KVH Industries (NASDAQ:KVHI) reported second-quarter revenue growth as demand for low-Earth-orbit, or LEO, connectivity services continued to expand, supported by subscriber additions, Starlink-related sales and new multi-network offerings.
Total revenue reached $33.7 million in the second quarter, up $1.4 million, or 4%, from the first quarter and 27% from the prior-year period. Service revenue was $29.7 million, rising 6% sequentially and 29% year over year.
Subscriber Growth and Terminal Demand
KVH shipped approximately 2,500 communication terminals during the quarter, below the record 3,100 terminals shipped in the first quarter but still representing strong demand, according to management. The company ended the quarter with about 10,700 subscribing vessels, adding more than 1,000 net vessels during the period.
Chief Financial Officer Anthony Pike said subscribing vessels increased 11% from the prior quarter, compared with 7% growth in the first quarter. Year to date, subscribing connectivity vessels have increased 18%.
During the question-and-answer session, Bruun said the company expects quarterly terminal shipments generally to range between 2,000 and 3,000 units, though he cautioned that market conditions remain subject to change.
Starlink remains the dominant connectivity choice among customers, Bruun said, though vessel operators continue to seek network redundancy. Some vessels use combinations of Starlink, OneWeb and VSAT services, while KVH continues to ship VSAT terminals primarily alongside Starlink or OneWeb equipment.
New Services and Broader Market Expansion
During the quarter, KVH introduced multi-network service plans that allow customers to purchase blocks of data that can be delivered through Starlink, OneWeb or VSAT networks. Bruun described the offering as a step toward simplifying connectivity management while giving customers more flexibility across satellite networks.
The company’s Link streaming service entered beta trials during the quarter and is expected to launch soon, according to Bruun. The service is intended to add streamed entertainment content to KVH’s Link Content platform and support crew welfare and onboard experiences.
KVH also said it is converting early managed IT service evaluations into commercial customer relationships. Bruun said the company expects those conversions to begin contributing to recurring revenue in the coming months. The company is using its CommBox Edge platform as part of the managed-services offering and expects the service to provide what Bruun described as “a nice uptick” in average revenue per user over time.
The company’s land-based Starlink initiative grew to approximately 1,600 sites at quarter end, an increase of about 500 sites during the quarter. KVH said the growth expands its managed-connectivity business beyond maritime markets.
KVH also added a regional sales leader in Latin America, expanded its Athens, Greece team and opened its first retail location in Fort Lauderdale. The new location sells Starlink and other communications equipment, including handheld devices, and serves commercial and recreational maritime customers.
Margins, Expenses and Cash Position
Service gross profit was $10.6 million, up $0.8 million from the first quarter. Service gross margin increased to 36% from 35% in the prior quarter. Pike said non-cash airtime depreciation expense represented 7% of service revenue in both the first and second quarters.
Operating expenses totaled $10.4 million, compared with $9.7 million in the first quarter. The increase included $200,000 in severance costs related to employees who left the business at the end of the second quarter.
Adjusted EBITDA was $3 million, compared with $2.8 million in the first quarter. Capital expenditures were $1.3 million, down from $2.6 million in the prior quarter. Of second-quarter capital expenditures, $400,000 related to an enterprise resource planning project and the fit-out of KVH’s new U.S. headquarters, which management said is complete. The ERP project is expected to be completed by year-end.
KVH ended the quarter with $57.7 million in cash, down approximately $1.4 million from the beginning of the quarter. Pike said the decline was primarily due to $2.3 million in stock repurchases. Including repurchases completed after quarter end, the company expects to complete its full $15 million share repurchase authorization during the current month.
VSAT Commitments and LEO Mix
Management said it does not expect a material mismatch between its legacy GEO VSAT capacity obligations and related revenue. Pike said that, based on disclosures in the company’s annual report, most GEO bandwidth commitments end at the close of 2026, with a smaller commitment remaining for 2027.
LEO services accounted for 55% of the company’s airtime revenue, Pike said, which he said reduces the overall effect of lower GEO margins as LEO becomes a larger portion of the business.
Bruun said Starlink’s closure of its reseller channel for “local priority” service, used for brown-water and land-based applications, has not affected the bulk of KVH’s Starlink business because the company primarily serves the “global priority” category. He also said recent Starlink product and pricing changes have not affected KVH’s business so far.
About KVH Industries (NASDAQ:KVHI)
KVH Industries, Inc develops and manufactures mobile connectivity, inertial navigation, and stabilization systems for maritime, land mobile and defense markets. Its Satellite Communications Group delivers a range of mobile VSAT and broadband systems under the TracPhone and TracNet brands, offering high-speed data, voice and TV programming for commercial and leisure vessels. The company pairs its hardware offerings with the OneCare global network and service platform, providing 24/7 support and coverage across major satellite constellations.
The Inertial Systems Group at KVH produces fiber-optic and hemispherical resonator gyros, inertial measurement units (IMUs) and related inertial navigation products for aerospace, unmanned platforms and precision stabilization applications.
