KVH Industries, Inc., reported financial results for the quarter and full year ended December 31, 2022 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 company’s website.
Fourth Quarter 2022 Highlights
- Total revenues from continuing operations increased by 2% in the fourth quarter of 2022 to $36.0 million from $35.3 million in the fourth quarter of 2021.
- Our VSAT Broadband airtime revenue increased 12% year-over-year to $26.8 million, despite the shutdown of our legacy network on December 31, 2021.
- Net income from continuing operations in the fourth quarter of 2022 was $0.6 million, or $0.03 per share, compared to a net loss of $2.7 million, or $0.15 per share, in the fourth quarter of 2021.
- Non-GAAP adjusted EBITDA from continuing operations was $4.3 million in the fourth quarter of 2022, compared to $0.7 million in the fourth quarter of 2021.
Commenting on the company’s results, Brent Bruun, KVH’s Chief Executive Officer, said, “Our results for the fourth quarter highlight the remarkable turnaround underway here at KVH. We launched a major restructuring in March 2022 with the goals of bringing our operating expenses more in line with our revenue, focusing our business on our core areas of strength, bringing to market innovative products that drive subscriber growth and profitable operations, and putting us on the path to sustained and growing profitability. I’m thrilled by the progress we’ve made in each of these areas to date. We recorded our first operating profit in more than six years, achieved in part as a result of our restructuring efforts, reductions in operating expenses, and the sale of our inertial navigation and non-core media businesses. At the same time, we introduced our award-winning TracNet hybrid terminals and KVH ONE network, increased quarterly airtime revenue 12% versus the fourth quarter of last year, ended the quarter with almost 6,900 subscribers, and achieved a quarterly airtime gross margin of 43.5%. Thanks to the changes we’ve made and the commitment of our global team, I expect that we will continue to drive profitability and shareholder value in 2023 and beyond. For 2023, we anticipate revenue of $145 million to $155 million, with service revenues growing faster than product revenues with projected subscriber growth in the double digits, and adjusted EBITDA in the range of $17 million to $23 million.”
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Fourth Quarter Financial Summary
Revenue was $36.0 million for the fourth quarter of 2022, an increase of 2% compared to $35.3 million in the fourth quarter of 2021.
Product revenues for the fourth quarter of 2022 were $7.2 million, a decrease of 13%. The decrease in product sales was primarily due to a $1.6 million decrease in sales of VSAT Broadband products, partially offset by a $0.4 million increase in sales of marine TV products. VSAT Broadband product sales in the fourth quarter of 2021 benefited from purchases by customers migrating from our legacy network to our HTS network.
Service revenues for the fourth quarter of 2022 were $28.8 million, an increase of 7%. Service sales increased primarily due to a $3.0 million increase in our VSAT Broadband service sales partially offset by a $1.2 million decrease in our content service sales, primarily driven by the sale of a subsidiary in April 2022.
Our operating expenses decreased $3.6 million to $12.0 million for the fourth quarter of 2022 compared to $15.6 million for the fourth quarter of 2021. Operating expenses decreased primarily due to a $1.9 million decrease in salaries and employee benefits, $0.9 million of expense reimbursement associated with the Transition Services Agreement with EMCORE as a result of the sale of the inertial navigation business in 2022, a $0.4 million decrease in finance and insurance expense, and a $0.3 million decrease in marketing expense. The decrease in salaries and employee benefits was primarily driven by our March 2022 restructuring.
Full Year Financial Summary
Revenue was $138.9 million for the year ended December 31, 2022, an increase of 4% compared to $133.9 million for the year ended December 31, 2021.
Product revenues for the year ended December 31, 2022, were $27.0 million, a decrease of 10% compared to the year ended December 31, 2021. The decrease in product sales was primarily due to a $2.6 million decrease in sales of marine mobile connectivity products, which was primarily driven by a $3.1 million decrease in sales of VSAT Broadband products and partially offset by a $0.5 million increase in TracVision product sales.
Service revenues for the year ended December 31, 2022, were $111.9 million, an increase of 8% compared to the year ended December 31, 2021. The increase in service sales was primarily due to a $10.4 million increase in our VSAT Broadband service sales, partially offset by a decrease of $2.6 million in our content service sales.
Our operating expenses decreased $7.1 million to $58.3 million in the year ended December 31, 2022, compared to $65.4 million in the year ended December 31, 2021. This decrease in operating expenses was primarily due to a $5.2 million decrease in salaries, benefits and taxes (excluding costs associated with the March 2022 reduction in workforce and executive retention), a $4.0 million decrease in professional fees, $0.9 million of expense reimbursement associated with the Transition Services Agreement with EMCORE as a result of the sale of the inertial navigation business in 2022, a $0.7 million decrease in amortization expense, a $0.5 million decrease in marketing expense, and a $0.3 million decrease in external commission expense. The decrease in professional fees was driven by a $3.1 million decrease in event-driven legal and advisory fees, primarily arising from a stockholder’s nomination of a competing slate of directors at our annual meeting of stockholders in 2021. This decrease in expenses was partially offset by additional costs of $1.9 million related to the reduction in our workforce in March 2022, a $0.6 million increase in warranty expense, a $0.6 million increase in recruiting expenses, which was driven by professional fees associated with the search for a new Chief Executive Officer and replacements for two recently departed members of our board of directors, a $0.5 million increase in expenses related to the separation and retirement of Mr. Kits van Heyningen in March 2022 and a $1.0 million increase in compensation expense related to executive retention agreements.
In our earnings release dated December 6, 2022, the amounts reported for adjusted EBITDA for the three and nine months ending September 30, 2022 included certain add-back amounts that related to discontinued operations, and therefore should not have been included in adjusted non-GAAP EBITDA for continuing operations. The revised amounts are shown in the table below, following the reconciliation of GAAP net loss to non-GAAP EBITDA and adjusted non-GAAP EBITDA.
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Other Recent Announcements
March 8, 2023 – KVH TracNet wins Editors’ Choice in Third-annual Best Elex Awards
February 23, 2023 – KVH TracNet recognized with the 2023 SMART4SEA Connectivity Award
February 13, 2023 – KVH’s New Crew Internet Service Offers Vital Connectivity to Mariners and Enables Vessel Traffic Allocation
February 10, 2023 – KVH Supports Seafarers with Free VoIP Calls to Turkey and Syria
February 3, 2023 – KVH Industries Announces Support Agreement with Black Diamond Capital Management
January 19, 2023 – KVH Introduces New Enterprise-grade Cybersecurity and Email Services for Mariners
Source: KVH Industries
