KVH Q4 2009 Results
KVH Industries, Inc., (NASDAQ:KVHI) reported financial results for the fourth quarter ended December 31, 2009. Revenue for the fourth quarter of 2009 was $26.3 million, up 24% from the quarter ended December 31, 2008. Net income for the period was $1.8 million, or $0.13 per diluted share. During the same period last year the company reported net income of $0.3 million or $0.02 per diluted share.
For the year ended December 31, 2009, revenue was $89.1 million, up 8% compared to $82.4 million for the year ended December 31, 2008. KVH reported a net loss of $0.1 million or $0.01 per share for 2009. During the same period last year, the company reported net income of $3.1 million or $0.21 per diluted share.
"We are very pleased with our strong finish to what has been a challenging year for most companies. Our market and product diversity enabled us to grow the top line for the company in 2009 and we believe we have positioned the company appropriately to be successful as the economy improves," said Martin Kits van Heyningen, KVH's chief executive officer. "I believe that our strategic initiatives, including the rollout of our global maritime broadband network and the expansion of our fiber optic gyro (FOG) business, proved themselves over the course of the year, and resulted in four consecutive quarters of record FOG sales and the highest overall quarterly revenue in the company's history. These initiatives are now major contributors to our growth and I am confident that they will help KVH thrive in the coming year."
KVH's defense-related guidance and stabilization revenue from the company's fiber optic gyro solutions, TACNAV military navigation systems, and related services was approximately $12.3 million in the fourth quarter of 2009, up 21% on a year-over-year basis. "Thanks to a 104% increase in sales, our fiber optic gyro business was the primary contributor to the fourth quarter's strong year-over-year growth compared to the same period last year. Our fourth quarter fiber optic gyro sales actually exceeded our total FOG sales for all of 2008. We also continued to win new business, including a $6.4 million order from Raytheon (RTN1.SG) for our TG-6000 inertial measurement unit as well as a new $10.2 million order for FOGs to be used in remote weapon stations," said Mr. Kits van Heyningen.
In the fourth quarter of 2009, mobile communications revenue from marine, land, and aeronautical products and services was $14.0 million, up 26% on a year-over-year basis. Mr. Kits van Heyningen commented, "The economic challenges remain in our mobile satellite communications business, especially in our leisure satellite TV markets. However, our aeronautical satellite TV shipments and strong contributions from mini-VSAT Broadband airtime subscriptions offset the declines in other areas during the fourth quarter. It's worth noting that our VSAT business has developed to the point where recurring airtime service revenues exceed the quarterly level of product hardware sales. In fact, fourth quarter revenue from mini-VSAT airtime services grew more than $1.2 million compared to the same quarter in 2008. Other services, including Inmarsat airtime, non-recurring engineering, and repair services all declined on a year-over-year basis.
"During the fourth quarter, we also made significant progress in the rollout and acceptance of our satellite communications network, including preparations for the recent activation of the mini-VSAT Broadband service in Africa, the deployment of the TracPhone V7 on two classes of U.S. Coast Guard cutters, and the receipt of our permanent license authority from the Federal Communications Commission. When completed, the mini-VSAT Broadband network will circle the globe, providing the only seamless multi-megabit global network for ships and planes," concluded Mr. Kits van Heyningen.
Speaking about the company's financial results, Patrick Spratt, KVH's chief financial officer, said, "We are pleased with our performance in the fourth quarter and the year as a whole, especially in light of the economic challenges. We continue to enjoy the benefits of a diverse revenue model with an almost even split between mobile satellite and guidance and stabilization sales. The strong sales of the relatively higher margin guidance and stabilization products helped us meet our target on the top line while they, along with some tax credits, contributed to our better-than-anticipated bottom line results. The balance sheet remained strong and we were able to maintain our strong cash, cash equivalents, and marketable securities position while continuing the steady pace of investments for our strategic growth initiatives.
"While we do have slightly better visibility in some areas and industry observers see some scattered signs of recovery in the leisure markets, we are still cautious with regard to our expectations for 2010. In the first quarter, we expect revenues to grow by 40% or more compared to the first quarter last year, to roughly $26 million. Bottom line results are expected to be in the range of $0.03 to $0.07 per share, reflecting continued investments as we enter the final phase of building out the global VSAT network infrastructure.
"Given the continuing state of economic uncertainty, we do not think it would be prudent to provide specific full year financial guidance at this time. However, we do believe that we are positioned well to take advantage of any strengthening of the economy. We expect 2010 to be a year of strong top line growth and progressively improving bottom line performance within the context of normal leisure market seasonality. We believe that our fiber optic gyro sales should show solid year-over-year growth but we do not expect a repeat of the more than 200% year-over-year growth experienced in 2009. We expect significant benefit in on-going sales and margin expansion following the anticipated completion of the mini-VSAT Broadband infrastructure in the second quarter. By the second half of the year we expect to be in a position to more fully leverage the mini-VSAT infrastructure on a global scale. One challenge that we will face is an unusual shipment schedule to LiveTV for aeronautical antennas. To support LiveTV's planned realignment of its inventory with its installation schedule, we will ship systems to LiveTV during the first half of 2010, and then resume antenna shipments in the first quarter of 2011."
Recent Operational Highlights:
In February 2010, KVH announced plans to open a new office in Singapore to support the sales opportunities in the Pacific-Asia region and the overall commercial market and also introduced a new dual-axis variant of its DSP-1500 fiber optic gyro, a small precision FOG.
On January 19, 2010, KVH announced the activation of the mini-VSAT Broadband service in Africa.
During the fourth quarter, KVH announced that the U.S. Federal Communications Commission granted permanent "Earth Station onboard - Vessel" or ESV license authority for KVH's mini-VSAT Broadband satellite communications service and that the U.S. Coast Guard was deploying the TracPhone V7 and mini-VSAT Broadband service on its 110-ft and 225-ft cutters.
During the fourth quarter, KVH received multiple FOG product orders, including a $6.4 million order for its TG-6000 inertial measurement units and a $10.2 million order for FOG to use in remote weapon stations.
On October 29, 2009, KVH unveiled its new TracVision HD7, the first compact marine satellite TV antenna capable of tracking three satellites simultaneously and offering access to DIRECTV (DTV) HD service via two Ka-band satellites and one Ku-band satellite.