MIDDLETOWN – KVH Industries Inc. (Nasdaq: KVHI) posted a 22.37 percent increase in annual profit, despite a sharp fourth-quarter decline, citing “a very difficult environment” that slowed sales of its marine and land-based mobile media systems.
“While the economic situation is a serious challenge for all companies, our innovative strategic plan and diversified business model are generating revenue from satellite communications on land, sea, and air, as well as growth from our defense and commercial businesses,” CEO Martin Kits van Heyningen said in the report today. “I am confident in our ability to continue to grow the company in spite of the current recession while strengthening our strategic position for the long term.”
The company’s full-year profit rose $559,000 year over year to $3.06 million – after falling 32 percent in 2007 to $2.50 million – on revenue that edged up 1.84 percent to $82.40 million. Earnings per diluted common share rose to 21 cents from 17 cents in 2007.
Patrick Spratt, the company’s chief financial officer, cited “our effective operational and cost-management controls.”
“At the start of the year, we identified two key strategic growth opportunities: the expansion of our mini-VSAT Broadband airtime service and the use of our fiber-optic gyros (FOGs) in remote weapon stations. While our short-term financial expectations evolved over the course of the year in response to the recession, we maintained our focus on these strategic initiatives,” Kits van Heyningen said. “Our investment is paying off, as both played critical roles in helping us strengthen the top and bottom line in 2008, as well as positioning us for the future.”
For the three months ended Dec. 31, KVH posted a profit of $306,000, a 68.19 percent decline from the 2007 fourth quarter’s $962,000, on revenue that rose 7.67 percent to $21.22 million. Fourth-quarter earnings per diluted common share shrank to 2 cents from the year-ago period’s 6 cents per share.
Fourth-quarter revenue from defense-related guidance and stabilization products and services– including KVH’s precision fiber-optic gyro systems, TacNav military navigation systems and related services – rose 79 percent year over year to $10.1 million, the company said.
Mobile communications sales fell 21 percent compared with the final quarter of 2007 to about $11 million in the quarter just ended. “Our land mobile business – especially sales to the recreational vehicle (RV) market – remains a challenge, as fourth quarter revenue from products and services declined 59 percent versus the same period last year,” Kits van Heyningen said.
“Within our marine business, the market weakness we saw at the end of the third quarter of 2008 in the leisure market (READ MORE) carried over into the fourth quarter and worsened, affecting our sales both in Europe and domestically.” But, he added, “sales of our TracPhone V7 and mini-VSAT airtime service helped to offset much of that weakness, resulting in only a 2 percent decline in revenue from marine products and services compared [with] the fourth quarter of 2007.”
Highlights of the fourth quarter included:
• Attracting a new, $3.5 million order for the FOGs for use in remote weapon systems. The Dec. 23 order, from an undisclosed manufacturer, is expected to begin shipping in the current quarter. (READ MORE)
• Receiving approval on Oct. 30 from Kengsberg Defence & Aerospace to begin shipping FOGs for the Swedish company’s Protector family of remote weapons stations, which helped make the final three months of the year a record quarter for FOG sales at KVH.
• Unveiling the ultra-compact TracVision M1 system for use in North America. The 12.5-inch-diameter, 7.5-pound system is the smallest and lightest in-motion satellite TV antenna system available for marine use.
• Winning top honors, for the 11th consecutive year, in the entertainment products category of the National Marine Electronics Association’s annual awards. Bringing home the gold for KVH this year was the TracVision M3ST satellite television system. The same system, or earlier versions, has won the category’s NMEA Industry Award since 1997. (READ MORE)
Last month, KVH announced the successful addition of the northern Pacific Ocean region to its mini-VSAT Broadband satellite communications service. (READ MORE) It inked a worldwide distribution network deal with satellite equipment maker Thrane & Thrane, allowing Thrane to offer KVH’s TracPhone V7 antenna and mini-VSAT service worldwide under its Sailor brand. (READ MORE) And it introduced a European version of its 14.5-inch-diameter TracVision M2 satellite TV system.
“Interest in our mini-VSAT Broadband solution continues to grow,” Kits van Heyningen said, “especially within the commercial maritime market, where ship operators are now looking for cost savings and cost effectiveness in an increasingly competitive market. With the TracPhone V7 and mini-VSAT Broadband service, we’re able to offer lower costs for hardware, installation and airtime service compared to other products, along with an expanding coverage area.”
Going forward, KVH predicted its first-quarter 2009 “sales will be down compared to last year’s first quarter, when sales of land products were still relatively robust, and that we will show a modest loss” for the period, said Spratt, the CFO.
For the full year, “assuming the macroeconomic conditions get no worse, we believe that revenue will grow about 10 percent for the year, driven by the growth of our mini-VSAT Broadband and fiber optic gyro businesses as well as the initial shipments of our new satellite antenna system for LiveTV aeronautical installations,” he said.
“As we all know, this is a very difficult environment in which to project performance, as conditions are so poor and so volatile that there is a very low level of consumer and commercial confidence. We will continue to be cautious about the outlook for our core businesses while being opportunistic with respect to our new-market growth initiatives.”
Spratt stressed that “our balance sheet remains solid, and we have continued our investment in infrastructure to support the rollout of the mini-VSAT Broadband global network,” and pledged that that “during this difficult economic time, we will be diligent managing cash to maintain our financial strength and the flexibility to carry out our business initiatives.”
KVH Industries Inc. (Nasdaq: KVHI) is a maker of live mobile media systems and navigation and guidance systems for defense and civilian use. Information about KVH’s fiber-optic gyro (FOG) systems is available at www.FiberOpticGyro.com, while information about defense navigation and guidance products is available at www.TacNav.com. Additional information about the company is available at www.kvh.com.
