KVH Industries(KVHI) - 2025 Q2 - Quarterly Results

Executive Summary and Key Highlights This section provides an overview of KVH Industries' second quarter 2025 performance, highlighting key financial results, strategic shifts, and CEO commentary on the company's transformation Second Quarter 2025 Highlights KVH Industries reported a significant turnaround in Q2 2025, achieving net income of $0.9 million compared to a net loss in the prior year, driven by increased revenues and a strategic shift towards LEO services, also completing the sale of 50 Enterprise Center, generating a gain and net cash Second Quarter 2025 Key Metrics | Metric | Q2 2025 | Q2 2024 | Change (YoY) | Q1 2025 | Change (QoQ) | | :--------------------- | :------ | :------ | :----------- | :------ | :----------- | | Total Revenues | $26.6M | $28.7M | -7% | $25.4M | +5% | | Net Income (Loss) | $0.9M | ($2.4M) | N/A | N/A | N/A | | Net Income (Loss) per Share | $0.05 | ($0.12) | N/A | N/A | N/A | | Non-GAAP Adjusted EBITDA | $2.7M | $2.6M | +3.8% | N/A | N/A | - Completed the sale of 50 Enterprise Center in June 2025, resulting in a gain of $1.3 million and net cash of $4.9 million[7] CEO Commentary CEO Brent C. Bruun highlighted the company's ongoing business model transformation, noting a sequential increase in revenues, adjusted EBITDA, and cash compared to Q1 2025, emphasizing reaching an inflection point in the transition to a multi-orbit, LEO-focused service provider, with LEO revenue growth offsetting declines in legacy GEO-based VSAT business, alongside an 8% sequential growth in maritime airtime subscribers exceeding 8,000 vessels, and a 24% increase in CommBox Edge Communications Gateway activations - Revenues increased $1.2 million, adjusted EBITDA increased $1.7 million, and cash grew by $7.3 million compared to Q1 2025[5] - Reached an inflection point in the transition from a GEO-based hardware and services company to a multi-orbit, LEO-focused service provider, with LEO revenue growth offsetting legacy GEO VSAT decline[6] - Maritime airtime subscribers grew 8% sequentially from Q1 2025, reaching over 8,000 subscribing vessels, primarily driven by Starlink and increasing demand for OneWeb service[6] - CommBox Edge Communications Gateway subscriber base expanded with activations increasing by over 24% from Q1 2025[6] Financial Performance Overview This section details KVH Industries' financial performance for the second quarter and six months ended June 30, 2025, including revenue analysis, operating expenses, and an explanation of non-GAAP financial measures Second Quarter 2025 Financial Summary KVH Industries reported a 7% year-over-year decrease in total revenue for Q2 2025, primarily due to a U.S. Coast Guard contract downgrade and the ongoing customer transition to LEO services, with service revenues declining largely from airtime services despite a significant increase in LEO service sales, which now represent over 30% of airtime sales, and product revenues also decreasing, impacted by lower Starlink and TracVision sales, partially offset by growth in OneWeb and VSAT Broadband products Second Quarter 2025 Revenue Summary | Metric | Q2 2025 (in millions) | Q2 2024 (in millions) | YoY Change | | :------------------ | :-------------------- | :-------------------- | :--------- | | Total Revenue | $26.6 | $28.7 | -7% | | Service Revenues | $23.0 | $24.6 | -$1.6M | | Product Revenues | $3.6 | $4.0 | -11% | - Airtime service sales decreased by $1.9 million, including a $2.5 million reduction from the U.S. Coast Guard contract downgrade[10] - LEO services sales represented over 30% of airtime services sales in Q2 2025, up from less than 10% in Q2 2024, driven by substantial increases in LEO sales and decreases in VSAT sales[10] - Product sales decrease was primarily due to a $0.5 million decrease in Starlink product sales and a $0.2 million decrease in TracVision product sales, partially offset by a $0.3 million increase in OneWeb product sales and a $0.2 million increase in VSAT Broadband product sales[11] Revenue Analysis This subsection provides a detailed breakdown of service and product revenues for the second quarter of 2025, highlighting key drivers of change Q2 2025 Revenue Breakdown | Revenue Type | Q2 2025 (in millions) | Q2 2024 (in millions) | YoY Change | | :----------- | :-------------------- | :-------------------- | :--------- | | Service | $23.0 | $24.6 | -$1.6M |\ | Product | $3.6 | $4.0 | -$0.4M | - LEO services sales increased significantly, now comprising over 30% of total airtime services sales, compared to less than 10% in Q2 2024[10] - Starlink product sales decreased by $0.5 million due to discounted pricing, and TracVision product sales decreased by $0.2 million due to competition from low-cost alternatives[11] Operating Expenses This subsection details the operating expenses for Q2 2025, noting a significant year-over-year decrease primarily due to reduced salaries, benefits, and taxes Q2 2025 Operating Expenses | Metric | Q2 2025 (in millions) | Q2 2024 (in millions) | YoY Change | | :---------------------- | :-------------------- | :-------------------- | :--------- | | Operating Expenses | $9.5 | $11.8 | -$2.3M |\ | Salaries, benefits, taxes | N/A | N/A | -$2.0M | - The decrease in operating expenses was primarily due to a $2.0 million decrease in salaries, benefits, and taxes, after accounting for $0.7 million in workforce reduction costs incurred in Q2 2024[12] Six Months Ended June 30, 2025 Financial Summary For the first six months of 2025, KVH Industries experienced a 10% year-over-year decline in total revenue, with service revenues decreasing due to a significant reduction in airtime sales, largely from the U.S. Coast Guard contract downgrade, though partially offset by increased LEO service sales, and product revenues also falling, primarily driven by lower TracVision and Starlink sales, influenced by product mix and discounted pricing Six Months Ended June 30, 2025 Revenue Summary | Metric | 6 Months 2025 (in millions) | 6 Months 2024 (in millions) | YoY Change | | :------------------ | :-------------------------- | :-------------------------- | :--------- | | Total Revenue | $52.0 | $57.9 | -10% |\ | Service Revenues | $44.7 | $49.7 | -10% |\ | Product Revenues | $7.3 | $8.2 | -11% | - Service sales decreased by $5.4 million, with $4.9 million related to the U.S. Coast Guard contract downgrade[14] - LEO services sales represented over 25% of airtime services sales for the six months ended June 30, 2025, compared to less than 10% for the same period in 2024[14] Revenue Analysis This subsection provides a detailed breakdown of service and product revenues for the six months ended June 30, 2025, identifying key factors influencing changes 6 Months 2025 Revenue Breakdown | Revenue Type | 6 Months 2025 (in millions) | 6 Months 2024 (in millions) | YoY Change | | :----------- | :-------------------------- | :-------------------------- | :--------- | | Service | $44.7 | $49.7 | -$5.0M |\ | Product | $7.3 | $8.2 | -$0.9M | - Product sales decline was primarily due to a $0.7 million decrease in TracVision product sales, a $0.4 million decrease in Starlink product sales, and a $0.3 million decrease in accessory and service parts product sales[15] - Partially offset by a $0.3 million increase in OneWeb product sales and a $0.2 million increase in VSAT Broadband product sales[15] Operating Expenses This subsection details the operating expenses for the six months ended June 30, 2025, highlighting a substantial reduction primarily from lower personnel costs 6 Months 2025 Operating Expenses | Metric | 6 Months 2025 (in millions) | 6 Months 2024 (in millions) | YoY Change | | :---------------------- | :-------------------------- | :-------------------------- | :--------- |\ | Operating Expenses | $19.2 | $25.5 | -$6.3M |\ | Salaries, benefits, taxes | N/A | N/A | -$5.6M | - The decrease in operating expenses was primarily due to a $5.6 million decrease in salaries, benefits, and taxes, after accounting for $2.4 million in workforce reduction costs incurred in the prior year period[16] Non-GAAP Financial Measures Explanation KVH Industries provides non-GAAP financial measures, such as adjusted EBITDA, to supplement GAAP financial statements, with management using these measures internally for operational performance assessment, financial decision-making, and comparison to competitors, excluding highly variable or difficult-to-predict items like interest income, taxes, depreciation, amortization, stock-based compensation, gains on asset sales, and employee termination costs, among others, to offer a clearer view of core operations - Non-GAAP financial measures are used internally by management to analyze financial results, assess operational performance, and facilitate financial and operational decision-making[19] - Non-GAAP adjusted EBITDA excludes items such as interest income, income tax expense, depreciation, amortization, stock-based compensation, gains on sales of real estate, and employee termination costs[20] - Investors are encouraged to review consolidated financial statements and publicly filed reports in their entirety, as non-GAAP measures may be calculated differently by other companies[22] Detailed Financial Statements This section presents the condensed consolidated statements of operations and balance sheets, along with a reconciliation of GAAP to non-GAAP adjusted EBITDA, providing a comprehensive view of the company's financial position and performance Condensed Consolidated Statements of Operations The Condensed Consolidated Statements of Operations show a net income of $0.9 million for Q2 2025, a significant improvement from a net loss of $2.4 million in Q2 2024, and for the six months ended June 30, 2025, the company reported a net loss of $0.8 million, narrower than the $5.5 million loss in the prior year period, largely attributed to reduced operating expenses and a gain from other income, net Condensed Consolidated Statements of Operations (in thousands) | Metric (in thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net sales | $26,623 | $28,673 | $52,037 | $57,940 |\ | Loss from operations | ($370) | ($2,889) | ($2,613) | ($6,687) |\ | Net income (loss) | $930 | ($2,376) | ($780) | ($5,539) |\ | Net income (loss) per common share (Basic) | $0.05 | ($0.12) | ($0.04) | ($0.29) | - Total costs and expenses decreased to $26.99 million in Q2 2025 from $31.56 million in Q2 2024, contributing to the improved operating loss[27] - Other income (expense), net, showed a positive $0.83 million in Q2 2025 compared to a negative $0.37 million in Q2 2024[27] Condensed Consolidated Balance Sheets The Condensed Consolidated Balance Sheets show a slight decrease in total assets from $155.08 million at December 31, 2024, to $152.04 million at June 30, 2025, with cash and cash equivalents increasing, while inventories and current assets held for sale decreased, and total current liabilities also saw a reduction, contributing to a stable stockholders' equity Condensed Consolidated Balance Sheets (in thousands) | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Cash and cash equivalents | $55,931 | $50,572 |\ | Accounts receivable, net | $25,350 | $21,624 |\ | Inventories, net | $20,258 | $22,953 |\ | Total current assets | $122,999 | $122,575 |\ | Total assets | $152,041 | $155,081 |\ | Total current liabilities | $13,092 | $15,872 |\ | Stockholders' equity | $138,384 | $138,625 | - Cash and cash equivalents increased by $5.36 million from December 31, 2024, to June 30, 2025[30] - Current assets held for sale decreased from $11.41 million to $7.83 million, reflecting the sale of assets[30] Reconciliation of GAAP to Non-GAAP Adjusted EBITDA The reconciliation shows that Non-GAAP Adjusted EBITDA for Q2 2025 was $2.66 million, slightly up from $2.64 million in Q2 2024, while for the six-month period, Adjusted EBITDA decreased to $3.67 million from $4.61 million, with key adjustments including adding back depreciation and amortization, stock-based compensation, and employee termination costs, while subtracting the gain on sale of fixed assets Reconciliation of GAAP to Non-GAAP Adjusted EBITDA (in thousands) | Metric (in thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) - GAAP | $930 | ($2,376) | ($780) | ($5,539) |\ | Non-GAAP EBITDA | $3,062 | $483 | $3,698 | ($266) |\ | Non-GAAP adjusted EBITDA | $2,658 | $2,636 | $3,665 | $4,607 | - Adjustments for Q2 2025 included adding back $2.61 million for depreciation and amortization, $0.43 million for stock-based compensation, and $0.03 million for employee termination costs, while subtracting a $1.33 million gain on sale of fixed assets[32] - Employee termination and other variable costs significantly decreased from $1.18 million in Q2 2024 to $0.03 million in Q2 2025[32] Company Information and Outlook This section provides information on recent company announcements, an overview of KVH Industries, and a discussion of forward-looking statements and associated risks Other Recent Announcement KVH Industries recently launched the CommBox Edge Secure Suite in May 2025, enhancing its offerings with advanced cybersecurity threat detection and response capabilities - On May 7, 2025, KVH launched CommBox Edge Secure Suite for Advanced Cybersecurity Threat Detection & Response[17] About KVH Industries, Inc. KVH Industries, Inc., founded in 1982 and based in Middletown, RI, is a global leader in maritime and mobile connectivity, providing solutions for commercial maritime, leisure marine, military/government, and land mobile applications through its KVH ONE network and product lines like TracNet, TracPhone, and TracVision, along with services such as AgilePlans Connectivity as a Service (CaaS) and KVH Link - KVH Industries, Inc. is a global leader in maritime and mobile connectivity delivered via the KVH ONE network[23] - Provides connectivity solutions for commercial maritime, leisure marine, military/government, and land mobile applications[23] - Key product lines include TracNet, TracPhone, and TracVision, with services like KVH ONE OpenNet Program, AgilePlans CaaS, and KVH Link[23] Forward-Looking Statements This section outlines various risks and uncertainties that could cause actual results to differ materially from forward-looking statements, including increasing competition, particularly from lower-cost and LEO satellite providers, the impact of reduced revenue from the U.S. Coast Guard contract, potential slowdowns in Starlink terminal sales, and challenges related to new product offerings and market consolidation, alongside other risks involving supply chain disruptions, inflation, geopolitical tensions, and the ability to retain employees and manage new business strategies - Forward-looking statements involve risks and uncertainties, including projected financial results, anticipated benefits of restructuring, and investment plans[24] - Factors causing differences in actual results include increasing competition from lower-cost providers and LEO satellite systems, reduced demand for geosynchronous satellite services, and the impact of lower revenue from the U.S. Coast Guard[24] - Other risks include potential slowdowns in Starlink sales, hardware/software competition for CommBox, unanticipated costs from manufacturing wind-down, increased customer reliance on third-party hardware, and the uncertain impact of industry consolidation, supply chain disruptions, inflation, and geopolitical events[24] Supplemental Information This section provides details on the conference call for Q2 2025 results and lists the company's trademarks Conference Call Details KVH Industries held a conference call on August 7, 2025, at 9:00 a.m. ET to discuss the Q2 2025 financial results, with the webcast and an audio archive accessible via the company's investor relations website, and questions submittable via email - Conference call held on August 7, 2025, at 9:00 a.m. ET to discuss Q2 2025 results[3][18] - Accessible at investors.kvh.com, with a replay available on the company's website[3][18] - Listeners could submit questions to ir@kvh.com[18] Trademarks KVH Industries, Inc. has registered or applied to register several trademarks globally, including KVH, KVH ONE, TracPhone, TracVision, AgilePlans, CommBox, and TracNet, while acknowledging other trademarks belong to their respective companies - KVH Industries, Inc. has registered or applied to register trademarks such as KVH, KVH ONE, TracPhone, TracVision, AgilePlans, CommBox, and TracNet[25] - Other trademarks mentioned in the report are the property of their respective companies[25]