KVH Reports Results for First Quarter
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MIDDLETOWN, R.I., April 23, 2009: KVH Industries, Inc., today reported financial results for the first quarter ended March 31, 2009. Revenue for the first quarter of 2009 was $18.3 million, down 21% from the quarter ended March 31, 2008. Net loss for the period was $2.6 million, or $0.18 per share. During the same period last year the company reported net income of $1.6 million or $0.11 per share.
"We just completed a difficult quarter in an extremely challenging economic environment that put significant pressure on sales of our satellite products into the leisure land and marine markets. However, we believe the first quarter offered evidence that our strategic growth drivers are gaining ground and establishing a foundation for long-term success," explained Martin Kits van Heyningen, KVH's chief executive officer.
"Recurring airtime revenues for satellite communications and broadband Internet increased as we expanded our reach into the commercial maritime market and continued the rollout of our planned global mini-VSAT Broadband network. We made excellent progress on our aeronautical satellite TV initiative, and demand for our fiber optic gyros (FOGs) grew for both military and commercial applications. Together, these elements of our business plan represent diverse revenue streams that are helping us weather the recession and offset some of the weakness in our leisure markets."
In the first quarter of 2009, mobile communications revenue from products and services was $11.0 million, down 39% on a year-over-year basis. Mr. Kits van Heyningen commented, "The deteriorating economic conditions and their impact on first quarter sales of boats, cars and recreational vehicles significantly affected the sales of our mobile satellite television products to the leisure markets. The corresponding reduction in TracVision(R) product sales for new leisure vessels and vehicles accounted for the majority of the decline in our quarterly revenues.
"During the first quarter, we did see continued strength in sales of our TracPhone(R) V7 satellite communications systems and the mini-VSAT Broadband(sm) service to commercial maritime operators. We also achieved several notable milestones that further increased the appeal of our satellite communications system. First, customers began to take advantage of our northern Pacific coverage area that went live late last year, enabling us to support vessels making the transit from Asia to the west coast of the United States as well as those operating in the Alaskan fishing grounds. We also activated the mini-VSAT Broadband service in the Persian Gulf. We are now focused on extending coverage further in the coming months to support mini-VSAT Broadband service in southeast Asian and Indian Ocean waters."
KVH's defense-related guidance and stabilization revenue from KVH's fiber optic gyro solutions, TACNAV(R) military navigation systems, and related services was approximately $7.2 million in the first quarter of 2009, up 43% on a year-over-year basis. "In addition to solid tactical navigation sales that were about equal to last year, we achieved our second consecutive record quarter for fiber optic gyro sales thanks in large part to our participation in a variety of remote weapon station programs. We view the remote weapon station opportunity as a primary strategic initiative and we believe that the long-term prospects are very positive. We received a new $2.9 million order for FOGs two weeks ago to support remote weapons and the recently submitted U.S. government supplemental defense spending bill includes an appropriation for 1,215 additional remote weapon stations, which could result in significant new sales opportunities for us," concluded Mr. Kits van Heyningen.
Commenting on the company's financial results, Patrick Spratt, KVH's chief financial officer, said, "While we had anticipated a modest loss during the first quarter, the pressure on sales to the leisure markets was much more pronounced than expected, resulting in a larger-than-projected revenue shortfall and a significant impact on gross margins driven by the lower volume, selected price discounting, and increases to excess inventory reserves. Cash declined sequentially from the fourth quarter in part due to the payoff of our original mortgage on our Rhode Island headquarters in the first quarter. A new $4 million mortgage was completed early in the second quarter. Our balance sheet remains solid and we continue to invest in new products and the necessary infrastructure to support the rollout of the mini-VSAT Broadband global network.
"Our original guidance for the year was contingent on general economic conditions not getting materially worse than at that point in time. However, economic conditions did get materially worse. Consumer demand and new vessel and vehicle production by OEMs were very weak and are expected to remain so. We expect sequential increases in sales for our mini-VSAT Broadband offering and for our fiber optic gyroscopes. Given these assumptions, we believe that the second quarter top and bottom line results should show improvement compared to the first quarter but in this environment, any prediction is uncertain. Although we remain very optimistic with respect to our strategic progress, we do not feel it would be prudent to provide additional guidance for the full year until we see clear evidence of economic stabilization."
Recent Operational Highlights:
-- On April 8, 2009, KVH announced that it had received $1.3 million in
new orders for its tactical navigation systems for international
customers.
-- On April 7, 2009, KVH received $3.8 million in new orders for fiber
optic gyros. The orders included $2.9 million for KVH's DSP-3100 FOGs
from a major remote weapons station manufacturer and a $0.9 million
order for KVH's CNS-5000 continuous navigation system for use in
commercial applications.
-- On April 7, 2009, KVH disclosed that its TracPhone V7 satellite
communications system and mini-VSAT Broadband network were in use
aboard U.S. military and government platforms operating in the Persian
Gulf. This initial deployment is expected to generate roughly $1
million in combined hardware and airtime sales in the first year.
-- On March 3, 2009, KVH's Inmarsat FleetBroadband-compatible TracPhone
systems began to support global voice and Internet access following
the expansion of the Inmarsat coverage area to include the Pacific
Ocean.
-- On February 17, 2009, KVH and ViaSat announced that the mini-VSAT
Broadband service had been successfully expanded to include the
Persian Gulf.
KVH is webcasting its first quarter conference call live at 10:30 a.m. Eastern time today through the company's website. The conference call can be accessed via the company's website at KVH 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.
