Q3 2024 KVH Industries Inc Earnings Call

November 7, 2024

Good day, and thank you for standing by welcome to the Katy H Industries third quarter 2024 earnings Conference call.

At this time all participants are in a listen only mode.

After the speaker's presentation, there will be a question and answer session.

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Please be advised that today's conference is being recorded.

Speaker Change: I would now like to hand, the conference over to your first speaker today, Anthony Pike, Chief Financial Officer. Please go ahead.

Anthony Pike: Thank you Andrea.

Anthony Pike: Good morning, everyone and thank you for joining us today, the caveats Industries' third quarter results, which are included in the earnings release, we published earlier this morning.

Joining me on the call is the Companys Chief Executive Officer, Brent Bruun.

Before I get into the numbers a few standard statements.

Firstly, if you would like a copy of the earnings release.

You'd like to listen to a recording of today's call both will be available on our website and if you are listening via the web please feel free to submit questions to IR at <unk>.

<unk> Dot com.

Anthony Pike: Further this conference call will contain certain forward looking statements that are subject to numerous assumptions and uncertainties that may cause our actual results to differ materially from those expressed in these statements.

Speaker Change: We undertake no obligation to update or revise any of these statements.

Speaker Change: We will also discuss adjusted EBITDA, which is a non-GAAP financial measure.

Speaker Change: Youll find the definition of this measure in our press release as well as a reconciliation to comparable GAAP numbers.

Speaker Change: We encourage you to review the cautionary statements made in our SEC filings specifically those under the heading risk factors in our Q3 2020 for Form 10-Q, which will be filed later today.

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

Brendan: Now to walk you through the highlights of our third quarter I will turn the call over to Brendan.

Brendan: Thank you Anthony and good morning, everyone.

Speaker Change: to the world like I talked about on the call with Argentina and Colombia and remote parts of the U.S. And we very well may expand to other regions, you know, we have a sales team located in Africa along with service providers and we're looking at opportunities there as well.

Thanks for watching!

And what prodded the...

Speaker Change: We're going to move to look at the land market, which, as you mentioned, is not a...

I'll be back in a minute.

Well, yeah, it'd be cool.

Speaker Change: The fact that we were able to easily get into the market using Starlink.

Speaker Change: The fact that we have an established presence in these regions, that we have an internal processes as far as activations and billing already in place, is basically an adjacent market which is very easy to step into.

Great.

Speaker Change: Also just to follow up I mean we see the the prepaid that popped up from the pre-commitment on Starlink

How should we think about the runoff of that?

I think you had mentioned previously.

Speaker Change: No, we previously said more than a year and we're not being overly exact but you know I would anticipate seeing a good portion of that running off in 2025, if not all of it.

Absolutely.

Gotcha.

Anthony Pike: And Anthony, it looks like the inventories have actually trended up since the start of the year.

here, can you explain that phenomenon?

Speaker Change: Yes, sure. So, I think as we announced in Q1, we're working on this final build-out and part of that is to bring in all the remaining raw materials required.

Speaker Change: you know a little bit longer and we'll be we'll be building

product through, you know, through next year.

Speaker Change: but really the increase has been where we've been bringing the raw materials in.

Speaker Change: primarily and the increase this quarter for example of 2.5 million

Brendan: you know we we brought in the vast majority of those build-out materials but also

Brendan: The Starlink inventory is up just short of 2 million quarter-on-quarter so that really accounts for the entire increase really.

Speaker Change: And likewise, on the OPEC side, this was sort of a record low R&D in the quarter, albeit you know, you've shed businesses, you know, that were previously contributing to that total. Is this a sort of a roundabout good quarterly run rate or when you look out?

you know, maybe in

Speaker Change: in the next year or two, do you see the need for...

you know major R&D investments and presumably they would

be more on the software side than where.

We have.

and appropriately sized

Speaker Change: R&D team, so I wouldn't see adding to that. We have applications engineers, electrical engineers, mechanical engineers, software engineers. We have our bases covered.

Brendan: So I would not anticipate any increase in R&D spend and the run rate of what was approximately $10 million, right? Yeah, when you strip out the impairment, $10 million is pretty much where we're at.

Brendan: Yeah, we're focused on trying to find yet a bit more improvement there.

Speaker Change: Great. And maybe final question, you mentioned that OneWeb is finally coming online for you.

Speaker Change: you know, how has the pipeline moved for you in the last, you know, say three to six months on that product and can you maybe just talk, you know, high level around how you're positioning it with customers relative to Starlink?

Well, it's early days.

Speaker Change: First and foremost, it won't necessarily be positioned against Starlink. We talk about a hybrid

service offering.

Brendan: And right now we're focused on doing Starlink with VSAT, but that doesn't mean that we couldn't have redundancy and alternative paths onboard a network with a OneWeb and a Starlink solution.

Brendan: You know, it's been a little slow out of the gate from a one-way perspective getting service going So until we're not we haven't really

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Brendan: established significant penetration in pipeline just yet because we're waiting to get the service launched.

We will share more of that in the year-end call.

Speaker Change: Great, and I guess I forgot to say, but you know, congrats on the results here. It looks like you guys have executed the turn with a, you know, pretty bold shift in business strategy, so keep up the good work.

Thank you for saying so, Chris.

Thank you.

Speaker Change: Thank you. I'm showing no further questions at this time. Thank you for your participation in today's conference. This concludes the program. You may now disconnect.

Chris Quilty, Ryan Koontz, Christopher Quilty

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