12.6 |
|
|
|
|
Estimated stock-based
compensation expense |
$ |
0.9 |
|
|
$ |
3.7 |
|
|
|
|
Acquisition-related
compensation |
$ |
0.2 |
|
|
$ |
0.8 |
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP adjusted
EBITDA |
$2.5 - $3.7 |
|
$21.0 - $28.0 |
|
|
|
|
|
|
|
|
|
|
(a) Reflects amortization of intangible assets resulting from
acquisitions and depreciation of fixed assets.
|
|
|
|
|
|
|
|
|
|
KVH INDUSTRIES, INC AND
SUBSIDIARIES |
|
|
|
|
|
|
NON-GAAP EPS GUIDANCE |
|
|
|
|
|
|
(unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter |
|
Full Year |
|
|
|
|
|
|
|
Fiscal 2016 (Projected) |
|
Fiscal 2016 (Projected) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per
common share |
$(0.10) - $(0.04) |
|
$0.12 - $0.42 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated amortization
(a) |
$ |
0.09 |
|
|
$ |
0.36 |
|
|
|
|
|
|
|
Estimated stock-based
compensation expense, net of tax |
$ |
0.04 |
|
|
$ |
0.15 |
|
|
|
|
|
|
|
Acquisition-related
compensation |
$ |
0.01 |
|
|
$ |
0.03 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP net income
(loss) per common share |
$0.04 - $0.10 |
|
$0.66 - $0.96 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) Reflects amortization of intangible assets resulting from
acquisitions.
Contact:
KVH Industries, Inc.
Peter Rendall
401-847-3327
prendall@kvh.com
FTI Consulting
Christine Mohrmann
212-850-5600
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