TAMPA, Fla. — Maritime connectivity provider KVH Industries is seeing signs of a turnaround after buying a chunk of satellite capacity from Starlink, SpaceX’s broadband constellation in non-geostationary orbit (NGSO).
In an Aug.1 earnings call with analysts for the three months to the end of June, KVH Industries CEO Brent Bruun noted a “slight increase” in vessels subscribed to its connectivity offering, following declines over the previous three quarters.
However, revenues still fell 15% year-on-year to $28.7 million as competition from Starlink weighed on the KVH’s legacy very small aperture terminal (VSAT) business, which leases capacity from geostationary satellite operators.
KVH also reported a $2.4 million net loss for the second quarter of 2024, compared with a net income of $0.8 million for the corresponding period last year.
“The maritime industry continues to undergo significant changes, driven by the emergence of NGSO networks,” Bruun said.
“In response to the new market realities, we have taken aggressive steps this year to reposition the company for the future. We’re already seeing encouraging results.”
In contrast to a $5.6 million decrease in VSAT service revenues during the quarter, KVH recorded a $1.7 million rise in Starlink service sales after activating more than 1,000 terminals from SpaceX since the start of the year.
KVH also recently laid off about 75 employees, or 20% of its workforce, as part of its cost-saving efforts.
Buying from the competition
In June, KVH announced it had prepaid for access to a large block of Starlink data for over a year at favorable rates as part of a bulk distribution deal with the company.
KVH paid around $17 million in the second quarter of 2024 for the NGSO capacity, which offers greater coverage and lower latency compared with services from geostationary orbit.
Vessels that choose KVH for Starlink services rather than directly going to SpaceX have access to more specialized customer and technical services.
KVH also offers services for customers seeking to integrate Starlink with 5G networks and satellites in other orbits, although the company expects its VSAT sales to continue to decline.
Subscribers to Starlink services via KVH roughly doubled between March 31 and June 30. KVH said Starlink is the fastest-growing service in the company’s history.
Bruun said existing KVH customers on the lower end of the leisure market are typically swapping out their VSAT service for Starlink. Larger yachts and commercial vessels are adding Starlink alongside VSAT for greater redundancy and flexibility.
The average revenue per user KVH gets from a standalone Starlink service “tends to be a little bit lower than what we experienced from a VSAT-standalone,” he added, while ARPU from a combined offering is “actually a bit more than what we’ve seen historically.”
Bruun also said vessels previously not signed up for VSAT communications are increasingly coming into its field of view with Starlink.
“Starlink is opening up a larger market,” he said, across leisure and light commercial markets such as fishing.
However, Starlink remains a threat to the company’s broader business.
The U.S. Coast Guard, one of KVH’s largest customers, is transferring its primary satellite service relationship to Starlink. KVH expects revenues will start declining from this customer from the third or fourth quarter of 2024 and continue into 2025.
Meanwhile, Bruun said KVH is testing OneWeb’s NGSO constellation as part of efforts to future-proof its offering, and services are slated to come online in the coming months.
