KVH Industries, Inc.

Good day and thank you for standing by. Welcome to the KVH industry's third quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Anthony Pike, Chief Financial Officer. Please go ahead.

Thank you, Andrea. Good morning, everyone, and thank you for joining us today for KVH Industries' third quarter results, which are included in the earnings release we published earlier this morning. Joining me on the call is the company's Chief Executive Officer, Brent Bruin. Before I get into the numbers, a few standard statements. Firstly, if you would like a copy of the earnings release, or if you would like to listen to a recording of today's call, both will be available on our website, and if you are listening via the web, please feel free to submit questions to ir.kvh.com. Further, this conference call will contain certain forward-looking statements that are subject to numerous assumptions and uncertainties that may cause our actual results to differ materially from those expressed in these statements. We undertake no obligation to update or revise any of these statements. We will also discuss adjusted EBITDA, which is a non-GAAP financial measure. You will find a definition of this measure in our press release, as well as a reconciliation to comparable GAAP numbers. We encourage you to review the cautionary statements made in our SEC filings, specifically those under the heading Risk Factors in our Q3 2024 Form 10-Q, which will be filed later today. The company's other SEC filings are available directly from the investor information section of our website. Now, to walk you through the highlights of our third quarter, I'll turn the call over to Brent.

Thank you, Anthony, and good morning, everyone. Let me begin with a high-level overview of our results. Third quarter airtime and service revenue was $24.4 million, down $5 million from the third quarter of 2023. Airtime gross margins declined slightly versus the same period last year due to a shift in our subscriber base. However, airtime margins increased sequentially versus the second quarter. The improvement in margins is driven by substantial contribution from Starlink data subscriptions, now sold through our bulk data purchase agreement, which went into effect on July 1st. Total revenue for the quarter was $28.9 million, roughly a 13% decrease from a year earlier This was due to the continuing decline in VSAT product sales and corresponding VSAT service revenue. These results are in line with the expectations we shared last quarter. Our new product and service initiatives continue to help us build positive momentum. We increased our subscribing vessel count for the second consecutive quarter. We also shipped a record number of communication antennas for the third consecutive quarter, driven by a substantial increase in Starlink terminals and continued demand for our VSAT units. In addition, we increased shipments of our Combox Edge communications gateway for the second consecutive quarter. As we discussed in last quarter's call, activation of Starlink and VSAT terminals, as well as Combox Edge units, tend to carry over into the next quarter, building a backlog of potential activations and establishing a robust leading indicator for future airtime and service subscription growth. Starlink is an exciting part of our multichannel portfolio, offering outstanding communications to commercial and leisure subscribers worldwide. We continue to see strong demand for mobile priority data service that we have been offering to commercial and leisure vessels, having now activated more than 1,500 terminals since the start of the year. We are now expanding beyond the maritime market with the addition of priority plans for stationary use. We have commenced Starlink's high-speed, low-intensity service for land-based applications in the United States, Colombia, and Argentina, and may expand the service offering to other countries. The land-based Starlink plans are ideal for seamless, high-speed connectivity for stationary solutions, in particular in areas unsupported by terrestrial communications. Potential applications include education, community Wi-Fi, remote commercial operations, construction, agriculture, disaster relief, and healthcare. These new plans are supported by all the Starlink terminals currently in our portfolio and our Combox Edge communications gateway. We also introduced several new services in the third quarter. Mail Link Plus is our next generation maritime email connectivity platform designed for easy installation on any compatible Windows-based computer. Mail Link Plus supports operational communications and enables users to stay connected with others on board via email, even when satellite or cellular connectivity is unavailable. In addition, we expanded delivery options for our award-winning KVH Link service with an over-the-air unicast delivery option for the Link Hub media server. The over-the-air service enables vessels equipped with Link Hub to receive daily news, sports, and entertainment updates virtually any onboard network, including VSAT, Starlink, OneWeb, or 5G cellular. Along with these changes, we continue to move forward on the development of additional new services. We will officially be rolling out our OneWeb service later this quarter, which follows a series of tests on vessels around the world. We also expect to expand the cybersecurity and crew captive portal capabilities of Combox Edge in coming months. During Q3 and in recent weeks, we also responded to several events, both planned and not. First, as expected, the U.S. Coast Guard scaled back its airtime and VSAT terminal deployments as part of their annual renewal. We're including this anticipated reduction in our updated guidance. Secondly, on October 19th, the IS-33E satellite operated by Intelsat experienced an anomaly that resulted in loss of service in Europe, Africa, Asia, and the Indian Ocean. Following the disruption of IS-33E, we rapidly restored service for the vast majority of our customers thanks to our multi-layered HCS network. We moved customers to alternative satellites and adjusted data prioritization on those beams. We are now working with Intelsat and SkyPerfJSAT to add capacity and to optimize network performance for our customers. I'm tremendously proud of the performance, initiative, and creativity shown by our network engineers and tech support teams in responding to this issue and minimizing any disruption to our customers in the region. KVH, together with the rest of the maritime industry, continues to adapt to significant technological disruptions, and we continue to feel the impact of these changes. However, we have reacted decisively to this fundamental shift by expanding our portfolio of new technology, delivering the products and services our customers desire, and making decisions necessary to reconfigure our business operations. As a result, our hybrid LEO-GEO deployments are increasing, We are meeting the demands for leisure boaters and commercial fleets for LEO technology and sophisticated value-added services, and we are establishing a solid pipeline for ongoing growth in service activations. Challenges remain, but I believe we have laid out a path toward growth and profitability. Now I'd like to hand it back to Anthony for a more detailed look at the numbers.