KVH reports marine market growth

MIDDLETOWN, R.I. – While KVH Industries, Inc., (Nasdaq: KVHI) third quarter didn’t meet its expectations, the company said growth in its marine business helped offset the impact of declines in other areas.

Revenue for the third quarter was $15.7 million, down 10 percent from the quarter ended Sept. 30, 2007, the company reported in a statement this morning. Net loss for the period was ($0.8) million.

For the nine months ended Sept. 30, revenue was $61.2 million or flat compared to the same nine-month period of 2007. KVH reported net income of $2.8 million for the 2008 period, versus net income of $1.5 million in the year-ago period.

"A combination of challenging economic conditions and a delay in two fiber optic gyro programs contributed to a third quarter that did not meet our expectations,” said Martin Kits van Heyningen, KVH's chief executive officer. “However, our diversified business model, including growth in marine product and airtime sales along with an increase in military navigation revenue, helped moderate the impact of these events. At the same time, we achieved major strategic milestones, including signing a new agreement to expand our mobile broadband service into the Pacific Ocean, adding defense-related backlog for 2009 and beyond, and making good progress in the development of our aeronautical satellite TV system."

In the third quarter of 2008, mobile communications revenue was $12.3 million, down 6 percent on a year-over-year basis, according to the company.

"Our marine revenue rose 22 percent over the same quarter last year with strong sales overseas and domestically. Among the key drivers in this market were TracPhone V7 antenna sales and the growth of our airtime service, which is steadily becoming a substantial recurring revenue source for the company," added Kits van Heyningen. "The expected addition of mini-VSAT Broadband coverage across the major Pacific Ocean shipping and aviation lanes in December 2008 should help us maintain our momentum. With this new coverage area, we will be capable of generating airtime revenue from a wider audience of commercial, leisure, and government vessels as well as in the future from business jets traveling through our network.

"Within the land mobile market, quarterly revenue was down 56 percent, with our sales into the recreational vehicle market substantially lower than our earlier, conservative projections. This market continues to be a challenge for KVH as well as others in the RV industry, where shipments of RVs are at an 11-year low through the end of August 2008."

KVH's defense-related guidance and stabilization sales were approximately $3.4 million in the third quarter of 2008, down 23 percent on a year-over-year basis.

"Looking ahead to the fourth quarter, we will be investing in infrastructure to support the rollout of our Pacific network hub and the start of mini-VSAT Broadband coverage in that region,” said Patrick Spratt, KVH's chief financial officer. “While the challenging economic climate and the exact timing of the resumption of FOG shipments add a level of uncertainty to our estimates, we still expect to return to year-over-year growth in the fourth quarter with revenue in the range of $20.0 million to $23.0 million and earnings per share of roughly $0.01 to $0.05."

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