Q3 2019 Earnings Call
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Thank you operator, good morning, everyone.
Thanks for joining us today to discuss KVH Industries' third quarter results and our guidance for 2019 fourth quarter and full year for all of which is included in the earnings release, we published this morning.
With me on this call as Martin could spend has begun the company's chief Executive officer and run through our Chief operating officer.
The earnings release is available on our website and also from our Investor Relations Department.
If you'd like to listen to a recording of today's call you can access a webcast replay on our website.
If you are listening via the web feel free to submit questions to IR KVH dotcom.
This conference call will contain certain forward looking statements that are subject to many assumptions and uncertainties that may cause our actual results to differ materially from those expressed in these statements.
We undertake no obligation to update or revise any forward looking statements.
We will also discuss certain non-GAAP financial measures and we'll find definitions of these measures in our press release as well as reconciliations of these non-GAAP measures to comparable GAAP measures.
We encourage you to review the cautionary statements made in our SEC filings, specifically those under the heading risk factors and our Form 10-K filed on March 1st.
And our 10-Q, which is expected to be filed this afternoon.
And the company's SEC filings available directly from the Investor second divested information section of our website.
At this time I would like to turn the call over to Mark Martin.
Thanks, Doug and good morning, everyone. Thanks for joining US Q3 was a busy one for us as we made solid progress in several strategic areas of our business results were generally in line with our guidance total revenue for the quarter was 39.3 million was about flat with the third quarter of 2018 net loss.
19 cents per share compared to a net loss of 11 cents per share in Q3 last year.
The last quarter, we announced the sale of Videotel training business were $90 million in in our last earnings call discuss how we plan to begin investing a small portion of the proceeds in the key strategic initiatives that will drive long term revenue and profitability growth.
I like to share an update on each of those initiatives, including agile plans, our new KVH watch aiotv connectivity as a service offering and our photonic chip technology.
In our mobile connectivity business, we continue to achieve excellent results for the third quarter airtime revenues were up 11% year over year, an increase of $1.9 million airtime subscribers were up 15% year over year airtime margins were up more than two points year over year, and we expect to see continued improvement in Q.
Before we still expect to have margins around 40% as we exit the year.
Our actual plans connectivity as a service program continues to enjoy high demand among commercial fleets. Thanks to its unique all inclusive no commitment value proposition as well as the speed and capabilities of our global HTS network.
As a result, agile plans revenue was up 100% compared to Q3 last year. The represented 70% of total commercial maritime VSAT shipments for the quarter.
Agile plan subscribers now make up 24% of our entire views that subscriber base and this is remarkable given that we launched agile plans just over two years ago.
We set out to reduce the barriers to next generation communications it see through a revolutionary business model and our results and strong demand showed that it's worked.
We're now investing in expanding marketing and demand generation initiatives fragile plans, especially with our key service providers around the globe.
In addition, we're digitizing our business platforms.
To enable us to scale efficiency efficiently and improve margins.
Our success in both the commercial and the leisure market enabled us to achieve an exciting milestone last week as we celebrated the shipment of our 10000th Babysat system.
When we launched our Tracfone Viasat systems, and our network. Our goal was to make maritime satellite communications more reliable more cost effective and more accessible to the seafarers.
The accelerating adoption of our Tracfone systems and can activity reflects the demand for the affordable airtime fast data speeds network security Aiotv proactive monitoring and value added services that we deliver.
Our ability to offer a fully integrated solution, which we see as the KVH advantage is desirable both the leisure voters as well as commercial.
As well as to the commercial industry in which the connected ship is rapidly becoming a reality.
The lesser market remains a tremendously valuable part of our business. We believe we offer the best solutions for the full range of leisure voters as R. 22 consecutive product of Excellence awards from the National Marine Electronics Association will attest.
And today that the Fort Lauderdale International boat show blend Vale, our newest satellite TV system. The track vision you HD seven.
This new antenna offers full support for Directv is for K Ultra HD programming, thanks to our exclusive Tri Ed antenna technology, which received signals from three different Directv satellite simultaneously.
The result is an at home TV experience on the water, including full DVR support and local channels plus improve support for dish network in waters around the us Central America in the Caribbean.
The awning market, particularly at the highest level is also seeing growing demand for viasat connectivity.
Our new KVH elite streaming option enables YOD owners and charter operators to subscribe either weekly or monthly to high speed dedicated bandwidth service with unlimited data and no overages.
KVH elite will be available starting in November with coverage from Florida through the Caribbean, including the islands of Eastern Caribbean.
The Mediterranean service is expected to follow in 2020 in time for the charters season there.
The services supported by both our 60 centimeter Tracfone Vseven and the one meter the 11 HTS. Unlike competing services KVH HTS subscribers don't need to buy new equipment, the simply activate the new elite service through our superior concierge team.
This enables us to pursue additional business with high value customers increase our viasat ARPU and optimize the use of our HCS network.
Our new Aiotv initiative KVH watch also Leverages, our end to end Maritime connectivity service, the HTS network and our successful agile plan style business model.
This aiotv connectivity as a service product is a unique communication solution for remote equipment monitoring and intervention by maritime equipment manufacturers and I O T application providers manufacturers will be able to act in real time, minimizing expensive service calls and ensuring off the.
Performance.
When we introduced KVH watch in June we're very pleased the also announced that Cogs Berg would be our first partner for KVH watch Iot Te connectivity.
Since that time, we've been working closely together with them and completing the development of the service.
Now installation is underway with Kongsberg for the first life pilot aboard a commercial vessel.
And lastly in mobile connectivity, we were pleased to announced last month that we are an official supplier for American magic in this challenge for the America's Cup.
Theres, a special meaning for us since the America's Cup as part of KVH as heritage with our very first product developed for 12 meter yacht preparing for the 980 America's Cup.
Now we're supporting their efforts with the most advanced systems available, including RV sent our LTL, our LTE E communications equipment for the teams Chase boats and our high performance fiber optic gyros and sensors to aid in the performance for the teams race boats.
Moving onto our inertial navigation business fiber optic gyro sales were down 1.7% compared to last year. This was partly a result of timing of both some large orders we have a solid backlog for Q4 shipments and we expect to see a rebound in our fog business this quarter.
Our total backlog for inertial navigation systems currently stands at $22 million, that's the highest level in more than five years.
We received a 4 million dollar order for our Fox from Kongsberg defense and aerospace for use in the US armies common remotely operated weapons station known as grows our Fox had been part of the Crows program for many years, thanks to their ability to provide precision stabilization and weapon control, even while the vehicles moving in high speeds.
And shipments for this order are expected to be completed by the end of next year.
TACNAV business also had some notable success during Q3, we announced two new orders totaling $6.7 million for our fog based TACNAV systems for use by military customers.
Shipments from one of these orders will be completed in Q4 of this year, while the other one is expected to continue shipping in starting in the fourth quarter and continuing through 2021.
And finally Im pleased to report that we've made outstanding progress and the development and product innovation of our photonic chip technology, we've invested in engineering talent and manufacturing equipment. That's enabled us to move ahead rapidly in our efforts to bring this new technology to market.
Photonic chip is currently in design verification testing in a military aviation pro product.
And we expected to be qualified by year end, we've begun integrating this technology into our existing products and expect to see both performance and cost improvements.
While our existing inertial systems offer the size weight power performance required for a wide range of application the integration of our photonic chip technology is expected to deliver performance and reliability enhancements for our customers along with manufacturing and margin benefits for us.
The primary focus of this development is to provide high end inertial system performance at Mems pricing levels for the automotive self driving car market.
So in conclusion, we have great confidence in our strategy and our innovative technology and services and our business models very strong balance sheet with no debt and $55 million in cash.
Our board of directors recently authorized share repurchase program of up to 1 million shares of the company's outstanding common stock.
With a solid inertial NAV backlog and continued strength in our Viasat business, we expect significant improvements in Q4.
Also I'd like to mentioned that on November November 14th I'll be joined by members of our senior management team for our first ever analyst and Investor day here KVH during which will showcase our newest technologies and discuss how we intend to leverage our strategic growth initiatives to accelerate progress towards building long term shareholder value.
Now I'd like to turn the call back over the done for the numbers.
Okay.
Thank you Martin.
As you know we concluded the Videotel dispositions in the second quarter of 2019, we concluded that the debt the videotel disposition.
In the second quarter met the criteria of a discontinued operation and we reflected about way in our earnings release and in our 10-Q.
The change in the discontinued operations. This quarter is due to the Finalization of the final financial statements for that business.
And the changes or investments shoes man determining the plumbing our again.
As Martin mentioned earlier, our third quarter revenue was $39.3 million, which includes a positive of prior period adjustment of point $5 million relating to sales type leases.
In short in the implementation of assay six so six we treated our vissat sales type lease transactions in the same manner as other combined VSAT airtime transactions, which means we were recognizing the hardware component of the transaction over the lease term instead of immediately upon shipment.
Going forward revenue generator generated on the lease arrangements will be recognized upfront as it was prior to AMC six or sex, even when its bundled with their time. This is really just a technical correction and is not significant to any past our future period.
Without this accounting correction third quarter revenue would have been slightly lower than compared to the 39.3 mine we recorded in the third quarter 2018.
Product revenue for the third quarter of 2019 was $14.8 million decrease a decrease of $1.6 million or 10% from the $16.4 million in the third quarter for the prior year.
Service revenue for the third quarter was $24.5 million, an increase of 1.6 million a 7% from 22.9 million in the third quarter of loss share.
Revenue from our inertial navigation segment decreased $2.4 million, an hour and our mobile connectivity segment increased $2.4 million.
By segment and our inertial navigation segment product revenues decreased $2 million with 23%, primarily due to a $1.7 million decrease in a fog product sales this quarter.
In our mobile connectivity segment product revenues increased by a half million dollars or 7%.
This increase was primarily due to our US 700000, our increase in mobile and Marine mobile communication product sales, which includes the adjustment that I discussed partially offset by a $200000 decrease in sales of our land mobile communication product sales.
Service revenues and our mobile connectivity segment increased $1.9 million due to an increase in mini VSAT broadband airtime service revenue of $1.9 million or 11%.
Sequentially mini VSAT broadband airtime revenues were up 4% from Q2 of this share 9% from Q1 of this year and on a year to date basis, 11% higher by 11% compared to the same period of loss share.
Driven primarily to the continued success of agile plans on the HTS network.
With respect to the agile program approximately 53% of our total unit shipments this quarter and 70% of our commercial shipments were agile orders, which helped us to achieve our 10000 Vissat shipments, which was announced just a few days ago.
Agile now represents 24% of all of our subscribers.
For the third quarter I consolidated gross profit margin decreased to 35.5%, excluding the adjustment as compared to 39.2% in the third quarter of last year.
From a segment perspective, our mobile connectivity gross margin was 35% again adjusted compared to 36.9% loss share, while our inertial navigation gross margin approximated, 37.5% compared to 45.9% last year.
Operating expenses for the third quarter of 2019 were 18.3 million up 6% from 17.3 million and a third quarter. The prior year, primarily due to increased spending to support our focus on service, though delivery in our key initiatives such as the photonic chip based gyro.
The third quarter. These changes in revenue margins and operating expenses resulted in a loss from operations of $4.8 million compared to the loss of $1.9 million and acquired in Q3 of 2018.
Mobile connectivity segment generated an operating loss of $20000 compared with the profit of $500000 loss share while our international irrigation segment had an operating loss of $200000 for the quarter compared with 1.9 million a profit last year.
Our unallocated loss from operations increased $100000 to $4.4 million the share from the $4.3 million recorded last year.
Our effective tax rate for the third quarter was a benefit of 12.9% and was impacted by the release of the valuation allowance against just can you discontinued operations tax expense.
Resulted from the sale Videotel.
For the third quarter, our net loss from continuing operations was $3.3 million as compared with a net loss of $1.9 million required in the same period last year.
On a non-GAAP basis, which excludes amortization of intangibles stock based compensation foreign exchange transaction gains and losses, the tax effect of the foregoing and the change in evaluation allowance, we had a net loss of $2.2 million compared with $700000 last year.
EPS for the quarter was a net loss of 19 cents per share compared with a net loss of 11 cents per share loss year.
non-GAAP EPS for the third quarter was a loss of 12 cents per share compared to four cents per share loss share.
The third quarter results were unfavorably impacted by 300000 miles or two cents due to the adjustment that I described earlier.
Our adjusted EBITDA for the third quarter was a loss of $1.2 million compared with a gain of $1.1 million recorded last year.
However, there are a couple of things to note here.
First the third quarter EBITDA was unfavorably impacted by $300000 due to the adjustment. If we had included a further adjustment in our EBITDA calculation for the out of period catch up our EBITDA would have been a loss of about $800000.
Further we continue to adjust.
Just out of our EBITDA calculation, the impact of foreign exchange gains and losses.
The third quarter that was a gain of about $600000 that we had backed out.
If we had not made this adjustment EBITDA would've been a loss of only $200000.
For a complete reconciliation of our non-GAAP measures. Please refer to our earnings release I was published earlier this morning.
From a continuing operations perspective, net cash used in operations was $4.9 million, an increase of $5.4 million compared to the third quarter of last year.
Capital expenditures were $2.6 million per quarter.
We are virtually debt free at the end of a quarter and our ending cash balance approximates $56 million.
Total backlog at the end September was $24 million of which approximately 10 million is scheduled to be delivered during the remainder of 2019.
Backlog for our inertial navigation products and services at the end of September was approximately $22 million of which approximately $9 million as scheduled scheduled to be delivered during the remainder of 2019.
With that I'll now turn our outlook to the fourth quarter and full year.
We reduced our full year guidance for revenues and earnings primarily due to lower than expected third quarter sales of five products and a reduction in our estimate of fog sales for the rest of for the remainder of there.
Our guidance for the fourth quarters is as follows.
Fourth quarter revenue is estimated to be in the range of 41 million to $45 million and GAAP EPS to be in the range of negative 15 cents to negative four cents per share.
non-GAAP EPS is expected to be in the range of negative six cents to positive two cents per share.
And adjusted EBITDA is estimated to be from positive $500000 to positive $2.5 million.
The full year, our revenue guidance is $156.3 million to $160.3 million.
Our expectations for full year GAAP EPS in the range of negative 90 cents negative 79 cents per share and our non-GAAP EPS is expected to be from negative 50 cents, a negative 41 cents per share and our adjusted EBITDA is expected to be in the range of negative $4.4 million to negative $2.4 million.
We continue to expect our air time gross margin will continue to grow throughout the year.
And that our agile plans program will be cash flow positive in the fourth quarter.
As a reminder, this guidance is based on continuing operations only and therefore excludes videotel completely including historic amounts for prior periods.
For 2019, we expect our capital expenditures will be in the range of 13 million to $16 million.
This guidance assumes no also assumes there'll be no significant changes in foreign currency exchange rates and no large international orders to be booked and shipped in the quarter.
This concludes our prepared remarks, and I'll now turn the call over to the operator to open the line for the two in a portion of this morning's call operator.
Thank you you would like to ask your question. Please signal by pressing star one telephone keypad, if you're using a your phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment again press star one to ask a question.
Our first question comes from Rich Valera with Needham.
Thank you first question on the photonic fog.
Development there Martin can you give any color on the timing of of incorporating that into your out your current products. It sounds like from your prepared remarks your.
Heading down that path, but can we start seeing.
These lower cost Fox in your products you know at the beginning of next year and what is that due to your kind of competitive price performance metrics.
What might that do for the business.
Yes. So we are incorporating that now so we're making the transition the manufacturing lease purchase manufacturing equipment, that's being delivered in November December timeframe. So we expect that starting in Q1 this will be in.
The majority of our that the majority but.
The 100% of our high end products like the Albian views and 1700 series products.
And it also is being qualified right now for a program that we've been funded for for the last two years.
Which is a military program. So it's sort of parallel track release of the product both into our commercial products and into this super high end military product.
So we should expect to see margin improvement starting in Q1 as these products get released.
And just from a.
Competitive standpoint, I mean, I would think that this would give you a significant cost advantage do you plan on sort of.
Taking that in margins in higher margins you do you think you can actually be more aggressive on price relative to the competition.
I think weve got both opportunities so I think that it will will.
The higher end products were focusing on the performance improvement.
I think will we have the opportunity to maintain prices and improve our margins and we also have the opportunity to introduce a new products that have still fog level performance, but are much more cost effective which we think we'll open up the market and help us increase our volumes that overall total.
Company revenues.
Okay.
Great and then just a question on the fog business if I could.
You know last quarter, you talked about the commercial side of the fog missed this being.
Activity, just being a lighter than expected.
That you were hopeful that that would pick up as you head into next year.
Are you seeing any evidence that that could be the case then.
Can you give us any thoughts on how we should think about fog next year.
Yes so.
Overall fog sales for the quarter were disappointing we did build backlog significantly. So that's good that's why we feel pretty confident that Q4 will be.
Significantly better.
But.
I think that the real.
Thing that needs to happen to jumpstart the fog business is the release of these new products or current product line. You know the IMU series is about five years old.
So this next gen product should dramatically sort of revitalize the product line. So I think it's kind of my senses is going to be status quo for another quarter or two until those new products hit the market.
Got it and then specifically.
It's more of a TACNAV question I think but I think you talked last quarter about.
The APN T program in a potential down select happening.
Yes, you know subsequent kicking the can you talk about any status there.
Yes so.
Collins Aerospace announced that they were the winner of that which is good for us so we.
Anticipate working with them on this program.
And.
The overall schedule is.
Starting between now and the next 12 months theres going to be prototypes delivered and qualified.
So as part of their press release, they announced that the total program could be up to 8000 systems.
You know so we don't know if all of those we'll have our flags in them or or or what depending on the which vehicles are being deployed so the good step for us. It's a good step forward in the program.
And the only caveat is that I read yesterday that.
As part of the merger with Raytheon United Technologies was has to divest the Collins GPS group that are no if that means anything you know.
For us probably not but it's good could introduce some delay I imagine.
Got it and just one final one probably for Don but just wanted to make sure. It's clear on the accounting treatment for hardware associated with actual plans going forward under six so six will you still be amortizing that or is that now going to be recognized upfront.
Well agile.
Our products sell agile as those service revenue so.
We would never recognize.
And any guidance all the new whenever recognize products sell an agile though it.
We retain ownership of the.
Of the equipment and depreciated over five years recognize service revenue multi basis.
So this adjustment I had nothing to do the agile plans, if we got it okay add to do with leases.
And I understood.
Yes. So we took the more conservative approach in said if it's a lease were being paid over time and its bundled with air time than we shouldn't recognize that revenue upfront.
Because of a guy by city antenna for $20000 in pays us in cash it's determined to be a bundled sale. If he has airtime and we recognize that overtime. So we recognize the lease bundle at the same way.
But the accounting rules, apparently have decided that if the guys paying us over time, we're going to recognize revenue all upfront.
For leases so.
Got it appreciate the clarification gentlemen, thank you.
Yeah. Thanks.
Our next question comes from Jim Mccleary with Chardan capital.
Thanks, Good morning.
Martin in response to answer.
In response to Rich's question you about the.
Photonic rollout.
You said something about 100% high end products and I.
I was hoping you clarify over what timeframe you thought 100% of the high end products would incorporate the technology is that something that takes place during the year or are you hope to have that.
At the end of Q1 next year.
Well, we hope to to launch it in Q1, so and once it launches will be in what we call or 1700 series.
Products and those are with used in all our high end product so.
Barring any residual inventory the plan is to once we launch it will be in all our high end products in the plan for that is in Q1.
And.
You mentioned that in military program has to be.
I don't know if you said requalified, but you said qualified is that going to have to take place for.
Other products.
That would be used so the new photonics yet.
Yes. So this particular program has never been qualified to this is so we intentionally did this as an opportunity to get qualified. So this was a new product that we were developing for customer under funded development was.
Over the period is over $6 million program of funded working is just a perfect opportunity for us to interject This new technology and really get it.
Super tested and qualified in probably the most demanding application there is for inertial sensors.
So we thought that'd be great endorsement of the technology and a great way to approve that its reliable and works great and all that kind of stuff. So that's an and new qual for existing products generally if it doesn't affect form fit or function you don't need to requalify it.
Yeah. So.
That would probably be on a case by case basis with any specific customer, but generally the products that I'm talking about EUR 1700 series or.
Sold as a commercial off the shelf product.
So it's you know it we have full discretion to change what goes inside the product.
Right, Okay, and the migration to the rest of the product line. The non high end is that something that that will happen over the course of the year it should be fairly fairly quickly as well.
Okay.
Alright, great.
And then.
Don can you address operating expenses for.
Q4, and any insight as to what might happen.
Next year, if there any special marketing R&D programs that would.
That are coming off or being contemplated to be added that would affect 2020 operating expenses are.
I think you can expect operating expenses in the fourth quarter this year to be higher than any quarter. This year.
We've talked about the.
Number of initiatives that we're investing in R&D initiatives marketing initiatives.
Good thing too.
The stock chip into development.
The.
Lets say increased support for agile school promotion programs.
Support the development of the T program. So you can expect the fourth quarter of this year to be higher.
Reasonably almost say significantly high, but certainly higher than the third quarter or any other quarter. This year.
That run rate will be higher going into 2020 for the same reasons.
Robert.
Premature every quite quite a bit of work to do there, but certainly our current indications are that are operating expenses will increase in 2020.
Let us by the same reasons or just where we're just.
Things that we're developing the initiatives that we're working on.
Got it okay.
Okay and pass <expletive> Thanks, a lot.
Okay. Thanks.
Our next question.
Prentiss with Raymond James.
Yes.
Couple of questions if I could.
On the agile plan.
You said, you're up to now 24% or subscribers. It was 70% of the commercial shipments how should we think about those sales is there any seasonality as far as that take rate on the agile plant into the commercial that might cause that to change in fourth quarter and then as we look out is there any reason to think.
It drops back down into the sixties at any point in time or is this kind of like the appetites stay strong for this product.
Starting at the your last question no. We don't expect any reason that it would go down.
I think that as far as seasonality goes Q3.
Is it not really a seasonal business but.
Particularly a lot of the commercial shipping in Europe , Yes, Theres lot vacations in July and August so that tends to be slower than other times of the year just for that reason, but there really has no seasonality in our commercial maritime business. So we don't so if we do expect Q4 to be stronger than Q3.
For our both for agile and for general these that business.
Okay, and the take rates kind of like this is last several quarters you've been it I think 70 769 now 70, so this kind of.
70 range should continue.
That's right, yes, so we don't see we still have some customers who prefer to the purchase which is obviously fine with us just because they if they make their capex versus opex decisions. So I don't think it's going to go to 100% I think you know after two years I'd say 70 is probably where it's going to stay.
But the most important thing for us as the subscriber growth was up 15% and where they purchase or lease or use agile, we don't really care.
As long as we get the subscribers that's why we're doing this though.
Got it seems to be.
Struck a nerve or hit a sweet spot as far as getting interest going up.
Yep.
Sure second question.
You guys mentioned, how you've you've adjusted out FX, but this time actually was a gain.
Any thoughts on reporting are providing EBITDA without adjusting or how do we get at those FX numbers to kind of see on a non adjusted FX basis kind of what EBITDA has been.
Well.
Essentially assigning a since we started excluding FX gains and losses response, two years ago, that's been gains that we've been back not EBITDAR every quarter [laughter].
Yeah. So.
Yes, so there were actually might be a case to be made in one of the reasons that we did it is it videotel was selling in British pounds. So it had to write an outsized impact on our results. So I think next year it might be something that we consider not doing because the business has changed now almost all of our sales are in U.S dollars. So.
But I think done Didnt want to do that and then in mid year, yes, So sure that big.
Exactly right. So what we consider that fourth quarter first quarter right. So I think the good news is that you see from this accounting adjustment were overly conservative I think you know this this is at 2018 prior period adjustment we took it we didnt take it out of the EBITDA number we didnt adjusted out so its a.
Yes, I think we're being very conservative and clean with her and transparent with our reporting here. So.
Okay, even though I'm didnt help us.
[laughter] didn't help this time hasn't helped for a little while it's a yeah right.
Okay, and then obviously the board has a has authorized a stock buyback program.
Talk a little bit about what triggered that how do you see market the size and obviously.
Liquidity is not huge on your name, but but what we were you trying to send a message would there where you hope to achieve.
Yes, I think that we've had a lot of shareholder interest in you know in doing a buyback with the question we get all the time and the board looked at our current balance sheet and the fact that agile plans is going cash flow positive now so it will be generating cash instead of consuming.
Cash so we felt that it was a good time to send a message to the market. We feel the stock is undervalued, we like our prospects we don't see.
So a need for cash that you know dramatic.
Given the amount of cash that we have we still have a bank line of credit.
Course that could change if there is.
Acquisition of to sum up something else changes.
These programs can be adjusted along the way, but we just felt it was appropriate time to to send a positive message about where we think the stocks going.
Okay.
And how do you think the right way is to consider valuing the stock and the potential of the future of these growth initiatives.
Well I think that we're we're on the right path in terms of increasing our EBITDA in Q4, I think 2020.
We're not giving guidance yet, but we think it's going to be a good year. So we see the direction of the company as as very strong agile plan has been a success. It continues to grow subscribers up 15% inertial NAV backlog is strong.
PMT you know, we think is going our way, which is good we still have these foreign TACNAV orders.
In the pipeline. So overall, we're very happy with the direction of the business.
I think.
At some point, we're going to get get rewarded for that.
And you think it shows up.
The EBITDA line, then as well a fairly quickly.
Yes, I mean, that's our that's our goal we have made because his decision here too when we sold Videotel business.
We've got a great price for it but we sold a very profitable marine business that we've built up.
It was generating.
Hey.
$9 million of EBITDA. So our goal is to quickly replace that you know as the regular business gross.
Through through organic growth.
Great. Okay. Thanks for the answers.
Yeah. Thanks, Eric.
Final question comes from Chris Quilty with Quilty analytics.
Hi, guys. It was a late to the Congress will forgive me already addressed this but you had talked last quarter about in addition to the photonic chipset going ahead and taking some of the electronics associated with that and developing a chipset around that question is how are you going on that development and.
Could that be a gating factor on some of the product rollouts or is that done later on again not impacting form fit function. A feature that you just work into the device design later.
That's a great question. So when I said, we're going to be releasing the product production. Starting in Q1. This is for our current products is not the new auto integrated automotive products. So that product for the automotive market is where we need the new electronics in the single chip electronics that over.
Replace today's printed circuit boards. So that's on a different time scale with qualification everything else. So that work is still ongoing but thats going to take more time, so thats, probably at least two year away.
Gotcha and Oh.
I don't know if you had earlier comment about some of the automotive Oems but.
I think a couple of quarters since you did a real deep dive on your thoughts on that market and the types of technologies that the automakers are trending for.
How secure do you feel now.
Relative to let's say a year ago or two years ago. When when you undertook this effort that fog based solution will be.
You know a primary secondary technology used for you know a majority or a significant portion of the automotive solutions that get deployed.
Well, we know from the people that were working with that they are you happy with the performance and are planning on using it I think theres going to be multiple different solutions as time goes on I think that.
People are now looking at level four and five autonomy for.
Automotive general public type applications as being pushed out but what we're seeing is that now people are focusing on delivery vehicles and people movers and other things actually being pulled forward a little bit.
So I think theres going to be a good market for this product sooner than we thought but the gigantic opportunity is probably later than we thought so I think it's kind of a mixed mixed bag there in terms of timing.
Gotcha.
If I also switch over again to the APN T opportunity.
We're seeing the a video de talking about a lot of different solutions to address that market, including bringing back the all the ran that work.
Again, you know how.
Secure or are you in the programs that you're involved with that they're going to be fully funded and that there's institutional support behind them.
Well, Dave I don't know if you caught them beginning with the.
They have made the down select now they've selected no Collins aerospace as the sole winner of that program.
So that's that's good news is moving forward.
If that up as I mentioned earlier, our 12 month schedule for testing in deployment and that's up to 8000 systems.
So I think that program is very secure very solid they've been working this you know for I'd say decade, So I think that there.
Finally in the deployment phase on that.
And unlike automotive, there's there's really zero appetite for.
So we're trying to find alternate solutions because of solution we have.
Yes, just absolutely delivers what it needs to for that application. So.
When we deliver 20000 TACNAV systems to armored vehicles around the world. So this is a very mature very well developed you know product that just absolutely works for their application and it can't be spoof then it can't be Jan.
Great.
Yeah, I didn't I missed that earlier comment so I'll go back and a check the transcript.
Very good all right. Thank you very much guys.
Alright, thanks, Thanks, Chris.
Yes.
And then answer session I'll now turn the conference back over to Mr. Riley.
Okay. Thank you everybody Martin and I in front of cost be available for any questions may have a later or.
Any questions, let me come to our IR site.
Thanks very much.
Thank you everyone. This concludes today's teleconference. You may now disconnect.