GlobeNewswire Inc | Jul 30, 2021 06:30AM EDT

July 30, 2021

MIDDLETOWN, R.I., July 30, 2021 (GLOBE NEWSWIRE) -- KVH Industries, Inc., (Nasdaq: KVHI), reported financial results for the quarter ended June30, 2021 today. The company will hold a conference call to discuss these results at 9:00 a.m. ET today, which can be accessed at investors.kvh.com. Following the call, a replay of the webcast will be available through the companys website.

Second Quarter 2021 Highlights

-- Total revenues increased by 17% in the second quarter of 2021 to $43.4 million from $36.9 million in the second quarter of 2020. -- Revenues for AgilePlans, our Connectivity as a Service program for the commercial maritime sector, were up more than 54% compared to the second quarter of 2020. AgilePlans now represent 44% of our mini-VSAT Broadband subscriber base. -- Our mini-VSAT Broadband airtime revenue increased $2.9million, to $23.1million, or 14%, in the second quarter of 2021 compared to the second quarter of 2020, driven primarily by a 13% increase in active subscribers. Unit shipments were up 87% for another record quarter. -- Fiber optic gyro (FOG) product and OEM product sales increased$1.5million, or 23%, in the second quarter of 2021 compared to the second quarter of 2020, and TACNAV product sales increased $0.5million in the second quarter of 2021 compared to the second quarter of 2020. -- Net loss in the second quarter of 2021 was $5.7million, or $0.31 per share, compared to a net loss of $3.6million, or $0.20 per share, in the second quarter of 2020. -- Non-GAAP net loss in the second quarter of 2021 was $0.8 million, or $0.05 per share, compared to a non-GAAP net loss of $1.6 million, or $0.09 per share, in the second quarter of 2020. -- Non-GAAP adjusted EBITDA in the second quarter of 2021 was $1.5million, compared to break even in the second quarter of 2020.

Commenting on the quarter, Martin Kits van Heyningen, KVHs chief executive officer, said, KVH recorded another strong quarter, reflecting our success in implementing our strategic priorities. We achieved record mini-VSAT Broadband shipments for the third consecutive quarter, driven largely by new AgilePlans subscriptions. While AgilePlans shipments do not immediately show up in revenue, they drive future top-line growth and are an important indicator of the robust health of our mobile connectivity business. Airtime revenue, a function of prior shipments, grew at double-digit rates over last year, and gross margin remained stable as we added network capacity to our expanding mini-VSAT Broadband HTS network. Our TracPhone V30, an ultra-compact VSAT antenna introduced at the end of March 2021, made up 26% of the total mini-VSAT Broadband shipments for the second quarter. For the mobile connectivity segment as a whole, revenue was up compared to a year ago. On the cost side, we continue to migrate VSAT customers onto our HTS network as we progress towards an exit of our legacy network by year-end. We are working hard to transition the remaining 26% of our airtime subscribers to our HTS network, which is important for maintaining the growth rate of our mini-VSAT Broadband service sales in 2022.

In the inertial navigation segment, product sales increased by more than 27%, and we made substantial progress in integrating the photonic integrated chip (PIC) across our product portfolio. With respect to our outlook for the full year, we maintain our view that our full year revenues will increase by mid to high single digits over 2020 revenue and adjusted EBITDA to grow at a faster rate than revenue for the full year.

The company operates in two segments, mobile connectivity and inertial navigation. In the second quarter of 2021, net sales for the mobile connectivity segment increased by $4.6 million compared to the second quarter of 2020. mini-VSAT Broadband airtime revenue increased by $2.9million and TracVision product sales increased by $0.8 million. In the second quarter of 2021, net sales for our inertial navigation segment increased by $1.9 million, or 24%, compared to the second quarter of 2020. Inertial navigation sales increased primarily due to a $1.5million increase in FOG and OEM product sales and a $0.5million increase in TACNAV product sales. These increases were offset in part by a $0.3 million decrease in contracted engineering revenue.

Financial Highlights(in millions, except per share data)

Three Months Ended Six Months Ended June 30, June 30, 2021 2020 2021 2020GAAP Results Revenue $ 43.4 $ 36.9 $ 85.7 $ 73.5 Net loss $ (5.7 ) $ (3.6 ) $ (9.7 ) $ (9.8 )Net loss per share $ (0.31 ) $ (0.20 ) $ (0.54 ) $ (0.56 ) Non-GAAP Results Net loss $ (0.8 ) $ (1.6 ) $ (1.8 ) $ (5.9 )Net loss per share $ (0.05 ) $ (0.09 ) $ (0.10 ) $ (0.34 )Adjusted EBITDA $ 1.5 $ 0.0 $ 2.6 $ (3.8 )

For more information regarding our non-GAAP financial measures, see the tables at the end of this release.

Second Quarter Financial Summary

Revenue was $43.4million for the second quarter of 2021, an increase of 17% compared to $36.9million in the second quarter of 2020.

Product revenues for the second quarter of 2021 were $17.3million, an increase of 24% compared to the prior year quarter due to a $2.0million increase in inertial navigation product sales and a $1.3 million increase in mobile connectivity product sales. Inertial navigation product sales increased primarily as a result of a $1.5million increase in FOG and OEM product sales and a $0.5million increase in TACNAV product sales. The increase in mobile connectivity product sales was primarily due to a $0.8 million increase in TracVision product sales. The increase in TracVision product sales was due to an increase in sales volume.

Service revenues for the second quarter of 2021 were $26.1million, an increase of $3.1million compared to the prior year quarter primarily due to a $3.2million increase in mobile connectivity service sales, partially offset by a $0.1million decrease in inertial navigation service sales. Mobile connectivity service sales increased primarily due to a $2.9million increase in our mini-VSAT Broadband service sales, which resulted in part from a 13% increase in active subscribers, primarily as a result of AgilePlans. Inertial navigation service sales decreased primarily due to lower contract engineering service revenue.

Our operating expenses increased $4.7 million to $21.1million for the second quarter of 2021 compared to $16.4million for the second quarter of 2020. This increase resulted primarily from an increase in professional fees, primarily relating to a stockholders nomination of a competing slate of directors at our annual meeting of stockholders, as well as an increase in salaries and employee benefits.

Six Months Ended June 30 Financial Summary

Revenue was $85.7million for the six months ended June 30, 2021, an increase of 17% compared to $73.5million for the six months ended June 30, 2020.

Product revenues for the six months ended June 30, 2021 were $35.7million, an increase of 32% compared to the six months ended June 30, 2020 primarily due to an increase of $7.0million in inertial navigation product sales and an increase in mobile connectivity product sales of $1.6million. The increase in inertial navigation product sales was primarily due to a $4.7 million increase in TACNAV product sales and a $2.4 million increase in FOG product sales. The increase in mobile connectivity product sales was due to a $1.6million increase in marine mobile connectivity product sales, which was primarily driven by a $0.9 million increase in TracVision product sales and a $0.6 million increase in mini-VSAT Broadband product sales.

Service revenues for the six months ended June 30, 2021 were $50.0million, an increase of 8% compared to the six months ended June 30, 2020 primarily due to an increase in mobile connectivity service sales of $4.5million, partially offset by a decrease of $1.0million in inertial navigation service sales. The increase in mobile connectivity service sales was primarily due to a $5.0million increase in our mini-VSAT Broadband service sales, which resulted in part from a 13% increase in active subscribers, primarily as a result of AgilePlans. Partially offsetting this increase was a $0.6million decrease in content service sales. The decrease in inertial navigation service sales was due to a decrease in our contract engineering service revenue.

Our operating expenses increased $4.6million to $40.4million in the six months ended June 30, 2021 compared to $35.8million in the six months ended June 30, 2020. This increase resulted primarily from the increase in professional fees described above, as well as an increase in salaries and employee benefits, partially offset by a decrease in warranty expense.

Other Recent Announcements

-- KVH Ships Record Number of VSAT Units in First Quarter 2021. -- V.Ships Norway Subscribes to KVH linkHUB Service Providing Quality Movie and TV Entertainment for Seafarers. -- KVH Elite Unlimited VSAT Streaming Service for Yachts Expands to Eastern North America. -- KVH Introduces TracPhone LTE-1 Global Cellular Marine Communications Solution for Offshore Internet Access. -- KVH Industries Shareholders Elect Both of Companys Director Nominees at 2021 Annual Meeting, Cielo Hernandez and Cathy-Ann Martine-Dolecki. -- Anglo-Eastern Chooses KVHs NEWSlink Special Edition Sports Package as Morale Booster for Their Crew. -- KVH Partners with StratumFive for KVH Watch Maritime IoT Solution. -- RIX Shipmanagement Selects KVH AgilePlans VSAT Connectivity to Improve Crew Welfare and Optimize Operations.

Please review the corresponding press releases for more details regarding these developments.

Conference Call Details

KVH Industries will host a conference call today at 9:00 a.m. ET through the companys website. The conference call can be accessed at investors.kvh.com and listeners are welcome to submit questions pertaining to the earnings release and conference call to ir@kvh.com. The audio archive will be available on the company website within three hours of the completion of the call.

Non-GAAP Financial Measures

This release provides non-GAAP financial information, which may include constant-currency revenue, non-GAAP net income (loss), non-GAAP diluted EPS, and non-GAAP adjusted EBITDA, as a supplement to our condensed consolidated financial statements, which are prepared in accordance with generally accepted accounting principles (GAAP). Management uses these non-GAAP financial measures internally in analyzing financial results to assess operational performance. Constant-currency revenue is calculated on the basis of local currency results, using foreign currency exchange rates applicable to the earlier comparative period, and management believes that presenting information on a constant-currency basis helps management and investors to isolate the impact of changes in those rates from other factors. The presentation of this financial information is not intended to be considered in isolation or as a substitute for the financial information prepared in accordance with GAAP. The non-GAAP financial measures used in this press release adjust for specified items that can be highly variable or difficult to predict. Management generally uses these non-GAAP financial measures to facilitate financial and operational decision-making, including evaluation of our historical operating results, comparison to competitors operating results, and determination of management incentive compensation. These non-GAAP financial measures reflect an additional way of viewing aspects of our operations that, when viewed with GAAP results and the reconciliations to corresponding GAAP financial measures, may provide a more complete understanding of factors and trends affecting our business.

Some limitations of non-GAAP net income (loss), non-GAAP diluted EPS, and non-GAAP adjusted EBITDA, include the following:

-- Non-GAAP net income (loss) and diluted EPS exclude, as applicable, amortization of intangibles, stock-based compensation expense, goodwill impairment charge, intangible asset impairment charge, transaction-related and other variable legal and advisory fees, variable inventory reserves, other variable costs, foreign exchange transaction gains and losses, the tax effect of the foregoing and certain discrete tax charges, including changes in our valuation allowance and other tax adjustments. -- Non-GAAP adjusted EBITDA represents net income (loss) before, as applicable, interest income, net, income taxes, depreciation, amortization, stock-based compensation expense, goodwill impairment charge, intangible asset impairment charge, transaction-related and other variable legal and advisory fees, variable inventory reserves, other variable costs and foreign exchange transaction gains and losses.

Other companies, including companies in KVHs industry, may calculate these non-GAAP financial measures differently or not at all, which will reduce their usefulness as a comparative measure.

Because non-GAAP financial measures exclude the effect of items that increase or decrease our reported results of operations, management strongly encourages investors to review our consolidated financial statements and publicly filed reports in their entirety. Reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures are included in the tables accompanying this release.

About KVH Industries, Inc.

KVH Industries, Inc., is a global leader in mobile connectivity and inertial navigation systems, with innovative technology designed to enable a mobile world. A market leader in maritime VSAT, KVH designs, manufactures, and provides connectivity and content services globally. KVH is also a premier manufacturer of high-performance sensors and integrated inertial systems for defense and commercial applications. Founded in 1982, the company is based in Middletown, RI, with research, development, and manufacturing operations in Middletown, RI, and Tinley Park, IL, and more than a dozen offices around the globe.

This press release contains forward-looking statements that involve risks and uncertainties. For example, forward-looking statements include statements regarding our financial goals for future periods, the success of our new initiatives, our investment plans, our migration of legacy customers to our HTS network, our development goals, our anticipated revenue and earnings, and the impact of our future initiatives on revenue, competitive positioning, profitability, and product orders. Actual results could differ materially from the results projected in or implied by the forward-looking statements made in this press release. Factors that might cause these differences include, but are not limited to: the adverse impact of the COVID-19 pandemic, as well as governmental, business and other responses thereto and any resulting economic slowdown, on our revenues, results of operations and financial condition, which could continue to be material (particularly for our media and other travel-related businesses); possible SBA determination that all or a portion of our PPP loan is not eligible for forgiveness; challenges or delays in the transition of customers from our legacy network to our HTS network, which could result in a material loss of revenue; the reluctance or refusal of remaining legacy network customers to migrate to our HTS network; unanticipated changes or disruptions in our markets; increased competition, including as a result of industry consolidation and from companies offering networks with greater communication security options; technological breakthroughs by competitors; changes in customer priorities or preferences; potential customer terminations; unanticipated liabilities; the potential that competitors will design around or invalidate our intellectual property rights; a history and expectation of continuing losses as we increase investments in various initiatives; continued fluctuations in quarterly results; the uncertain duration of the initial adverse impact on our overall revenues of our AgilePlans and KVH Watch, under which we recognize no revenue for product sales, either at the time of shipment or over the contract term; potential delays in the development of a market for our IoT services; the need to develop an ecosystem of applications for our new IoT services; higher costs arising from the HTS network; costs arising from the termination of our legacy network; the uncertain impact of federal budget deficits, Congressional deadlock and the change in administration; the uncertain impact of changes in trade policy, including actual and potential new or higher tariffs and trade barriers, as well as trade wars with other countries; unanticipated obstacles in our photonic chip and other product and service development, cost engineering and manufacturing efforts; delays in anticipated orders for our products and services, including significant orders for TACNAV products, or the potential failure of such orders to occur; adverse impacts of currency fluctuations; our ability to successfully commercialize our new initiatives without unanticipated additional expenses or delays; potential reduced sales to companies in or dependent upon the turbulent oil and gas industry; continued substantial fluctuations in military sales, including to foreign customers; the unpredictability of defense budget priorities as well as the order timing, purchasing schedules, and priorities for defense products, including possible order cancellations; the uncertain impact of potential budget cuts by government customers; the impact of extended economic weakness on the sale and use of marine vessels and recreational vehicles; the potential inability to increase or maintain our market share in the market for airtime services; the need to increase sales of the TracPhone V-HTS series products and related services to maintain and improve airtime gross margins; the need for, or delays in, qualification of products to customer or regulatory standards; potential declines or changes in customer demand, due to economic, weather-related, seasonal, and other factors, particularly with respect to the TracPhone V-HTS series, including with respect to new pricing models; increased price and service competition in the mobile connectivity market; exposure for potential intellectual property infringement; changes in tax and accounting requirements or assessments; and export restrictions, delays in procuring export licenses, and other international risks. These and other factors are discussed in more detail in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 3, 2021. Copies are available through our Investor Relations department and website, investors.kvh.com. We do not assume any obligation to update our forward-looking statements to reflect new information and developments.

KVH Industries, Inc., has used, registered, or applied to register its trademarks in the USA and other countries around the world, including but not limited to the following marks: KVH, TracVision, TracPhone, TACNAV, KVH Watch, mini-VSAT Broadband, and AgilePlans. Other trademarks are the property of their respective companies.

KVH INDUSTRIES, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(in thousands, except per share amounts, unaudited)

Three months ended June Six months ended 30, June 30, 2021 2020 2021 2020Sales: Product $ 17,269 $ 13,949 $ 35,701 $ 27,043 Service 26,094 22,977 49,954 46,451 Net sales 43,363 36,926 85,655 73,494 Costs and expenses: Costs of product sales 11,894 9,554 23,114 19,190 Costs of service sales 16,124 14,378 31,547 29,573 Research and 4,505 3,866 9,072 8,153 developmentSales, marketing and 7,937 6,795 15,483 15,495 supportGeneral and 8,705 5,769 15,848 12,167 administrative Total costs 49,165 40,362 95,064 84,578 and expenses Loss from (5,802 ) (3,436 ) (9,409 ) (11,084 )operationsInterest income 222 217 455 530 Interest expense 14 3 32 7 Other (expense) (1 ) (161 ) (790 ) 1,341 income, netLoss before income tax (5,595 ) (3,383 ) (9,776 ) (9,220 )expense (benefit)Income tax expense 78 169 (75 ) 546 (benefit)Net loss $ (5,673 ) $ (3,552 ) $ (9,701 ) $ (9,766 ) Net loss common share: Basic and diluted $ (0.31 ) $ (0.20 ) $ (0.54 ) $ (0.56 ) Weighted averagenumber of common shares outstanding:Basic and diluted 18,174 17,648 18,057 17,588

KVH INDUSTRIES, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETS(in thousands, unaudited)

June 30, December 31, 2021 2020ASSETS Cash, cash equivalents and marketable securities $ 34,368 $ 37,719 Accounts receivable, net 32,995 33,687 Inventories, net 22,300 24,674 Other current assets and contract assets 5,276 4,980 Total current assets 94,939 101,060 Property and equipment, net 59,102 56,273 Goodwill 6,622 6,592 Intangible assets, net 1,760 2,254 Right of use assets 4,492 6,893 Other non-current assets and contract assets 9,602 10,446 Non-current deferred income taxes 35 73 Total assets $ 176,552 $ 183,591 LIABILITIES AND STOCKHOLDERS? EQUITY Accounts payable and accrued expenses $ 29,024 $ 27,525 Contract liabilities 4,245 4,445 Current portion of long-term debt 6,927 4,992 Current operating lease liability 2,505 3,826 Total current liabilities 42,701 40,788 Other long-term liabilities 161 674 Long-term operating lease liability 2,114 3,204 Long-term contract liabilities 4,314 4,688 Non-current deferred tax liability 386 418 Long-term debt, excluding current portion ? 1,935 Stockholders? equity 126,876 131,884 Total liabilities and stockholders? equity $ 176,552 $ 183,591

KVH INDUSTRIES, INC. AND SUBSIDIARIESRECONCILIATION OF GAAP NET LOSS TO NON-GAAP NET LOSS(in thousands, except per share amounts, unaudited)

Three months ended Six months ended June 30, June 30, 2021 2020 2021 2020Net loss - GAAP $ (5,673 ) $ (3,552 ) $ (9,701 ) $ (9,766 )Amortization of 280 241 556 489 intangiblesStock-based 1,055 742 1,987 1,547 compensation expenseTransaction-relatedand other variable 2,720 58 3,585 201 legal and advisoryfeesForeign exchangetransaction (gain) (73 ) 28 284 (1,157 )lossTax effect on the (806 ) (211 ) (1,330 ) (224 )foregoingChange in valuationallowance and other 1,658 1,070 2,847 2,974 tax adjustments^ (a)Net loss - Non-GAAP $ (839 ) $ (1,624 ) $ (1,772 ) $ (5,936 ) Net loss per common share - Non-GAAPBasic and diluted $ (0.05 ) $ (0.09 ) $ (0.10 ) $ (0.34 ) Weighted averagenumber of common shares outstandingBasic and diluted 18,174 17,648 18,057 17,588

(a)Represents a change in the valuation allowance on current year United States net operating losses, research and development tax credits and uncertain tax position adjustments.

KVH INDUSTRIES, INC. AND SUBSIDIARIESRECONCILIATION OF GAAP NET LOSS TO NON-GAAPEBITDA AND NON-GAAP ADJUSTED EBITDA(in thousands, unaudited)

Three months ended Six months June 30, ended June 30, 2021 2020 2021 2020GAAP net loss $ (5,673 ) $ (3,552 ) $ (9,701 ) $ (9,766 )Income tax expense 78 169 (75 ) 546 (benefit)Interest income, net (208 ) (214 ) (423 ) (523 )Depreciation and 3,613 2,752 6,963 5,402 amortizationNon-GAAP EBITDA (2,190 ) (845 ) (3,236 ) (4,341 )Stock-based 1,055 742 1,987 1,547 compensation expenseTransaction-relatedand other variable 2,720 58 3,585 201 legal and advisoryfeesForeign exchangetransaction (gain) (73 ) 28 284 (1,157 )lossNon-GAAP adjusted $ 1,512 $ (17 ) $ 2,620 $ (3,750 )EBITDA

KVH INDUSTRIES, INC. AND SUBSIDIARIESREVENUE AND OPERATING INCOME (LOSS) BY SEGMENT(in millions except for percentages, unaudited)

Three months ended Six monthsSegment Net Sales June 30, ended June 30, 2021 2020 2021 2020Mobile connectivity sales Product $ 8.0 $ 6.7 $ 14.9 $ 13.3 Service 25.7 22.5 49.3 44.8 Net sales $ 33.7 $ 29.2 $ 64.2 $ 58.1 Inertial navigation sales Product $ 9.2 $ 7.2 $ 20.8 $ 13.7 Service 0.4 0.5 0.6 1.7 Net sales $ 9.6 $ 7.7 $ 21.4 $ 15.4

Operating Income (Loss) Three months ended Six months ended June 30, June 30, 2021 2020 2021 2020Mobile connectivity $ 0.6 $ 0.6 $ 0.2 $ (1.7 )Inertial navigation 0.6 0.2 2.7 (0.7 ) 1.2 0.8 2.9 (2.4 )Unallocated (7.0 ) (4.2 ) (12.3 ) (8.7 )Loss from operations $ (5.8 ) $ (3.4 ) $ (9.4 ) $ (11.1 )

Three months Six months ended ended June 30, June 30, 2021 2020 2021 2020 (percentage of total (percentage of total revenue) revenue)Mobile Connectivity Revenue ComponentsProduct sales 19 % 18 % 17 % 18 %mini-VSAT Broadband airtime 53 % 55 % 52 % 54 %Content service 4 % 4 % 4 % 5 %Inertial Navigation Revenue ComponentsFOG-based products 17 % 16 % 16 % 15 %Tactical navigation products 3 % 3 % 8 % 3 %

KVH Industries, Inc. FTI ConsultingContact: Roger Kuebel Christine Mohrmann 401-608-8945 212-850-5600 rkuebel@kvh.com