KVH INDUSTRIES INC \DE\ Q1 FY2025 earnings call

• First quarter results reflected positive impact of strategic initiatives; gross profit grew sequentially compared to Q4 last year. • Subscriber base increased by 5%, operating and capital expenditures were in check. • Starlink revenue continued to rise as a percentage of total revenue; quarterly shipments of connectivity terminals exceeded 1,300 units for the fifth consecutive record quarter, including significant increase in Starlink terminals, TracNet and TracFone VSAT terminals, and first-time OneWeb terminals. • Subscribing vessels increased by 5% from Q4 2024 to over 7,400, with Starlink driving growth in commercial and leisure markets. • CommBox Edge Communications Gateway shipments were up 33% from Q4 last year, and active subscribers increased by 35%; launched CommBox Edge Secure Suite for cybersecurity threat detection. • Began shipments and activations of OneWeb terminals in late January, with significant interest outside the U.S. • Sales of headquarters and factory facilities remain pending, expected to close headquarters before end of quarter and factory in Q3 after zoning approvals. • Bought back over 30,000 shares under stock repurchase program in Q1.

In Q1 2025, KVH Industries' revenue was $25.4 million, primarily down due to lower VSAT airtime service revenue, including the loss of U.S. Coast Guard revenue. Starlink revenue continued to increase as a percentage of total revenue. Airtime gross margin was 31.5% in Q1, up from 28.2% in the prior quarter, with airtime gross margin excluding depreciation at 44.1% compared to 41.4% in the prior quarter. CommBox Edge product shipments were up 33% from the previous quarter, and active CommBox Edge subscribers increased by 35%. Reported Q1 product gross profit was breakeven compared to a positive $0.3 million in the prior quarter excluding nonrecurring charges.

• Expect to close sale of headquarters before end of Q1 and factory sale in Q3 following zoning approvals. • Anticipate being free cash flow positive in 2025. • Continue with stock repurchase program, with more buybacks expected in future quarters.

• Uncertainty around tariffs; exposure to potential tariffs on imports from China reduced but still a risk. • GEO bandwidth commitments running until end of 2026 could continue to put pressure on GEO margins.

Q: About LEO margins, how much is from airtime versus value-added services?

A: The vast majority of the margin is from the actual airtime, with value-added services like One Care having similar margins but the underlying LEO bandwidth margin being very strong.

Q: Where do SpaceX plans sit in terms of optimization for customers?

A: Current plans are well optimized, but SpaceX has changed pricing with a monthly terminal access charge, and KVH will renegotiate follow-on pool later this year.

Q: Concerns about slowdown in terminal shipments?

A: Rate may not keep up, but market is much larger with new products like Starlink Mini, so no immediate saturation expected.

Q: Expansion beyond maritime market?

A: Existing sales team handles land-based applications, identifying and signing up service providers for land opportunities.

Q: Coast Guard contract roll-off?

A: Revenue from Coast Guard was around $2.5 million per quarter in first three quarters last year, with a final $0.5 million payment in last quarter, and minimal revenue this year.

Q: Buyback plans given expected free cash flow positive in 2025?

A: Continuing to buy back shares daily, with larger number expected in next quarter.