KVH swings to $2.6M loss in ‘difficult’ Q1

By Ted Nesi
PBN Web Editor

MIDDLETOWN – KVH Industries Inc. today announced that it lost money in the first quarter, as the firm’s revenue dropped 21 percent compared with the same period last year.

KVH (Nasdaq: KVHI) posted a first-quarter net loss of $2.6 million, or 18 cents a share, on revenue that fell 21 percent year-over-year to $18.3 million. A year ago, the company posted a profit of $1.6 million, or 11 cents a share.

The loss was in line with a warning about falling sales that the company issued on April 8.

In a statement, KVH founder and CEO Martin Kits van Heyningen blamed the recession for the weak results. “We just completed a difficult quarter in an extremely challenging economic environment that put significant pressure on sales of our satellite products into the leisure land and marine markets,” he said.

“However,” he continued, “we believe the first quarter offered evidence that our strategic growth drivers are gaining ground and establishing a foundation for long-term success.”

From January through March, KVH said its mobile communications revenue fell 39 percent to $11 million, compared with a year earlier. Kits van Heyningen said most of the decline stemmed from a drop in sales of the company’s TracVision product for new leisure boats and vehicles.

“The deteriorating economic conditions and their impact on first quarter sales of boats, cars and recreational vehicles significantly affected the sales of our mobile satellite television products to the leisure markets,” Kits van Heyningen said. But he said the company saw “continued strength” in first-quarter sales of its TracPhone V7 satellite communications system and mini-VSAT Broadband service.

KVH did see a big increase in sales of its defense products, which increased 43 percent to $7.2 million, compared with a year earlier, led by demand for its fiber optic gyro and TACNAV military navigation systems.

Patrick Spratt, KVH’s chief financial officer, echoed Kits van Heyningen, saying “the pressure on sales to the leisure markets was much more pronounced than expected.” Gross margins suffered due to falling sales, discounting and inventory increases, Spratt said.

Spratt also said the company paid off the original mortgage on its Middletown headquarters during the first quarter, and took out a new $4 million mortgage on it earlier this month.

“Our balance sheet remains solid and we continue to invest in new products and the necessary infrastructure to support the rollout of the mini-VSAT Broadband global network,” Spratt said.

Spratt cautiously predicted that the company’s results for the current quarter would show an improvement over the first quarter, but added that “in this environment, any prediction is uncertain.”

The company also mentioned that it received more than $5 million in new orders earlier this month.

In 2008, KVH posted an annual profit of nearly $3.1 million, up 22 percent from the previous year, on sales that grew 1.8 percent to $82.4 million.

KVH Industries Inc. (Nasdaq: KVHI) – an ISO 9001-certified company – is a maker of live mobile media systems and navigation and guidance systems for defense and civilian use. Additional information about the company is available at www.kvh.com.