Q3 2020 KVH Industries Inc Earnings Call

[music].

Good day and welcome to the KVH industries each quarter through 2020 earnings Conference call. Today's conference is being recorded at this time I'd like to turn the conference over to Don Riley Chief Financial Officer. Please go ahead Sir.

Thank you operator, good morning, everyone.

Thanks for joining us today to discuss KVH Industries' third quarter results, which are included in the earnings release, we published this morning with.

With me on this call is Martin kits been Hagen, the company's Chief Executive Officer, and Brian Brewing, Our Chief operating officer.

The earnings release is available on our website and through our Investor Relations Department. If you would 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 too high our KVH dot com.

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.

<unk> undertakes no obligation to update or revise any forward looking statements.

We will also discuss certain non-GAAP financial measures and you will 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 in our second quarter form 10-Q filed on July 31st 2019 form 10-K, which was filed on February 28.

The Companys other SEC filings are available directly from the Investor information section of our website.

At this time I'd like to turn the call over to Martin Martin.

Thanks, Don Good morning, everyone and thanks for joining us today.

Overall, we're very pleased with our results this quarter, which came in much better than expected.

Despite the pandemic, we stayed focused on executing our strategy then optimizing operations during the quarter.

Orders revenue total was up 5% to 41.1 million compared to Q3 of last year, our gross margins rose significantly compared to the previous quarter airtime revenue was up 9% and inertial navigation product and services revenue rose, 27% compared to last year.

We maintained our cost management discipline throughout the quarter and prioritize managing our supply chain and our sales and service partners worldwide.

Due to travel and gathering restrictions, we eliminated in person trade shows and business travel scaled back other discretionary cost.

[noise] blanket in person trade shows offered the means of reducing cost, but it also reduced opportunities for conversations with new prospects and building our pipeline.

However, we adapted rapidly to the world of virtual trade shows and conferences.

In house marketing team worked closely with sales and was able to pivot to focus on alternative to in person events.

Focusing instead on webinars and panels, while maintaining a strong digital and networking presence at these online events.

All these efforts paid off with one of our strongest third quarters in many years, our EBITDA from continuing operations was $3.4 million and that's a $4.6 million increase year over year.

So it's not really an improvement over a low revise cobot estimate.

We maintained a strong cash position of more than $40 million and entered Q4 with a backlog of almost 26 million.

At the start of the fourth quarter. We also ended the temporary salary and benefit reductions we've put in place six months ago.

As we have confidence in our current financial situation, the sales pipeline and operational stability.

Our Q3 results validate our strategy of diversification with strong results across virtually all markets and product lines and where their established worldwide service and support network, we're well positioned for the future.

Now, let's look at the details of our core markets, starting with mobile connectivity.

The leisure and commercial maritime markets appear to be withstanding the challenges caused by co bid over the last few quarters commercial port calls have stabilized with an average of roughly 22004 visits a day and that's about 15% below historic levels.

Leisure marinas are opened recreational boat is around the water throughout the summer and the Fort Lauderdale International boat show the world's largest in water boat show opened yesterday.

In this steadily improving business environment. Our overall mobile connectivity revenue was 31.4 million for the quarter. That's just slightly down compared to Q3 of last year, but airtime revenue increased 9% or 1.8 million to 21.7 million quarter over quarter.

So.

The year over year, rather as we increased our subscriber base by 4%.

Type margins rose to almost 39% and that's up more than two points compared to Q2 of this year and more than four points versus Q3 of last year.

This improvement reflects the success of our ongoing efforts to migrate existing customers and add new customers to our HTS network.

Biggest coverage footprint of for our entire track wishing product line. It also connects boat owners charter guests in commercial cruise to live news local channels and television and movie programming from leading satellite T V providers worldwide.

Yesterday at the Fort Lauderdale show, we rolled out a new unlimited use regional airtime plan for our smallest Tracfone V. Three HTS subscribe.

Subscribers select the high speed data package with speeds as fast as five megabits per second.

And these packages range from 200 megabytes to 10 gigabytes a month.

If the subscriber runs out of high speed data before the end of the month the system automatically shifts to a slower managed right that provides continuous service with no overage charges.

We believe that these fixed price no overage plants, we very popular with owners of smaller boats, just as they have with our agile plans regional product.

Together with a 37 centimeter V three H T S.

They are very compelling solution for leisure and commercial vessels currently equipped with old slow and very expensive L ban sad phones.

Our track record of innovation was recognize recently when the National Marine Electronics Association.

Bestowed product Excellence awards on our track phone V. Three R track vision, you H D seven and our Tracfone L. T. E. One recipients are selected by members of NEMA, which is an industry group comprising more than 600 manufacturers dealers in boat builders all of whom are experts in the industry, we're very gratified by their.

Mission.

And finally in mobile connectivity, we're making excellent progress with K V. H watch R. I O T connectivity is a service solution. We just completed our product launch hardware and service readiness review, we're now ready to deliver watch flow and watch remote expert services.

Commercial vessels are prime candidates for data driven optimization and remote support. These are complex machines operating in the middle of the ocean offshore for long periods of time, where even the smallest adjustments going to have to tremendous ramifications.

But optimization inefficiencies rely on getting real time data. The date is held aboard the vessel and is only accessible import it's fine for historical analysis, but real time visibility at affordable cost.

Enables I O T to provide cost savings that have never existed before.

The importance of remote data intervention and support has never been more apparent than during the pandemic as access to vessels is restricted and remote surveys if suddenly become the norm.

And the demand for remote Tech support has increased.

So ship owners and managers recently spoke at the shipping inside conference about the growing need for equipment manufacturers to have remote access to their onboard equipment, even in a post covid world we've.

We've seen our sales funnel and partner funnel for K VH watch expand during the quarter and it's well beyond.

Just equipment manufacturers now.

Now includes Iot service companies multi card service providers charter party and insurance players and others. So.

And what's unique about our service is that it's designed on a multi tendency model, where many different companies can subscribe to our service on the same ship and make use of our software and are dedicated high speed VSAT antenna on board.

K P. H watches an ideal solution for these applications the system delivers 24 by seven.

Ship to shore data for remote monitoring and analytics as well as high bandwidth on demand remote interventions that enable experts onshore to work directly with the crew even during deep sea time.

Plus we design KH watch with cyber security in mind, including a Standalone air gaps VSAT terminal isolated onboard local area network multifactor authentication and satellite network security.

Throughout this quarter, we've continued to build a strong pipeline, we're very excited about the prospects for the strategic initiative.

Moving onto our inertial navigation market.

Revenue for the quarter increased 27% to 9.7 million from 7.7 million in Q3 of last year.

Thanks to growth for both are fog and tack naff military product lines.

Similar to mobile connectivity Q3 saw pivot from in person trade shows to virtual engagement for the inertial naff market.

Attendance, an engagement where low for virtual shows so we focused our efforts on Webinars and speaking opportunities case studies and digital advertising to build a sales pipeline.

Early in Q3, we announced a new international order worth more than $10 million for our attack NAV tactical navigation systems shipment of that order are beginning this quarter queue for which should help further improve our overall financial performance.

On the fog side of the business, we saw reinvigorated demand across multiple applications and markets new autonomous solutions that need our level of performance are launching all the time.

And we continue to see strong interest in our photonic chip or pick technology after making strategic investments in this groundbreaking technology, we shipped our first production I M. U at the end of Q2 that had to pick inside and we're actively working to incorporate that pick technology and the remainder of our core product line.

By the end of this year.

Beyond this here's roll out of the Peck. This patent is that technology enables a whole new platforms of performance. So we can target incremental new markets and applications are multiyear product development roadmap for pick is quite extensive.

And the impact of this innovation is only just beginning.

Even asked me incorporate the picket today's products, we're developing new optical engine, which will have which will provide even more integration and hopefully improve performance and even lower cost.

So in summary aggressive in early actions during the pandemic helped us mitigate the impact of the global economic situation.

Despite the uncertainties in the markets continue to focus on executing well on our strategic and operational plans, keeping our employees healthy and delivering a premium experience through our customers.

We know the pandemic is far from over and we remain vigilant.

We're proceeding cautiously, but with confidence in our outstanding team worldwide, our business model and the progress that we've made on our strategic initiatives.

And now I'm Gonna turn the call back to dawn for more detail on the numbers done.

Thank you Martin.

First you said and.

And our second quarter call. Some perspective is required in order to put our third quarter results in context much.

Much into the world and the industry's research continue to be impacted by the COVID-19 health crisis, given the impact that COVID-19 has had wild our business. We believe our third quarter results should be viewed quite positively.

Having said that I would like to walk through our third quarter results in more detail.

As Martin mentioned earlier or third quarter revenue came in at just over $41 million.

This compares to $39.3 million recorded in the third quarter of 2019.

Revenue from our National Navigation segment increased over $2 million, while revenues and a mobile connectivity segment decreased about $300000 and the prior year third quarter.

Product revenue for the third quarter was $16.7 million, an increase of $1.8 million are over 12% from $14.8 million in the third quarter of the prior year.

By segment product revenues, and our inertial navigation segment increased $2.7 million or about 40 per cent, primarily due to a 1.5 million dollar increase in a bargain OEM cell and at 1.2 million dollar increase in attack Naff product sales appeared to the 2019 third quarter.

Product revenues and a mobile connectivity segment decreased about $900000 or 11% driven mostly by a 500000 dollar decreasing chalk vision sales on a decrease in olean mobile product sales.

Service revenue for the third quarter was flat $24.5 million for both the third quarter of this year in the prior year.

Many VSAT broadband airtime revenue increased $1.8 million compared to 2019, driven by a 4% increase in subscribers, primarily as a result of agile plans and a 900000 dollar one time amount from a customer in connection with the resolution of a certain contracts on certain contractual matters.

These increases were partially offset by at 900, a thousand a decrease in a media business, which was significantly impacted by the travel restrictions associates associated with COVID-19.

As I mentioned hydro plans as a significant driver of the increase in on many VSAT broadband near term revenue, which approximate of $21.7 million, but they're a quarter roving approximately 9% in the prior year.

VSAT shipments in connection with the agile planned program approximated, 64% of our total units shipments and as Martin said, 78% of our commercial shipments for the quarter.

Agile plans now represents 35% of all many b side of your time subscribers.

The third quarter, Arkansas, and gross profit margin was 38, 5% compared with 34, 2% of the third quarter of last year.

A segment perspective, a mobile connectivity gross margin was 37, 6% of about four percentage points, primarily due to the impact of all of the increase in a mini be sacked broadband anytime revenues.

Or a nurse navigation gross margin increased about 3.7 percentage points.

41, 2%, primarily due to higher fog and talking to ourselves.

Operating expenses for the quarter was $16.3 million down almost 11% from $18.3 million in the third quarter of the prior year in part due to the continuation of the cost control measures as we put in place early in the year to mitigate the impact of the pandemic.

The third quarter. These changes in revenue margins and operating expenses resulted in the loss from operations of about $500000 compared with a loss of $4.9 million recorded in the third quarter of 2019.

A mobile connectivity segment generated an operating profit of $2.3 million compared with an operating loss of $300000 last year, while our inertial navigation segment had an operating profit of one $4 million compared to an operating loss of $200000 last year.

And our unallocated loss was about $4.2 million compared to $4.4 million and the 2019 third quarter.

And for the third quarter on net loss was about 500000 $500000 compared with a net loss last year $3.3 million.

On a non-GAAP basis, which excludes amortization of intangibles stock-based compensation employee termination another non-recurring costs now recurring legal fees foreign exchange transaction gains and losses attacks effected the foregoing and changes in our valuation allowance. Another tax adjustments, we had net income of 1.1 million.

Compared with a net loss of $2.2 million last year.

P S. The third quarter with a net loss of three cents per share compared to a loss of 19 per share last year.

And non-GAAP EPS in the third quarter [laughter].

[noise], whereas the excuse me was six non-GAAP, yes, the third corps last year was.

19 cents ugly.

I've just got to the quarter was $3.4 million compared with the negative $1.2 million recorded in 2019 third quarter.

But complete reconciliation of our non-GAAP measures. Please refer to our earnings release that was published earlier this morning.

Total backlog at the end of the third quarter was $25.6 million of which approximately $14.8 million is scheduled to be good levick during 2020.

Backlog for our nurse navigation products and services at the end of September was approximately $25 million of which approximately $14 million was scheduled to be delivered during 2020.

[noise] net cash from operations was about break even for the quarter compared to $4.9 million used in operations the third quarter of the prior year.

Capital expenditures were about $3.2 million per quarter.

So to wrap up I would like to say that we are pleased about third quarter results, especially in the context of the COVID-19, pandemic, which continues to affect the global economy in general in many aspects of our business in particular.

Although we believe our business continues to withstand the economic turbulence caused by let him the pandemic very well we need to recognize the ongoing uncertainty caused by the global health crisis.

The duration of the COVID-19, pandemic is still unknown and opinions on the matter very and change daily.

Quietly our revenues results of operations and financial condition may still be materially impacted in the future and so cold covered Ah 19 is finally eradicated.

Anytime we will continue to focus on cost and efficiencies to assure that we continue to be as well prepared as we can be into the COVID-19 threat is resolved.

This concludes our prepared remarks now now I'll turn the call over to the operator to open the lines and the Q&A portion of this morning's call. Thank you operator. Thank you at this time out openness lack of questions. If you would like to ask a question. Please press the star keep up I don't want key.

Darwin Casking on your question, if you're using a speaker phone please pick up the handset I like it.

Signal to reach our equipment again that was styles lane.

My first question concerned metrorail error and lead them in cow.

[noise]. Thank you good morning Miami.

Starting off on on the the many VSAT uhm gross airtime gross margins really impressive performance there and I thought last quarter, you said you might see some some downward.

Reversion, there because you had a bit of a pretty significant pop I think in the queue too. So just trying to understand the dynamics there and do we think that gross margins are sustainable in this high 30% range over the near term.

Well I think I'll, let dawn answer that question, specifically, but we did have a sort of one time pick up on some over its charges that we don't expect to recur and also queue for the some seasonality, especially in the leisure market where people put their boats away for the winter. So that's a normal seasonal change and so in that.

Also has an impact on margins because they they downgrade to lower plans, but but I'll, let them answer the detail on the margin that number.

Right. So we the third quarter was was very high for the reasons Martin attribute.

<unk> described the fourth quarter will not be as high as the third quarter first we had that one time bump also will add capacity in the fourth quarter. So so no it won't be that high to probably between.

30, and 35% in the fourth quarter is my guess.

Okay. That's helpful and just trying to understand maybe the underlying demand trends in the many VSAT business I mean, historically, you've you've kind of talked about.

Installs and orders may be is there any color you can given should have the the cadence of installs and orders as you moved you know from two of <unk> and now into <unk> has that been pretty steady is picking up trailing off any any color there.

Yeah.

The surprising thing is this.

In terms of unit volume. It's ahead of last year for the quarter, so very strong bookings and installation or shipment quarter. So.

And as I mentioned in the sort of prepared remarks, you know, it's logistically was super challenging quarter. So our team did a really nice job managing.

All the various testing requirements to enter countries import so and I think we did gain.

Get into market share because of that.

No. That's that's helpful.

And then pivoting to a nurse so.

So it sounds like we got about $14 million backlog, they're scheduled to ship in the fourth quarter.

One I guess confidence level on actually shipping that is there any risk to that production components anything and then would we normally expect there to also be some turns business. There so that the the revenue in that segment could.

Could it could exceed 14 million in the fourth quarter, just any any color on that would be helpful down.

So we do expect to ship it in the fourth quarter.

And.

Most of in the fourth quarter could could carry over to next year, but Robyn recognition in the fourth quarter, we're pretty confident in but under the new revenue recognition revenue recognition rolls.

We have to consider lots of factors. So even if we may ship. It on the fourth quarter and we think will recognize revenue in the fourth quarter. There is a risk from a revenue recognition point of view, we may have to postpone Robyn recognition. So some time of 2021.

But I think in production point of view, we should be fine from a shipping point of view, we should be fine.

I will say that there is.

Just to put some risk on it.

What we have seen as in general supply chains are pretty strained.

So.

Getting parts in on time and lead time, so pushing out for electronic components, you know, which is which is odd but it is getting tighter than it was even sort of at the height of the pandemic you know so.

I'm not sure why that is whether it's you know just general demand for consumer electronics, but we are seeing some tightening of supply chain. So, but that's not said right. Now we look like you know we think we're in pretty good shape.

We've got all the parts promised to come in and on time so.

We do expect to ship if not all of it the the vast majority of in queue for.

Okay. That's helpful and one more just modeling question quick for you done it sounds like Opex are going to go up and <unk> as you return sort of pay scales to normal et cetera can you give us any sense of the magnitude of increase we might expect an opex from Q3 to queue for.

Sure.

One second.

[noise], So I'd say operating expenses in the fourth quarter will be.

At least a coupla million dollars higher than the third quarter.

And maybe comparable to the fourth quarter of last year.

[laughter].

Got it okay very helpful. Alright, Thanks, gentlemen, nice job on the quarter.

Alright, thanks for it.

Our next question 10 times, Chris Karate Karate analytics.

Martin and I just wanted to follow up on the gross margin question understand the seasonality down in in queue for that you expect it down but.

Are you still modeling longer term that this business should be around a 40% ish type gross margin as you achieve scale.

Yes, yes.

If you look at the seasonality of prior years, we don't expect it to be any different. So you have you know, adding subs and continuing to grow the business and then that's offset with some seasonal suspensions and leisure and then commercial fishing as well so.

But just to be clear, there's no increase in seasonality or seasonal suspension that we expect so but it is the normal Q4.

So but get back to 40% question. The answer is yes. So are long term models have us driving to that.

To that number and is dawn said in any given quarter you might have where you add some capacity and we've had some very strong subscriber growth and uses growth, particularly in Asia.

So we are adding capacity and we've added some in the third quarter as well so.

And you'll see some of that in the we'll have a full quarter of that in in queue for.

Great and Europe, obviously, covid is kind of raging out of control worse than even in the spring are you seeing any impact on your business.

No we haven't and you know.

We were.

Obviously areas of concern would be if the boat builders clothes again.

That would be problematic, but so far the restriction soon to be allowing people to go to and from work.

But it seems to be more on the the bars and restaurants and theaters. This this time as opposed to the Lockdowns that we had in March and April.

I understand and switching gears over to the inertial side.

The large tack now programs that still sit out there that you haven't yet landed any update on you know whether they're continuing to move to the right or any of those getting closer to closing.

[laughter] well.

As I've said before we like to do.

Stop trying to.

[noise] forecast when those will hit so.

Sure we're happy that one of the one of the biggest ones landed this year and then it'll it'll be shipping this quarter. So.

So our our tech that business going to be very strong. This year, we expect another strong tack naff year next year.

So we do expect one or more of those to the land and and 21.

So there's a lot of opportunities there and there's some new opportunities that have popped up even in the current quarter that could ship in 21. So.

I'd say overall the the the tax to have sales pipeline looks very strong and should have a strong year again next year.

And any updates on the assured P N D program.

No nothing on the production side Collins has won the development Ah.

Project and I believe part of that includes delivering.

Only 83 units.

So the it seems to be sort of devolving into more of a platform type play again, where the higher value platforms will get higher end inertial systems and the lowest platforms will get just GPS, but enhanced GPS with m-code.

So.

Unclear, where the funding it's gonna come out on that you know so be interesting to see what the next defense budget comes out because it is a program of record now so it should be.

But it needs funding.

Okay shifting over to T V. H watch I think last quarter. You said you hoped to actually get a commercial customer signed up you know.

Either Q3 or by the end of the year, making any progress there.

We are and you should expect to see a flurry of announcements there this quarter. So we're.

We're making great progress there.

And how about on the the other side in terms of signing up for aligning with.

You know the caterpillars of the world and other.

Systems companies that might choose to sign up for the service.

Yeah. So we're so we're talking both the equipment manufacturers as well as Iot companies and what are called multi card service provider people, who serve as a number of different pieces of equipment onboard ships.

So the overall customer target list is expanding but absolutely includes.

Entered manufacturers and turbo manufacturers scrubbers, all the people who make the key equipment on board the ships.

And final question for you just on the pick technology.

You're in production with your first product now any surprises either positive or negative and what you've seen in terms of the production costs or you know product.

Integration.

No no surprises with you know.

We've integrated as you said in the first product where now.

We still on schedule to design it into the rest of the products by by the end of this quarter.

We have two suppliers one of which is currently doing better than the other one.

In terms of.

Performance prices are similar.

So where.

I would say overall, it's behaving as expected.

Great. Thank you very much.

Thanks.

And again, if you'd like to ask you a question. Please press the Saki thought the other one key Oh styling.

Our next question comes from like Princess If I Miss James.

Hey, Good morning, guys. This is actually recognize your breath on for a wreck right. Now my first question would be how do you feel about visibility not just for for you, but for 2021 I need to get ready to maybe give some guidance next quarter do you think you'll be able to give all your guidance.

We hope so I think that you know it really depends on how things shake out in terms of what's going on in terms of various lockdowns in the economy. So.

That's a vaccine rolls out and things start to return to normal then we expect to be able to return to giving guidance. So I think at this point, it's more of a macro question than a caveat each question.

Got it okay. Thanks, and then the other would be there's a lot of buzz right now surrounding the upcoming Leo constellations space to X one way and some other plan one how do you view the addressable market for those constellation.

Well I think it's super exciting so.

As a as a purchaser of satellite bandwidth.

We've got more and more options every day so.

We're talking to all the companies that are in the Leo and Neo space as well as our current suppliers are launching new satellites that have greater throughput. So.

It's really a great time to be a you know in the satellite business suddenly you know we have many many opportunities.

Also opportunities tress really so all of these Leo constellations require tracking antennas for the consumer products as well as for the Earth's station. So.

Sort of the Golden age of.

Space in satellite technology, and a lot of these systems are.

Design for consumer applications, so they would need to be modified for use in our type of mobile applications through stabilized platforms as well as maronites antennas.

But we think it's going to be a great opportunity to deliver a lot more bandwidth at better prices.

Okay and related to that you guys have obviously done some great work with antennas, where do you think the internet costs for those Leo constellations could realistically get down to as far as a cost per antenna.

Well it depends I think if if you try to do a true phased array there gonna be astronomically high.

I think the general consensus is that that's not practical for most consumer business type applications. It's it's more appropriate for aviation commercial aviation. So they if you use a hybrid approach or mechanical approach that can be made relatively expensive not as.

Not as inexpensive as today's antennas right. So today's antanas for for people will provide satellite.

Connectivity to the home, it's a simple fixed you know dish pointed in one spot in the skies nailed to the house, so it'll never be as cheap as that.

But the technology in general driven by volumes.

If they're smart about it will be should be affordable.

Alright, thanks, guys.

HM.

And at this time, we have no further questions in here and I would like to turn it back to Denise speakers.

Operator before before we and this is Don Riley.

When I was going to my prepared remarks, I misspoke and some a little a little when I was describing non-GAAP EPS I'd like to correct that before we end the call non-GAAP EPS in the third quarter was a positive six cents per share this year.

Compared to non-GAAP EPS loss of 12 cents per share last year. So just to clarify that in any way I'm sure people might be confused as I stumbled over those words.

But Martin.

No. Thanks, thanks for cleaning clearing that up and as always will be available after the call and available by E mail as well.

Thanks, everyone.

Have you seen gentlemen, this concludes today, Sir I bet you mean.

Okay.

[music].

[music].

[music].

[music].

Good day and welcome to the K P. H industries each quarter through 2020 earnings Conference call. Today's conference is being recorded at this time I'd like to turn the conference over to Don Riley Chief Financial Officer. Please go ahead Sir.

Thank you operator, good morning, everyone. Thanks for joining us today to discuss KVH Industries' third quarter results, which are included in the earnings release, we published this morning.

Yeah, let's call it <unk>, the company's Chief Executive Officer, and Brian <unk>, Our Chief operating officer.

The earnings release is available on our website and through our Investor Relations Department, If you would like to listen to what recording of todays call. You can access a webcast replay on our website.

If you are listening via the web feel free to submit questions to <unk> KVH Dot com.

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.

Undertake no obligation to update or revise any forward looking statements.

We will also discuss certain non-GAAP financial measures and you will find definitions of these measures in our press release as well as reconciliations of these non-GAAP measures to comparable GAAP measures.

Coverage you to review the cautionary statements made in our SEC filings specifically those under the heading risk factors in our second quarter form 10-Q filed on July 31st 2019 form 10-K, which was filed on February 28.

The Companys other SEC filings are available directly from the Investor Relations section of our website.

At this time I'd like to turn the call over to Martin Martin.

Thanks, Don Good morning, everyone. Thanks for joining us today.

Overall, we're very pleased with our results this quarter, which came in much better than expected.

Right. The pandemic, we stayed focused on executing our strategy and optimizing operations during the quarter. The quarter's revenue total was up 5% to 41.1 million compared to Q3 of last year, our gross margins rose significantly compared to the previous quarter.

Airtime revenue was up 9% and inertial navigation product and services revenue rose, 27% compared to last year.

We maintained our cost management discipline throughout the quarter.

Advertise managing our supply chain and our sales and service partners worldwide.

Due to travel and gathering restrictions, we eliminated in person trade shows and business travel it's scaled back other discretionary cost.

The lack of in person trade shows offered the means of reducing cost, but it also reduced opportunities for conversations with new prospects and building our pipeline.

However, we adapted rapidly to the world of virtual trade shows and conferences.

In house marketing team worked closely with sale and was able to pivot to focus on alternative to in person a bad.

Focusing instead on webinars and panels, while maintaining a strong digital and networking presence at these online events.

All these efforts paid off with one of our strongest third quarters in many years.

Our EBITDA for continuing operations was $3.4 million, that's a $4.6 million increase year over year. So.

So it's not really an improvement over a low revise cobot estimate.

We maintained a strong cash position of more than $40 million and entered Q4 with a backlog of almost 26 million.

At the start of the fourth quarter. We also ended the temporary salary and benefit reductions we've put in place six months ago.

As we have confidence that our current financial situation, the sales pipeline and operational stability.

Our Q3 results validate our strategy of diversification strong results across virtually all markets and product lines.

And whether our established worldwide service and support network, we're well positioned for the future.

Now, let's look at the details of our core markets, starting with mobile connectivity.

The leisure and commercial maritime markets appear to be withstanding the challenges caused by co bid over the last few quarters.

Commercial port calls have stabilized with an average of roughly 22000 poured visits a day and that's about 15% below historic levels.

Leisure marinas or open recreational boat is around the water throughout the summer and the Fort Lauderdale International boat show the world's largest in water boat show opened yesterday.

In this steadily improving business environment.