KVH Industries, Inc. (KVHI)
Q4 2012 Earnings Call
February 12, 2013 10:30 AM ET
Peter Rendall - CFO
Martin Kits van Heyningen - President and CEO
Rich Valera - Needham and Company
Jim Mcllree - Dominick & Dominick
Chris Quilty - Raymond James
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Good morning. I am Peter Rendall and with me is Martin Kits Van Heyningen, Chief Executive Officer of KVH Industries. This call will address the fourth quarter earnings release that we issued earlier today. Copies of the release are available on our website and also from our Investor Relations department.
This call is being simulcast on the Internet, and will be archived on our website for future reference. If you are listening via the web, feel free to submit questions at email@example.com and we will answer them following this call.
This conference call will contain certain forward-looking statements that involve risk and uncertainty. For example, statements regarding financial and product development goals are forward-looking. The Company’s future results may differ materially from the projections described in today’s discussion.
Factors that might cause these differences include, but are not limited to, those mentioned in today’s call and risk factors described in our quarterly report on Form 10-Q filed with the SEC on November 8, 2012. The Company’s SEC filings are directly available from us, from the SEC, or from the Investor Information section of our website.
Now, I will turn it over to Martin for today’s discussion of results. Martin?
Martin Kits van Heyningen
Thank you, Peter, and thank you for joining us today. So overall 2012 was a very good year for KVH. We just reported our second record revenue quarter in a row. It was an especially strong year for our mini-VSAT broadband business which continued to grow at a solid rate, driven by the investments we’ve made to expand our global coverage footprint and launch new innovative products.
In our Satellite TV business, we saw encouraging science of a recovery in the leisure market as our new global TracVision HD11 helped us win new high-end yacht customers. In our guidance and stabilization business, we received the largest order in the Company’s history for our TACNAV tactical navigation system and won the contract to be the fiber optic gyro supplier for the U.S. Army’s new CROWS remote weapon station.
We also just introduced the DSP-1750 IMU, which is a breakthrough inertial measurement unit. It has been very well received by potential customers. Increasing our revenues in the fourth quarter by 24% year-over-year to $39.5 million, we surpassed our previous revenue record from the third quarter. We recorded earnings per share of $0.18, that's up from $0.11 a year earlier. For the year, our revenues were just over $137 million, up 22% compared to our 2011 revenues of $112.5 million. Net income for the year was $0.24 per share, compared to $0.06 per share for the full year last year.
Peter will cover all the numbers in more detail, but let's take a look at some of our key business areas, starting off with our satellite business. In the fourth quarter, our satellite revenues were $21.5 million, that's up 23% year-over-year, with our mini-VSAT revenue up 33% from the fourth quarter of 2011.
For the year, our satellite communication revenues overall grew 26% to $88.6 million, with our mini-VSAT revenues growing by 40%. This included growth of 59% in air time as new subscribers continue to generate a larger and more predictable revenue stream.
Our Satellite TV business rebounded with a 31% increase in revenues for the fourth quarter, which contributed to a 16% increase in revenues for the year, thanks in part to the success of our new HD11. This might be the first sign of a general recovery in the leisure markets, but it's still too soon to bank on that.
We recently announced that we had sold our 3,000th TracPhone mini-VSAT product, which further solidified KVH as the maritime market share leader. Last year, the three leading research firms in our industry named KVH as having the leading market share in the Maritime Ku-Band VSAT space.
To further add to our credibility, we now have very good reference customers, including commercial market leaders like V.Ships in the UK, Vroon in Holland and NYK in Japan, as well as premiere government customers like the U.S. Coast Guard and the U.S. Navy combined Maritime force operating in the Arabian Sea.
Our mini-VSAT Broadband service delivered over 200 terabytes of data in 2012, and over 15 million minutes of VoIP calls and had a network up time exceeding 99.5%, which is among the best in the industry. The current Maritime VSAT install base is estimated between 10,000 and 12,000 users.
We estimate there are over 250,000 vessels carrying 1.4 million sea farers in the shipping, commercial fishing, oil and gas, government and yachting markets that are prospective customers for broadband service. The research firm NSR projects the maritime market for broadband will grow by 90,000 subscribers, net over $1 billion in new annual service revenue in the next 10 years and we believe that we're well positioned to capture a significant portion of this market.