Credit: KVH

PARIS — Maritime satellite connectivity hardware and service provider KVH Industries reported a doubling of revenue from its no-commitment, connectivity-as-a-service AgilePlans offer, introduced in April 2017, but cautioned that the business will continue to incur operating losses as it moves from conventional to high-throughput (HTS) satellites.

Similar to what satellite broadcasters face in the transition to HD format, KVH will need to maintain its current legacy network of satellite capacity, contracted with Viasat Inc. and others, until it moves its customer base to HTS.

The operating loss includes a $2.2 million reserve, booked in the April-June quarter, on its TracPhone V-IP product line, which is being dropped as KVH focuses on the HTS service. Credit: KVH

“We expect to incur substantial losses in the near future as we continue to bear the expenses of maintaining two satellite networks during the transition of our mini-VSAT customers” to HTS, KVH said in an Oct. 30 filing with the U.S. Securities and Exchange Commission (SEC).

KVH said it is also seeing an increase in customers cancelling or suspending service, especially for oil-service vessels with the drop in crude-oil prices.

 

For the three months ending Sept. 30, KVH reported a 15% increase in mini-VSAT broadband subscribers and an 11% increase in associated revenue compared the same period a year ago.

Credit: KVH

For the nine months ending Sept. 30, KVH reported total mobile connectivity revenue of $92 million, up 6.6% from a year earlier. Services accounted for 74% of that revenue and were up 8%. Product sales, expected to decline as AgilePlans takes hold, were up 2%.

The company said AgilePlans now accounts for 24% of KVH subscribers and were 70% of is commercial maritime VSAT shipments in the three months ending Sept. 30.

“This is remarkable, considering that we launched AgilePlans just over two years ago,” KVH Chief Executive Martin Its van Heyningen said in an Oct. 30 investor call. He said he expected that AgilePlans take-up among subscribers would remain around 70%, reflecting the fact that not all customers want that kind of service.

“We still have customers who prefer to purchase” the VSAT hardware,” Kits van Heyningen said. “We don’t really care as long as we get the subscriber.”

KVH is introducing two new services, a lower-bandwidth IoT service, called KVH Watch, for remote equipment monitoring and maintenance; and the TracVision UHD 7 service that employs KVH’s Triad antenna that receives Ku- and Ka-band signals from three DirecTV satellites at once.

The IoT service is entering service trials with inaugural customer Kongsberg Digital.

KVH said the cost of sales in its mobile connectivity division increased 9% in the three months ending Sept. 30, mainly because of increased airtime cost as it adds HTS satellite capacity.

KVH launched its HTS service with satellite fleet operators Intelsat and Sky Perfect JSat. Its global footprint includes capacity from Telesat Canada, EchoStar, Hispasat, SES, Eutelsat, Nilesat, Measat and Indosat of Indonesia.

The company is a reseller of mobile satellite services provided by Iridium and Inmarsat, even as it competes with both those companies for IoT and broadband customers.

In addition to these two companies, KVH’s competitors include Marlink, Speedcast and Global Eagle Entertainment.

Competitors on the hardware side include Intellian, Cobham Satcom, Orbit Communications Systems, Jotron AS, KNS and AddValue.

The company said it was ready to absorb the impact on operating margins on behalf of securing a global HTS footprint.

“We intend to continue to invest in the mini-VSAT broadband network on a global basis,” it said in its SEC filling. “[W]e would plan to seek to acquire additional satellite capacity from satellite operators.. and hire additional personnel.”