KVH Industries (KVHI) Q1 2025 Earnings Call May 07, 2025 09:00 AM ET Company Participants Anthony Pike - CFOBrent Bruun - President & CEOChris Quilty - Co-CEO & President Operator Good day, and thank you for standing by. Welcome to the Q1 '20 '20 '5 KVH Industries, Inc. Earnings Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. To ask a question during the session, you will need to press 11 on your telephone. You wi ...

Financial Data and Key Metrics Changes - Revenue for the first quarter declined year over year to $25.4 million, primarily due to lower revenue from VSAT airtime service, including the loss of U.S. Coast Guard revenue [6][12] - Airtime gross margin increased to 31.5% from 28.2% in the prior quarter, with adjusted EBITDA for the quarter at $1 million [14][17] - Ending cash balance was $48.6 million, down approximately $2 million from the beginning of the quarter [17] Business Line Data and Key Metrics Changes - Subscriber base increased by 5%, reaching over 7,400 subscribing vessels, recovering from the decline experienced in 2023 [8][15] - Quarterly shipments of connectivity terminals exceeded 1,300 units, marking the fifth consecutive record quarter, with significant increases in Starlink terminals [7][10] - Product gross profit was breakeven compared to a positive $300,000 in the prior quarter, with expectations for product margins to remain about breakeven [16] Market Data and Key Metrics Changes - Starlink revenue continued to increase as a percentage of total revenue, driven by strong demand in commercial and leisure markets [6][8] - The company is seeing significant interest in OneWeb terminals, especially outside the U.S. [11][12] Company Strategy and Development Direction - The company is transitioning from a GEO-focused business model to a primarily LEO-based mobile connectivity market, with ongoing double-digit annual growth in subscribers [18] - The launch of the Commvox Edge Secure Suite aims to enhance cybersecurity for vessel communications [10][11] - The company is managing GEO bandwidth commitments carefully, anticipating continued pressure on GEO margins while focusing on strong LEO margins [18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's strategic initiatives, highlighting record-breaking subscriber growth and increased product shipments [13][14] - The company is optimistic about generating positive cash flow moving forward, despite challenges in the GEO segment [18] Other Important Information - The company expects to close the sale of its headquarters before the end of the quarter and anticipates the factory sale to close in Q3 [12] - Share buybacks were initiated, with over 30,000 shares purchased at a cost of approximately $163,000 [13] Q&A Session Summary Question: LEO margins breakdown - The majority of the margin comes from actual airtime, with strong underlying LEO bandwidth margins [20][21] Question: Optimization of plans for customers - Current plans are well optimized, but changes in pricing and terminal access charges are expected later this year [22][23] Question: Potential saturation in the maritime market - The market is much larger than before, and saturation is not anticipated in the foreseeable future [25][26] Question: Expansion beyond maritime applications - The existing sales team is handling land-based applications, with no new hires but efforts to identify service providers for land opportunities [27][28] Question: Coast Guard contract revenue roll-off - Negative variance from the Coast Guard contract is expected through the third quarter, with minimal revenue in the fourth quarter [29][32] Question: Future buyback efforts - The company is continuing to buy back shares, with larger numbers expected to be disclosed in the next quarter [33]