KVH Industries, Inc.

Hello, my name is Lisa, and I will be your conference operator today. At this time, I would like to welcome everyone to the KVH Industries Report's second quarter 2022 results conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. If you would like to withdraw your question, press star 1 again. Thank you. I would now like to turn the call over to Mr. Roger Keeble. Please go ahead, sir.

Thank you, Lisa. Good afternoon, everyone, and thank you for joining us today for KVH Industries' second quarter results, which are included in the earnings release we published within the past hour. Joining me on the call are the company's Chief Executive Officer, Brent Bruin, and Chief Technology Officer, Bob Balog. Before we dive in, a couple of quick announcements. First, if you would like a copy of the earnings release, it is available on our website at www.kvh.com on the Investors page, which can be found by clicking on About KVH, then Investors, and then scroll down to the Recent News section. It is also available from our Investor Relations team. If you would like to listen to a recording of today's call, it will be available on our website. If you are listening via the web, feel free to submit questions to ir at kvh.com. Finally, this conference call will contain certain forward-looking statements that are subject to numerous risks, assumptions, and uncertainties that may cause our actual results to differ materially from those expressed in these statements. We encourage you to review the cautionary statements made in our earnings release and in our SEC filings, specifically those under the heading Risk Factors in our 2021 form 10-K, which was filed with the SEC on March 11th. The company's SEC filings are also available on the company's website in the investor section under financial information, then under SEC filings. We undertake no obligation to update or revise any forward-looking statements. We will also discuss certain non-GAAP financial measures, and you'll find definitions of these measures in our earnings release as well as reconciliations of these non-GAAP measures to comparable GAAP measures. Now, to walk you through the highlights of our second quarter, as well as an important recent development, I'll turn the call over to Brent.

Thank you, Roger, and good evening, everyone. I'm pleased to share positive results regarding our second quarter and plans for the future. 2Q is a transition period for us, the first full quarter since our restructuring in March. We finalized our leadership and operational reorganization, recorded the remaining material expenses from the restructuring, and launched a wide array of new initiatives that reflect our commitment to the future by strengthening our core business through subscriber growth and innovative new products, improving efficiencies for our employees, and generating increased value for our shareholders. We've made significant progress in many areas. We have a stable and engaged workforce with limited turnover, and we've introduced new connectivity products that offer unique solutions to mariners. Financially, our revenue was $41.8 million, down from $43.4 million in 2Q last year. Supply chain challenges led directly to the year-over-year decline. We recorded a loss of $1.4 million for the second quarter, This is a significant improvement over last year when we recorded a loss of $5.7 million. Our adjusted EBITDA was $4.1 million, the highest in five years. Based on these results and progress in our mobile connectivity business, we entered the third quarter with a robust foundation and a sustained and growing company. Earlier today, we announced the sale of our inertial sensor and tactical navigation business to mCore. This is an all-cash deal for $55 million. It includes the Tinley Park factory and all inertial navigation intellectual property. In addition, MCOR is offering employment to all current inertial navigation employees. We are very proud of our innovations and progress after purchasing this business in 1997. However, mobile connectivity has always been our primary business and key driver for revenue and growth. Our commitment and investment in this market is our top priority. Our new technology and expanding demand for mobile connectivity presents the opportunity for growth and scale. We'll carefully evaluate the best use of the proceeds from the sale to support that growth. Now I'd like to share some of the reasons we're so excited about the future of our mobile connectivity business. Total revenue in connectivity was $34.6 million. up from $33.8 million year over year. June was our highest ever month for airtime revenue. And we also continue to benefit from the shutdown of our legacy Arclight network and the migration of some remaining customers to our HTS network. Network operating expenses were down and our airtime revenue increased to $25.8 million and had an associated outstanding gross margin of 43%. Despite losing some subscribers, our base grew 1% versus 2Q last year. I'd like to offer some additional context regarding our number of subscribers. At the end of Q2 last year, we supported roughly 6,300 Airtime subscribers, 1,600 of those subscribers were on our legacy ArcLight network. 4,700 subscribers relied upon our more affordable, higher margin HTS network. By the end of the second quarter of this year, we expanded our HTS network subscriber base by roughly 40% due to our successful migration efforts. We ended the second quarter with more than 6,600 HTS network subscribers. These numbers are a key metric, and we will continue to report our airtime revenue and subscriber population on a quarterly basis. Elsewhere in our mobile connectivity business, KVH Elite unlimited streaming service for super yachts remains strong, and we're thriving in the Caribbean, Mediterranean, and Eastern North America. Additionally, Agile plans continue to be the critical engine for commercial maritime growth. In early July, we introduced our TrackNet family of antennas and the KVH-1 hybrid network. These remarkable solutions continue our trend of disrupting the maritime market. These new solutions set the standard for integration, convenience, speed, and affordability for commercial and leisure boaters alike. KVH-1 and the TrackNet terminals offer a solution that we believe is unique in the industry. A new hybrid network and product line that offers global VSAT, cellular service, and shore-based Wi-Fi integrated into a single antenna. The hybrid design helps maximize speeds and minimize costs at the dock, underway, and offshore. Each TrackNet terminal is far more efficient due to our modem and dome design. Consolidating three communication devices into one dome rather than requiring the purchase, installation, and networking of three separate communication devices is a game changer in the market. TrackNet also requires only a single cable for installation and is as much as 50% lighter and competing terminals. We also rolled out new airtime plans that offer more data per dollar for our customers and higher margins for us. We've extended the popular high-speed unlimited use airtime model introduced with our Tracfone V30 to all of our new TrackNet terminals, including the 37-centimeter TrackNet H30, the 60-centimeter H60, and 1-meter H90. Our new 1-meter TrackNet H90 offers tremendous efficiency gains reflected in even more affordable airtime plans. The first new TrackNet system shipped in mid-July, and we're about to kick off an aggressive marketing campaign with the start of the commercial and leisure boat trade show season. On the satellite TV side of our business, we continue to see strong demand in unit shipments. The mix in the second quarter favored smaller systems due to supply chain challenges slowing the production for our higher value TV systems. As a result, we entered the third quarter with a backlog of $3.5 million for our mobile TV products. Our second quarter results demonstrated that we're on the right path. We renewed our strategic focus, taking decisive steps to reset our operations and are introduced to the new innovative communication products that our customers expect from KBH. We anticipate that the global supply chain economic environment will continue to be challenging, but we continue to address these challenges on a daily basis to minimize impact. We are committed to growth, innovation, and delivering outstanding products and services to our customers and long-term value to our shareholders. With that, I'll turn the call over to Roger for the financial details.