KVH Industries Reports Third Quarter 2013 Results

KVH Industries Reports Third Quarter 2013 Results

  *Q3 revenue of $40.2M, EPS $0.09

  *mini-VSAT Broadband Q3 airtime revenue up 34% year-over-year

MIDDLETOWN, R.I., Oct. 30, 2013 (GLOBE NEWSWIRE) -- KVH Industries, Inc.,
(Nasdaq:KVHI) today reported financial results for the third quarter ended
September 30, 2013. The company reported third quarter revenue of $40.2
million and net income of $1.4 million or $0.09 per diluted share. During the
same period last year the company reported net income of $1.7 million, or
$0.12 per diluted share, on revenues of $38.8 million.

"The third quarter was highlighted with solid growth in our satellite service
business," said Martin Kits van Heyningen, KVH's chief executive officer. "We
are now shipping our new TracPhone V-IP series terminals with their Integrated
CommBox Modem providing onboard network management, VoIP calling, and Internet
café services as a standard option on every product we ship. We continue to
make good progress developing our new IP-MobileCast content delivery service,
which will offer movies, television, news, and sports to our customers."

For the nine months ended September 30, 2013, revenue was $123.3 million, up
26% compared to $97.6 million for the nine months ended September 30, 2012.
KVH reported GAAP net income of $4.9 million for the first nine months of
2013, or $0.32 per diluted share. Excluding the Headland Media
acquisition-related costs, net of income tax benefit, incurred in the second
quarter, the company recorded non-GAAP net income of $5.6 million or $0.37 per
diluted share. During the same period last year, the company reported GAAP net
income of $0.8 million, or $0.05 per diluted share. A reconciliation between
net income on a GAAP basis and net income on a non-GAAP basis is provided
below.

KVH's mobile communications revenue, which included $3.3 million of revenue
from Headland Media's operations, was $29.0 million in the third quarter of
2013, a 31% increase year-over-year. Combined, mini-VSAT Broadband airtime and
TracPhone product revenues in the third quarter amounted to $18.1 million, up
25% compared to the same period last year while maritime satellite TV sales
were up 5% year-over-year. "Although we saw increases in our global mobile
broadband revenues, continuing poor economic conditions in many parts of
Europe resulted in lower revenues in the European marine markets with shipping
companies continuing to delay equipment upgrades," continued Mr. Kits van
Heyningen.

KVH's guidance and stabilization revenue, which relates to fiber optic gyro
(FOG) solutions, TACNAV military navigation systems, and related services, was
$11.2 million in the third quarter of 2013, down 33% year-over-year. Revenue
from the sale of TACNAV products of $2.6 million was 59% lower than the same
period last year. TACNAV product revenues under the previously announced Saudi
Arabian National Guard contract ended in the second quarter of 2013. Revenue
in the third quarter from this contract was $2.2 million, primarily comprised
of lower margin installation services and project management services. In the
third quarter of 2012, we reported $7.3 million of revenue under this
contract, including $4.5 million of higher margin TACNAV product. During the
third quarter, sales of our FOG products were $5.8 million, down 17% compared
to the same period last year.

Speaking about the company's financial performance, Peter Rendall, KVH's chief
financial officer, said, "We continue to be pleased with the financial
performance of our mobile communications and commercial FOG businesses and
while the year-over-year decline in revenues in our TACNAV business was
significant, it was expected. The year-over-year decrease in FOG revenues
primarily relate to U.S. government funding cuts that have significantly
slowed orders under the CROWS remote weapon station program. Even though our
year-over-year guidance and stabilization revenues were down, our mini-VSAT
Broadband airtime revenues were up 34% and that contributed to the 120 basis
point increase we saw in our overall gross profit margin this quarter. The
leverage of our mini-VSAT Broadband airtime infrastructure costs resulted in
mini-VSAT Broadband gross profit margins increasing from 31% in the third
quarter last year to 36% this quarter."

Mr. Rendall added, "We also saw a full quarter's contribution from the
Headland Media business that we acquired in the second quarter. The
integration of that business into the mobile communications business is now
complete. The $2.1 million increase in operating expenses we recorded this
quarter compared to the same quarter last year was largely the result of
incremental Headland Media operating expenses."

"Planning for the remainder of 2013, we expect our mini-VSAT Broadband
business to continue to show strong year-over-year growth. Although we
continue to see a slowdown in U.S. defense sales resulting from the
implementation of sequestration measures, our FOG business is expected to
continue to benefit from new commercial applications for the remainder of
2013. Continuing a trend we have seen throughout 2013, we remain cautious with
respect to expectations for growth in leisure markets, due to ongoing
challenges in global economies. Operating expenses will be sequentially higher
in the fourth quarter as we invest in the roll-out of the new IP-MobileCast
service. With this context, our full-year revenue guidance is in the range of
$161 million to $165 million. We expect to achieve a full-year operating
margin in the range of approximately 4% to 5%. We are projecting that our
annual effective tax rate will be 35% or higher, subject to the effect of
unforeseen discrete items. The net result is that, including the Headland
Media acquisition-related costs, net of income tax benefit (which equated to
$0.05 per share), our GAAP EPS guidance for the full year is now expected to
be in the range of $0.37 to $0.41 per share."

"For the fourth quarter of 2013, we expect revenue to be in the range of $38
million to $42 million, reflecting strong year-over-year growth from our
mini-VSAT Broadband business and a marked decline in sales of TACNAV products.
We expect the fourth quarter EPS to be in the range of $0.05 to $0.09 per
share."

Mr. Kits van Heyningen concluded, "We are very pleased with our overall
progress so far this year and, with the acquisition and integration of
Headland Media. Our airtime business continues to grow and we are on track to
deliver exciting new content and services alongside our global broadband
service."

Recent Operational Highlights:
          
10/21/2013 New DSP-1760 multi-axis fiber optic gyro offers improved
           performance and maximum ease of integration
          
10/03/2013 KVH wins two prestigious National Marine Electronics Association
           "product awards"
          
07/29/2013 KVH announces that it has more than doubled the mini-VSAT Broadband
           network capacity in the Asia-Pacific region
          
07/18/2013 KVH announces that Crewtoo, which focuses on seafarers, gains
           60,000 members in 12 months

Please review the corresponding press releases for more details regarding
these developments.

KVH is webcasting its third quarter conference call live at 10:30 a.m. Eastern
time today through the company's website. The conference call can be accessed
at investors.kvh.com and listeners are welcome to submit questions pertaining
to the earnings release and conference call to ir@kvh.com.The audio archive
and an MP3 podcast will also be available on the company website within three
hours of the completion of the call.

About KVH Industries, Inc.

KVH Industries is a leading manufacturer of solutions that provide global
high-speed Internet, television, and voice services via satellite to mobile
users at sea, on land, and in the air. KVH's Headland Media group is a
leading provider of commercially-licensed news, sports, music, and movies, as
well as the Walport Training video series. KVH is based in Middletown, RI,
with facilities in Illinois, Denmark, Norway, the U.K., Singapore, the
Philippines, Belgium, Holland, Cyprus, and Japan.

This press release contains forward-looking statements that involve risks and
uncertainties.For example, forward-looking statements include statements
regarding our financial goals for future periods, and our anticipated revenue
growth, competitive positioning, profitability, and product orders.The actual
results we achieve could differ materially from the statements made in this
press release.Factors that might cause these differences include, but are not
limited to: the impact of extended economic weakness and increasing fuel
prices on the sale and use of motor vehicles and marine vessels, particularly
in Europe; potential unanticipated technical or legal impediments related to
new service rollout plans and expected strategic relationships; the need to
increase sales of the TracPhone V-IP series products and related services to
improve airtime gross margins; the need for, or delays in, qualification of
products to customer or regulatory standards; unanticipated declines or
changes in customer demand, due to economic, seasonal, and other factors,
particularly with respect to the TracPhone V-IP series products; potential
further declines in military sales, including to foreign customers, such as
the recent decline in sales of TACNAV to the Saudi Arabian National Guard; the
unpredictability of defense budget priorities as well as the order timing,
purchasing schedules, and priorities for our defense products, including
possible order cancellations; the uncertain impact of actual and potential
budget cuts by government customers, including the effects of sequestration;
potential reductions in our overall gross margins in the event of a shift in
product mix; unanticipated increases in media costs or loss of distribution
rights; unanticipated challenges in integrating the operations of Headland
Media; and currency fluctuations, export restrictions, delays in procuring
export licenses, and other international risks.These and other risk factors
are discussed in more detail in our most recent Form 10-Q filed with the SEC
on August 9, 2013. Copies are available through our Investor Relations
department and website, http://investors.kvh.com. We do not assume any
obligation to update our forward-looking statements to reflect new information
and developments.

KVH Industries, Inc., has used, registered, or applied to register its
trademarks in the USA and other countries around the world, including the
following marks: KVH, KVH logo, Azimuth, TracVision, TracPhone, Tri-Americas,
CommBox, TACNAV, Sailcomp, mini-VSAT Broadband and the mini-VSAT Broadband
logo, E•Core, Crewtoo, Muzo, and the banded, dome-shaped housing of its
satellite antennas.Other trademarks are the property of their respective
companies.




KVH INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts, unaudited)
                                                                    
                                        Three Months Ended  Nine Months Ended
                                        September 30,       September 30,
                                        2013       2012     2013    2012
Sales:                                                             
Product                                  $ 20,331   $ 24,529 $ 71,433 $ 62,653
Service                                  19,885     14,293   51,907   34,916
Net sales                                40,216     38,822   123,340  97,569
                                                                  
Costs and expenses:                                                
Costs of product sales                   11,780     13,297   39,999   37,026
Costs of service sales                   11,909     10,035   33,019   22,659
Research and development                 3,334      2,949    9,534    9,148
Sales, marketing and support             6,344      6,360    20,828   17,239
General and administrative               4,774     3,040   13,084   8,906
Total costs and expenses                 38,141    35,681  116,464 94,978
                                                                  
Income from operations                   2,075      3,141    6,876    2,591
                                                                  
Interest income                          199        147      572      359
Interest expense                         189        76       450      243
Other income, net                        212       23      290      99
                                                                  
Income before income tax expense         2,297      3,235    7,288    2,806
Income tax expense                       911       1,490   2,390    1,983
Net income                                $ 1,386 $ 1,745 $ 4,898 $ 823
                                                                  
Net income per common share:                                       
Basic                                    $ 0.09     $ 0.12   $ 0.32   $ 0.06
Diluted                                  $ 0.09     $ 0.12   $ 0.32   $ 0.05
                                                                  
Weighted average number of common shares                           
outstanding:
Basic                                    15,200     14,846   15,109   14,743
Diluted                                  15,354     15,024   15,300   14,972




KVH INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATEDBALANCE SHEETS
(in thousands, unaudited)
                                                             
                                                September 30, December 31,
                                                2013          2012
ASSETS                                                        
                                                             
Cash, cash equivalents and marketable securities $ 57,577      $ 38,285
Accounts receivable, net                         25,731        27,654
Inventories                                      18,133       16,203
Deferred income taxes                            712          1,146
Other current assets                             3,891        3,264
Total current assets                             106,044      86,552
                                                             
Property and equipment, net                      36,706        36,733
Deferred income taxes                            38            3,524
Goodwill                                         18,086        4,712
Intangible assets, net                           15,181        1,684
Other non-current assets                         4,972         4,363
                                                             
Total assets                                     $ 181,027     $ 137,568
                                                             
LIABILITIES AND STOCKHOLDERS' EQUITY                          
Accounts payable and accrued expenses            $ 21,399      $ 19,280
Deferred revenue                                 5,468         1,892
Current portion of long-term debt                1,044         138
Total current liabilities                        27,911        21,310
                                                             
Other long-term liabilities                      1,121         140
Long-term debt, excluding current portion        6,407         3,414
Line of credit                                   30,000        7,000
Stockholders' equity                             115,588       105,704
                                                             
Total liabilities and stockholders' equity       $ 181,027     $ 137,568




KVH INDUSTRIES, INC. AND SUBSIDIARIES
RECONCILIATION OF NET INCOME TO ADJUSTED NET INCOME
Net Income Excluding Transaction Costs and Income Tax
Benefit Related to Business Acquisition
(in thousands, except per share amounts, unaudited)
                                                          
                                        Three Months Ended Nine Months Ended
                                        September 30, 2013 September 30, 2013
                                                          
Net Income - GAAP                        $1,386           $4,898
                                                          
Transaction costs related to business    11                876
acquisition of Headland Media
Tax benefit from transaction costs
related to business acquisition of                         (152)
Headland Media
                                                          
Net Income - Non-GAAP                    $1,397           $5,622
                                                          
Net income per common share - Non-GAAP:                    
Basic                                    $0.09            $0.37
Diluted                                  $0.09            $0.37

Adjusted net income excluding the transaction costs related to the acquisition
of Headland Media on May 11, 2013, for the three and nine months ended
September 30, 2013 is presented in the table above. This is a non-GAAP
financial measure and should not be considered a replacement for GAAP results.
We believe the adjusted information is useful to investors because it is
reflective of underlying operational trends, as it excludes significant
non-recurring or otherwise unusual transactions as described above. Our
criteria for adjusted net income may differ from models used by other
companies and should not be considered as an alternative to net income
prepared in accordance with GAAP as an indicator of our operating
performance.


CONTACT: KVH Industries, Inc.
         Peter Rendall
         401-847-3327
         prendall@kvh.com
        
         FTI Consulting
         Christine Mohrmann
         212-850-5600

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