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KVH Industries(KVHI) - 2021 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total revenues increased 16% in Q1 2021 to $42.3 million from $36.6 million in Q1 2020 [7] - Non-GAAP adjusted EBITDA in Q1 was $1.1 million compared to a loss of $3.7 million in Q1 2020 [7][34] - Consolidated gross profit margin improved to 37% from 32.1% in Q1 2020 [26] - Net loss for Q1 was $4.0 million compared to a net loss of $6.2 million in the same quarter last year [33] Business Line Data and Key Metrics Changes - Revenue from the inertial navigation segment increased by $4.1 million year over year with gross margin rising about 14.5 percentage points to 44.1% [26] - Revenue from the mobile connectivity segment increased by $1.6 million with a gross margin of 34.2%, up around 1.5 percentage points [26] - AgilePlans revenues increased by 48% compared to Q1 2020, representing 41% of the VSAT subscriber base [10] Market Data and Key Metrics Changes - Airtime revenue grew to $21.4 million, approximately 11% over the first quarter of last year, driven by a 7% increase in subscribers [30] - Revenue from the HTS network airtime was up 56% year over year [12] - The media and NEWSlink business continued to be negatively affected by the shutdown of cruise ship operations worldwide [10] Company Strategy and Development Direction - The company is focusing on migrating customers from the legacy network to the new global HTS network, expecting to shed roughly $12 million in annual network operating expenses [12] - The introduction of the TracPhone V30 is aimed at strengthening the company's position in the commercial market for fishing vessels and offshore workboats [15] - The company is expanding its IoT tech connectivity initiatives through KVH Watch, anticipating several new announcements in the coming weeks [16] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the demand for VSAT products and the overall market recovery, particularly in the second half of the year [41] - The company is in a strong position with a solid balance sheet and is evaluating opportunities in a consolidating industry [43] - Management expects to see a nice bump in margins next year as subscriber growth continues [50] Other Important Information - Total backlog at the end of Q1 was $17 million, with approximately $13.8 million scheduled to be delivered this year [35] - Capital expenditures for 2021 are expected to be in the range of $15 million to $20 million, primarily driven by AgilePlans shipments [36] Q&A Session Summary Question: What have you learned in the first few months on the job? - The new CFO expressed confidence in the company's products and markets, noting a strong team and good prospects for growth [39] Question: How should we think about the visibility of customer returns activity by early Q3? - Management indicated that demand for VSAT products is increasing and expects a recovery in the cruise business by Q3 [41] Question: How is the company positioned regarding M&A and joint ventures in the industry? - Management acknowledged industry consolidation and emphasized the company's organic growth strategy, which has allowed it to gain market share without debt [43] Question: Can you clarify the network cost savings? - Management confirmed that the total network costs to be shed are around $12 million, with net savings expected to be closer to $6 million if subscriber numbers remain stable [48] Question: What is the outlook for TACNAV orders and DOD programs? - Management reported that about 70% of the annual forecast for TACNAV is already in backlog, with various smaller programs being pursued [67]