KVH Industries, Inc. reports 150% EBITDA growth in 2018 and 1.9 pp EBITDA Margin growth from 1.4% to 3.3%
03/01/2019 • About KVH Industries, Inc. (
$KVHI) • By InTwits
KVH Industries, Inc. reported 2018 financial results today. Here are the key drivers of the company's long term financial model:
- EBITDA Margin is quite volatile: 3.3% in 2018, 1.4% in 2017, 6.4% in 2016, 8.6% in 2015, 6.9% in 2014
- KVH Industries, Inc. has medium CAPEX intensity: 5 year average CAPEX/Revenue was 5.3%. At the same time it's in pair with industry average of 7.4%
- CAPEX is quite volatile: $16m in 2018, $13m in 2017, $6m in 2016, $6m in 2015, $5m in 2014
- The company has unprofitable business model: ROIC is -4.9%
- It operates with medium-size leverage: Net Debt/EBITDA is 2.0x while industry average is -0.5x
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
The company's Revenue increased on 6.7%. Revenue growth showed acceleration in 18Q4 - it increased 12.2% YoY. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased slightly on 1.4 pp from 1.1% to 2.5% in 2018.
Gross Margin decreased on 2.3 pp from 43.7% to 41.4% in 2018. SG&A as a % of Revenue decreased on 2.4 pp from 39.2% to 36.8% in 2018.
Net Income margin increased on 2.1 pp from -6.9% to -4.8% in 2018.
Investments (CAPEX, working capital and M&A)
KVH Industries, Inc.'s CAPEX/Revenue was 9.3% in 2018. The company's CAPEX/Revenue increased on 6.2 pp from 3.1% in 2015 to 9.3% in 2018. Average CAPEX/Revenue for the last three years was 6.8%. The company investments to CAPEX were large: 279% of EBITDA. CAPEX as a % of Revenue stuck to a growing trend at 1.8 pp per annum in the last 5 years.
Return on investment
The company operates at negative ROIC (-4.9%) and ROE (-8.0%). ROIC showed almost no change in 2018. ROE increased on 2.4 pp from -10.4% to -8.0% in 2018. ROIC stuck to a declining trend at -1.9 pp per annum in the last 5 years.
Leverage (Debt)
Company's Net Debt / EBITDA is 2.0x and Debt / EBITDA is 5.2x. Net Debt / EBITDA dropped on 3.5x from 5.5x to 2.0x in 2018. Debt dropped on 37.6% while cash dropped on 47.8%.
KVH Industries, Inc. has no short term refinancing risk: cash is higher than short term debt (181.8%).
Management team
KVH Industries, Inc.'s CEO is Martin A Kits Van Heyningen. Martin A Kits Van Heyningen is a founder and has 12 years tenure with the company. Donald W Reilly "Don" is a KVH Industries, Inc.'s CFO. Donald W Reilly "Don" has spent 2 years at the company.
Financial and operational results
FY ended 12/31/2018
KVH Industries, Inc. ($KVHI) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 172.6 | 184.6 | 176.1 | 160.1 | 170.8 | 6.7% |
| Gross Profit | 73.4 | 82.4 | 76.8 | 69.9 | 70.7 | 1.1% |
| SG&A | 57.4 | 65.2 | 62.1 | 62.8 | 62.9 | 0.1% |
| EBITDA | 11.9 | 15.9 | 11.2 | 2.3 | 5.7 | 150.5% |
| Net Income | 0.0 | 2.3 | -7.5 | -11.0 | -8.2 | |
Balance Sheet
|
|---|
| Cash | 25.3 | 22.7 | 26.4 | 34.6 | 18.1 | -47.8% |
| Short Term Debt | 6.2 | 6.6 | 7.9 | 2.5 | 9.9 | 300.0% |
| Long Term Debt | 64.7 | 58.1 | 50.2 | 44.6 | 19.4 | -56.4% |
Cash flow
|
|---|
| Capex | 5.1 | 5.7 | 5.6 | 12.8 | 15.9 | 24.3% |
Ratios
|
|---|
| Revenue growth | 6.3% | 7.0% | -4.6% | -9.1% | 6.7% | |
| EBITDA growth | -2.1% | 33.7% | -29.4% | -79.8% | 150.5% | |
|
|---|
| Gross Margin | 42.6% | 44.6% | 43.6% | 43.7% | 41.4% | -2.3% |
| EBITDA Margin | 6.9% | 8.6% | 6.4% | 1.4% | 3.3% | 1.9% |
| SG&A, % of revenue | 33.3% | 35.3% | 35.3% | 39.2% | 36.8% | -2.4% |
| Net Income Margin | 0.0% | 1.2% | -4.3% | -6.9% | -4.8% | 2.1% |
| CAPEX, % of revenue | 3.0% | 3.1% | 3.2% | 8.0% | 9.3% | 1.3% |
|
|---|
| ROIC | 1.1% | 1.7% | -0.7% | -5.3% | -4.9% | 0.4% |
| ROE | 0.0% | 1.9% | -6.7% | -10.4% | -8.0% | 2.4% |
| Net Debt/EBITDA | 3.8x | 2.6x | 2.8x | 5.5x | 2.0x | -3.5x |
KVH Industries, Inc. ($KVHI) key quoterly financial indicators
| mln. $ | 18Q1 | 18Q2 | 18Q3 | 18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 40 | 39 | 44 | 44 | | -0.3% | -4.5% | 7.6% | 12.2% |
| EBITDA | -0 | 1 | 2 | 1 | | | -51.2% | 140.8% | -11.3% |
| Net Income | -4 | -1 | -1 | -2 | | | | | |
Balance Sheet
|
|---|
| Cash | 38 | 35 | 33 | 18 | | 28.5% | 13.5% | -7.0% | -47.8% |
| Short Term Debt | 2 | 5 | 23 | 10 | | 0.4% | 101.5% | 815.3% | 300.0% |
| Long Term Debt | 42 | 39 | 20 | 19 | | -10.2% | -15.8% | -55.2% | -56.4% |
Ratios
|
|---|
| Gross Margin | 43.3% | 37.0% | 42.2% | 39.1% | | 2.5% | -7.6% | -1.0% | -6.9% |
| EBITDA Margin | -0.3% | 1.7% | 5.2% | 3.4% | | 3.9% | -1.6% | 2.9% | -0.9% |
| Net Income Margin | -9.7% | -3.5% | -2.7% | -4.2% | | 2.4% | 1.5% | 3.3% | 0.2% |
Peers in Communications Equipment
Below you can find KVH Industries, Inc. benchmarking vs. other companies in Communications Equipment industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.
Top companies by Revenue growth, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Ribbon Communications Inc. ($RBBN) | | | | 30.6% | 75.2% |
| Extreme Networks, Inc. ($EXTR) | | 6.4% | -4.4% | 13.2% | 64.4% |
| Optical Cable Corporation ($OCC) | | -11.3% | -12.2% | -0.8% | 37.0% |
| ParkerVision Inc ($PRKR) | | | 37,601.2% | -97.5% | 35.0% |
| Network-1 Technologies, Inc. ($NTIP) | | 34.6% | 292.9% | -74.7% | 34.4% |
| |
|---|
| Median (66 companies) | | -0.4% | 7.6% | 5.6% | 2.8% |
|---|
| KVH Industries, Inc. ($KVHI) | | 7.0% | -4.6% | -9.1% | 6.7% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| F5 Networks, Inc. ($FFIV) | 82.1% | 82.7% | 83.1% | 83.1% | 83.3% |
| Radware Ltd. ($RDWR) | 82.1% | 82.4% | 81.8% | 81.3% | 82.2% |
| Radcom Ltd. ($RDCM) | 63.2% | 76.8% | 69.6% | 71.8% | 74.0% |
| Casa Systems, Inc. ($CASA) | | 70.8% | 69.1% | 73.4% | 73.4% |
| NetScout Systems, Inc. ($NTCT) | 78.7% | 79.2% | 65.6% | 70.2% | 72.4% |
| |
|---|
| Median (67 companies) | 41.4% | 41.3% | 43.9% | 41.0% | 40.5% |
|---|
| KVH Industries, Inc. ($KVHI) | 42.6% | 44.6% | 43.6% | 43.7% | 41.4% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Network-1 Technologies, Inc. ($NTIP) | 35.5% | 33.7% | 50.6% | 37.8% | 42.8% |
| InterDigital, Inc. ($IDCC) | 50.8% | 58.1% | 73.6% | 67.3% | 41.9% |
| EchoStar Corporation ($SATS) | 25.7% | 39.7% | 40.3% | 38.1% | 37.4% |
| Ubiquiti Networks, Inc. ($UBNT) | 34.7% | 25.5% | 37.3% | 34.3% | 32.8% |
| Ituran Location and Control Ltd. ($ITRN) | 32.4% | 30.5% | 29.9% | 29.9% | 30.4% |
| |
|---|
| Median (65 companies) | 5.3% | 4.7% | 5.5% | 6.5% | 5.4% |
|---|
| KVH Industries, Inc. ($KVHI) | 6.9% | 8.6% | 6.4% | 1.4% | 3.3% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Resonant Inc. ($RESN) | | | 132.5% | 124.8% | 245.2% |
| ViaSat, Inc. ($VSAT) | 22.8% | 26.5% | 26.7% | 33.0% | 32.1% |
| Applied Optoelectronics, Inc. ($AAOI) | 31.5% | 30.1% | 19.0% | 17.5% | 26.9% |
| EchoStar Corporation ($SATS) | 19.7% | 43.8% | 39.9% | 30.9% | 26.5% |
| Finisar Corporation ($FNSR) | 11.3% | 11.9% | 9.4% | 9.7% | 16.8% |
| |
|---|
| Median (65 companies) | 2.2% | 2.2% | 1.9% | 1.8% | 1.6% |
|---|
| KVH Industries, Inc. ($KVHI) | 3.0% | 3.1% | 3.2% | 8.0% | 9.3% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| F5 Networks, Inc. ($FFIV) | 33.9% | 40.8% | 43.1% | 46.9% | 47.9% |
| Ubiquiti Networks, Inc. ($UBNT) | 61.4% | 31.5% | 41.5% | 38.5% | 39.1% |
| Motorola Solutions, Inc. ($MSI) | -16.1% | 18.9% | 26.4% | 39.5% | 35.3% |
| Ituran Location and Control Ltd. ($ITRN) | 50.9% | 46.8% | 50.1% | 48.5% | 35.1% |
| Casa Systems, Inc. ($CASA) | | | 43.2% | 39.7% | 21.9% |
| |
|---|
| Median (70 companies) | 2.1% | 2.3% | 2.4% | 2.2% | 0.7% |
|---|
| KVH Industries, Inc. ($KVHI) | 1.1% | 1.7% | -0.7% | -5.3% | -4.9% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Extreme Networks, Inc. ($EXTR) | | | -2.2x | -1.5x | 7.1x |
| ViaSat, Inc. ($VSAT) | 3.4x | 2.5x | 3.2x | 2.5x | 5.8x |
| CommScope Holding Company, Inc. ($COMM) | 2.3x | 9.6x | 4.3x | 4.6x | 4.4x |
| Inseego Corp. ($INSG) | | | | | 3.9x |
| Finisar Corporation ($FNSR) | -0.3x | 0.2x | -0.5x | 1.6x | 3.8x |
| |
|---|
| Median (45 companies) | -0.8x | -0.8x | -0.9x | -0.8x | -0.3x |
|---|
| KVH Industries, Inc. ($KVHI) | 3.8x | 2.6x | 2.8x | 5.5x | 2.0x |
