Good day, and welcome to the KVH Industries, Incorporated Third Quarter 2019 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Don Reilly, Chief Financial Officer. Please go ahead, sir..

Thank you, Operator. Good morning, everyone.

Thanks for joining us today to discuss KVH Industries’ third quarter results, and our guidance for the 2019 fourth quarter and full-year, all of which is included in the earnings release we published this morning.With me on this call is Martin Kits Van Heyningen, the Company's Chief Executive Officer; and Brent Bruun, our Chief Operating Officer.The earnings release is available on our website and also from our Investor Relations department.

If you would like to listen to a recording of today's call, you can access a webcast replay on our website.

If you are listening via the web, feel free to submit questions to ir@kvh.com.This conference call will contain certain Forward-Looking Statements that are subject to many 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 forward-looking statements.We will also discuss certain non-GAAP financial measures, and you will find definitions of these measures in our Press Release as well as reconciliations of these non-GAAP measures to comparable GAAP measures.

We encourage you to review the cautionary statements made in our SEC filings, specifically those under the heading Risk Factors in our Form 10-K filed on March 1st, and our 10-Q which is expected to be filed this afternoon, and the Company's SEC filings available directly from the Investor Information section of our website.At this time, I would like to turn the call over to Martin.

Martin..

Thanks, Don and good morning everyone. Thanks for joining us. Q3 was a busy one for us as we made solid progress in several strategic areas of our business. Results were generally in-line with our guidance. Total revenue for the quarter was $39.3 million, this is about flat with the third quarter of 2018.

Net loss was $0.19 per share, compared to a net loss of $0.11 per share in Q3 last year.In the last quarter we announced the sale of Videotel, our training business for $90 million and in our last earnings call, discussed how we plan to begin investing a small portion of the proceeds and the key strategic initiatives that will drive long-term revenue and profitability growth.I would like to share an update on each of those initiatives including AgilePlans, our new KVH Watch, IoT connectivity as a service offering and our photonic chip technology.

In our mobile connectivity business, we continue to achieve excellent results. For the third quarter, airtime revenues were up 11% year-over-year, an increase of $1.9 million.Airtime subscribers were up 15% year-over-year. Airtime margins were up more than two points year-over-year, and we expect to see continued improvement in Q4.

We still expect to have margins around 40% as we exit the year.Our AgilePlans’ connectivity as a service program continues to enjoy high demand among commercial fleets, thanks to its unique all-inclusive, no commitment value proposition as well as the speed and capabilities of our global HTS Network.As a result, AgilePlans' revenue was up 100%, compared to Q3 of last year.

It represented 70% of total commercial maritime VSAT shipments for the quarter.

AgilePlans subscribers now make up 24% of our entire VSAT subscriber base and this is remarkable, given that we launched AgilePlans just over two years ago.We have set out to reduce the barriers to next-generation communication at sea through a revolutionary business model and our result of strong demand show that it's worked.

We are now investing in expanding marketing and demand generation initiatives for AgilePlans, especially with our key service providers around the globe.In addition, we digitizing our business platform to enable us to scale efficiently and improved margins.

Our success in both the commercial and leisure market enabled us to achieve an exciting milestone last week, as we celebrated the shipment of our 10,000 VSAT systems.When we launched our TracPhone VSAT systems in our network, our goal is to make maritime satellite communications more reliable, more cost-effective and more accessible to seafarers.

The accelerating adoption of our TracPhone systems and connectivity, reflects the demand for the affordable airtime fast data speeds, network security, IoT proactive monitoring and value-added services that we deliver.Our ability to offer a fully integrated solution, which we see as a KVH advantage is desirable to both to leisure boaters as well as commercial industry in which the connected ship is rapidly becoming a reality.

The leisure market remains tremendously valuable part of our business.We believe we offer the best solutions for the full range of leisure boaters as our 22 consecutive Product of Excellence award from the National Marine Electronics Association will attest, and today at the Fort Lauderdale International Boat Show, will unveil our newest satellite TV system that TracVision UHD 7.This new antenna offers full support for DirecTV's 4K Ultra HD programming, thanks to our exclusive try at antenna technology, which receives signals from three different DirecTV satellites simultaneously, resulted in the at home TV experience on the water, including full DVR support and local channels, plus improved support for Dish Network in waters around the U.S., Central America and the Caribbean.Beyond in market, particularly at the highest level is also seeing growing demand for VSAT Connectivity.

Our new KVH Elite streaming option enables yard owners and charter operators to subscribe either weekly or monthly to a high-speed dedicated bandwidth service with unlimited data and no overages.KVH Elite will be available starting in November, with coverage from Florida through the Caribbean including the islands of the Eastern Caribbean.

Mediterranean service is expected to follow in 2020, in time for the charter season there.The services supported by both our 60 cm TracPhone V7 and the one meter V11 HDS. Unlike competing services, KVH HDS subscribers don't need to buy new equipment to simply activate the new Elite service through our super yard configures team.

This enables us to pursue additional business with high-value customers, increase our VSAT ARPU and optimize the use of our HCS network.Our new IoT initiative KVH Watch, also leverages our end-to-end maritime connectivity service. The HCS Network and our successful AgilePlans style business model.

This IoT connectivity as a service product is a unique communication solution for remote equipment monitoring and intervention by maritime equipment manufacturers and IoT application providers.Manufacturers will be able to act in real time, minimizing expense of service calls and ensuring optimal equipment performance.

When introduce KVH Watch in June, we were very pleased to also announce the Kongsberg would be our first partner for KVH Watch IoT connectivity. Since that time, we have been working closely together with them in completing the development of the service.Now installation is underway with Kongsberg for the first live pilot aboard a commercial vessel.

And lastly, in mobile connectivity, we were pleased to announce last month that we are an official supplier for American Magic in its challenge for the America's Cup.There has special meaning for us since the Americas Cup is part of KVH's heritage with a very first product developed for a 12 meter yard preparing for the 1980 America's Cup.

Now we are supporting their efforts with the most advanced systems available including our VSAT, our LTL, our LTE communications equipment for the team - boats and our high-performance fiber-optic gyros and sensors to aid in performance for the teams race boat.Moving on to our inertial navigation business, fiber-optic gyros sales were down 1.7%, compared to last year.

This was partly a result of timing of some large orders. We have a solid backlog for Q4 shipments and we expect to see a rebound in our FOG business this quarter.Our total backlog for inertial navigation systems currently stands at $22 million that is a highest level in more than five years.

We received a $4 million order for our FOG from Kongsberg defense and aerospace for use in the U.S. Army's common remotely operated weapon station known as CROS.Our - have been part of the CROS program for many years. Thanks to their ability to provide precision stabilization and weapon control even while the vehicle is moving at high speed.

The shipments for this quarter are expected to be completed by the end of next year.Our TACNAV business also had some notable success during Q3. We announced two new orders totaling $6.7 million for our five based TACNAV systems for use by military customers.

Shipments from one of these orders will be completed in Q4 of this year, while the other one is expected to continue shipping starting in the fourth quarter and continuing through 2021.And finally, I'm pleased to report we made outstanding progress in the development and in productization of our photonic chip technology.

We have invested in engineering talent and manufacturing equipment, that is enabled us to move ahead rapidly in our efforts to bring this new technology to market.Our photonic chip is currently in design verification testing in a military aviation product and we expect it to be qualified by year-end.

We have begun integrating this technology into existing products, and we expect to see both performance and cost improvements.While existing inertial systems offer the size, weight, power, performance required for a wide range of application.

The integration of our photonic chip technology is expected to deliver performance and reliability enhancements for our customers along with manufacturing and margin benefits for us.The primary focus of this development is to provide high-end inertial system performance at MEMS pricing levels for the automotive, self driving car market.So in conclusion, we have great confidence in our strategy and our innovative technology and services and our business model.

We have a very strong balance sheet with no debt and $55 million in cash. Our Board of Directors recently authorized a share repurchase program of up to one million shares of the Company's outstanding common stock.With a solid inertial backlog and continued strength in our VSAT business, we expect significant improvements in Q4.

Also I would like to mention that, on November 14th, I will be joined by members of our Senior Management team for our first ever Analyst and Investor Day here at KVH, during which we will showcase our newest technologies, discuss how we intend to leverage our strategic growth initiatives to accelerate progress towards building long-term shareholder value.Now I would like to turn the call back over to Don for numbers..

Thank you Mark. As you know, we have included the Videotel dispositions in the second quarter of 2019.

We concluded that the Videotel dispositions in the second quarter, met the criteria of a discontinued operation and we have reflected in that way in our earnings release and in our 10-Q.The change in the discontinued operations this quarter is due to the finalization of the final financial statements for that business and the changes in certain estimates used by determining the pulmonary gains.

As Martin mentioned earlier, our third quarter revenue was $39.3 million, which includes a positive prior period adjustment of $0.5 million relating to sales type leases.In short, in the limitation of ASC 606 we treated our VSAT sales pipe of lease transactions in the same manner as other combined VSAT and Airtime transactions, which means we were recognizing the hardware component of the transaction over the lease term instead of immediately upon shipment.Going forward, revenue generated under lease arrangements will be recognized upfront as it was prior to ASC 606, even when it bundled with airtime.

This is really just a technical correction and is not significant to any past or future period.

Without this accounting correction, third quarter revenue would have been slightly lower than - compared to the $39.3 million, we recorded in the third quarter of 2018.Product revenue for the third quarter of 2019 was $14.8 million, a decrease of $1.6 million or 10% from the $16.4 million in the third quarter of the prior year.

Service revenue for the third quarter was $24.5 million, an increase of $1.6 million or 7% from $22.9 million in the third quarter of last year.Revenue from our Inertial Navigation segment decreased $2.4 million and our Mobile Connectivity segment increased $2.4 million.

By segment, in our Inertial Navigation segment product revenues decreased to $2 million or 23%, primarily due to $1.7 million decrease in our FOG product sales this quarter.In our Mobile Connectivity segment, product revenues increased by $0.5 million or 7%.

This increase was primarily due to a $700,000 of increase in Marine Mobile Communication product sales, which includes the adjustment that I discussed, partially offset by a $200,000 decrease in sales of our land Mobile Communication product sales.Service revenues in a Mobile Connectivity segment increased $1.9 million dollars due to an increase in many VSAT broadband airtime service revenue of $1.9 million or 11%.

Sequentially, many VSAT broadband airtime revenues were up 4% from Q2 of this year, 9% in Q1 of this year and on a year-to-date basis higher by 11%, compared to the same period last year, driven primarily to the continued success of AgilePlans and the HDS Network.With respect to the agile program, approximately 52% of our total unit shipments this quarter and 70% of our commercial shipments were Agile orders, which helped us to achieve our 10,000 VSAT shipment, which was announced just a few days ago.

Agile now represents 24% of all of our subscribers.For the third quarter, our consolidated gross profit margin decreased to 35.5%, excluding the adjustment as compared to 39.2% in the third quarter of last year.

From a segment perspective, our mobile connectivity gross margin was 35%, again adjusted compared to 36.9% last year, while our Inertial Navigation gross margin approximated 37.5%, compared to 45.9% last year.Operating expenses for the third quarter of 2019 were $18.3 million up 6% from $17.3 million in the third quarter of the prior year, primarily due to increased spending to support our focus on service delivery and our key initiatives such as photonic chip-based gyros.In the third quarter these changes in revenue, margins and operating expenses resulted in a loss from operations of $4.8 million, compared to the loss of $1.9 million quoted in Q3 of 2018.

Our mobile connectivity segment generated an operating loss of $20,000, compared with a profit of $500 last year while our Inertial Navigation segment had an operating loss of $200,000 for the quarter compared with $1.9 million of profit last year.Our unallocated loss from operations increased $100,000 to $4.4 million this year from $4.3 million per quarter last year.

Our effective tax rate for the third quarter was a benefit of 12.9% and was impacted by the lease of the valuation allowance against the discontinued operations tax expense resulted from the sale of Videotel.For the third quarter, our net loss from continuing operations was $3.3 million, as compared with a net loss of $1.9 million recorded in the same period last year.

On a non-GAAP basis, which excludes amortization of intangibles, stock-based compensation foreign exchange transaction gains and losses, the tax effect foregoing and the change of evaluation allowance, we had a net loss of $2.2 million, compared with $700,000 last year.And EPS for the quarter was a net loss $0.19 per share, compared with a net loss of $0.11 per share last year.

Non-GAAP EPS for the third quarter was a loss of $0.12 per share, compared to $0.04 per share last year.

The third quarter results were unfavorably impacted by a $300,000 or $0.02 due to the adjustment that I described earlier.Our adjusted EBITDA for the third quarter was a loss of $1.2 million, compared with a gain of $1.1 million recorded last year. However, there are a couple things to note here.

First, the third quarter EBITDA was unfavorably impacted by $300,000 through the adjustment and we have included a further adjustment in our EBITDA calculation for this out of period catch up, our EBITDA would have been a loss of about $800,000.Further, we continue to adjust out our EBITDA calculation, the impact of foreign exchange gains and losses.

In the third quarter, that was a gain of about $600,000 that we had backed out. If we had not made this adjustment, EBITDA would have been a loss of only $200,000.

For a complete reconciliation of our non-GAAP measures, please refer to our earnings release that was published earlier this morning.From a continuing operations perspective, net cash used in operations was $4.9 million, an increase of $5.4 million, compared to the third quarter of last year. Capital expenditures were $2.6 million for quarter.

We are virtually debt free at the end of the quarter and our - cash balance approximates $56 million.Total backlog at the end of September was $24 million of which approximately $10 million is scheduled to be delivered during the remainder of 2019.

Backlog for our Inertial Navigation products and services at the end of September was approximately $22 million of which approximately $9 million is scheduled to be delivered during the remainder of 2019.With that, I will turn now outlook for the fourth quarter and full-year.

We have reduced our full-year guidance of revenues and earnings primarily due to lower-than-expected third quarter sales of FOG products and a reduction in our estimate FOG sales for the remainder of the year.Our guidance for the fourth quarter is as follows.

Fourth quarter revenue is estimated to be in a range of $41 million $45 million and GAAP EPS to be in a range of negative $0.15 to negative $0.04 per share.

Non-gap EPS is expected to be in a range of negative $0.06 to positive $0.02 per share and adjusted EBITDA is estimated to be from positive $500,000 to positive $2.5 million.full-year revenue guidance is $156.3 million to $160.3 million. Our expectations for your GAAP EPS is a range of negative $0.90 to negative $0.79 per share.

Now non-GAAP EPS is expected to be from negative $0.50 to negative $0.41 per share and our adjusted EBITDA is expecting to be in the range of negative $4.4 million and negative $2.4 million.We continue to expect our airtime gross margin will continue to grow throughout the year.

And then our AgilePlans program will be cash flow positive in the fourth quarter. As a reminder, this guidance is based on continuing operations only and therefore excludes Videotel completely, including historical amounts from prior periods.For 2019 we expect our capital expenditures will be in the range of $13 million to $16 million.

This guidance also assumes there will be no significant changes in foreign currency exchange rates and no larger to national orders to be booked and shipped in the quarter.This concludes our prepared remarks. And I will now turn the call over to the operator to open the line for the Q&A portion of this morning's call. Operator..

Thank you. [Operator Instructions] First question comes from Rich Valera with Needham..

Thank you. First question on the photonic FOG development there. Martin Can you give any color on the timing of incorporating that into your current product? It sounds like from your prepared remarks, you are sort of heading down that path.

But can we start seeing these lower cost FOGs in your products at the beginning of next year and what does that do to your kind of competitive price performance metrics? And what might that do for the business?.

Yes, so we are incorporating this now. So we are making the transition to manufacturing, we have purchase manufacturing equipment that is being delivered in the November, December timeframe.

So we expect that starting in Q1 this will be in the majority of our - not the majority but 100% of our high end products the all the IMUs and 1700 series products.And it also is being qualified right now for a program that we have been funded for the last two years, which is a military program.

So it says are parallel track release of the product, both into our commercial products, and into this super high-end military product. So we should expect to see margin improvement starting in Q1 as these products get released..

And just from a competitive standpoint, I mean, I would think that this would give you a significant cost advantage. Do you plan on sort of taking that in margins in higher margins, or do you think you can actually be more aggressive on price relative to the competition..

I think we have got both opportunities. So I think that the higher end products, we are focusing on the performance improvements. I think we have the opportunity to maintain prices and improve our margins.

And we also have the opportunity to introduce some new products that have still five level performance, but are much more cost effective, which we think will open up the market and help us increase our volumes and overall total Company revenues..

Great. And then just a question on the FOG business if I could. Last quarter you talked about the commercial side of the FOG activity just being lighter than expected and that you are hopeful that, that would pick up as you headed into next year.

Are you seeing any evidence that, that could be the case and can you give us any thoughts on how we should think about FOG next year?.

Yes. So, overall FOG sales for the quarter were disappointing. We did build backlog significantly.

So, that is good and that is why we feel pretty confident that Q4 will be significantly better, but I think that, the real thing that needs to happen to jumpstart the FOG businesses is relates of these new products.So our current product line the IMU series is about five years old.

So, this next gen product should dramatically sort of revitalize the product line. So, I think it kind of - my sense is it is going to be status quo for another quarter or two until those new products hit the market..

Got it. And then specifically just more of a tack-nick question, but I think you talked last quarter about the APNT program and a potential down select happening..

Yes..

You know subsequent, can we talk about a status there?.

Yes. So, Collins Aerospace announced that they were the winner of that, which is good for us. So, we anticipate working with them on this program and their overall schedule is you know starting between now and the next 12 months. There is going to be prototypes delivered and qualified.

So, as a part of their press release, they announced that the total program could be up to 8,000 systems.So, we don't know if all of those will have our FOG in them or what depending on which vehicles are being deployed. So, it is a good step for us.

It is a good step forward in the program, and the only caveat is that, I read yesterday that, it is part of the merger with Raytheon, United Technologies has to divest the Collins GPS group better know, if that means anything for us, probably not, but it could introduce some delay I imagine..

Got it. And just one final one probably for Don.

But just wanted to make sure it is clear on the accounting treatment for hardware associated with AgilePlans going forward under 606, will you still be amortizing that or is that now going to be recognized upfront?.

Well, Agile is number of product sale. Agile is always service revenue, so we would never recognize in any guidance all the new, we never recognize a products sale on Agile. We detain ownership of the equipment and - depreciated shares over five years recognized service revenue on a monthly basis..

So, this is definitely nothing to do with AgilePlans. It has to do with leases.

And so, we took the more conservative approach and said if it is a lease we are being paid overtime and it is bundled with airtime then we shouldn't recognize that revenue upfront, because if a guy buys the antenna for $20,000 and pays us in cash, its determined to be a bundle sale.If he has airtime, and we recognize that overtime, so we recognize the lease bundle the same way.

But, the accounting rules apparently have decided that, if the guy is paying us that overtime we are going to recognize revenue all upfront for leases..

Got it. I appreciate the clarification gentlemen. Thank you..

Thanks..

Our next question comes from Jim McIlree with Chardan Capital..

Thanks. Good morning. Martin in responses Rich's question about the photonic rollout. You said something about 100% high end products.

And I was hoping you could clarified over what timeframe you thought 100% of the high end products would incorporate the technology? Is that something that takes place during the year, or you hope to have that at the end of Q1 next year?.

Well, we hope to launch it in Q1. So and once it is launched, it will be in where we call it 1700 series products and those are what's used in all our high end products. So barring any residual inventory, the plan is to once we launch it, it will be in all our high end products. And the plan for that is in Q1..

And you mentioned that a military program has to be I don't know if you said requalified, but you said qualified. Is that going to have to take place for other products? That would be you the new photonic chip..

Yes, so this particular program has never been qualified. So we intentionally did this is an opportunity to get it qualify. So this was a new product that we were developing for customer under a funded development with over the period is - over as a $6 million program of funded work.

And it's just a perfect opportunity for us to interject this new technology and really get it, super tested and qualified in probably the most demanding application there is for inertial sensors.So we thought that would be a great endorsement of the technology and a great way to prove that it is reliable and works great and all that kind of stuff.

Now that is a new qual. For existing products and generally, if it doesn't affect from fitter function, you don't need to really qualify it.So that would probably be on a case-by-case basis with any specific customer. But generally, the products that I'm talking about 1700 series are sold as a commercial off the shelf product.

So we have full discretion to change what goes inside the product..

Right. Okay. And the migration to the rest of the product line, the non-high end, is that something.

That will happen over the course of a year. It should be fairly quickly as well..

Okay. Alright. Great. And then, Don, can you address operating expenses for Q4. And any insight as to what might happen next year, if there are any special marketing R&D programs that would that are coming off or being constantly to be added that would affect 2020 Operating Expenses..

Sure. I think you can expect operating expenses in the fourth quarter of this year to be higher than a quarter of this year.

We have talked about the number of initiatives that we are investing in, R&D initiatives, marketing initiatives, going to assign chip - to development, look the let’s say, increased support for agile through promotion programs support the development of the IoT program.So you can expect the fourth quarter of this year to be higher, reasonably significantly higher but certainly higher than the third quarter or any other quarter this year.

That run rate will be higher going into 2020 for the same reasons - quite a bit of work to do therapy, but still current indications are that our operating expenses will increase in 2020 for the same reasons the things ever developing, the initiatives we are working on..

Got it. Okay. Fantastic. Thanks a lot..

Okay. Thanks..

Great..

Our next question comes from Rich Prentiss with Raymond James..

A couple of questions, if I could. on the AgilePlans you said you are up to now 24% on subscribers, it was 70% of the commercial shipments.

How should we think about those sales, is there any seasonality as far as that take rate on the AgilePlans into the commercial that might cause that to change in fourth quarter? And then as we look out, is there any reason to think it drops back down into the 60s at any point in time or is this kind of like the appetite stay strong for this product?.

Starting to your last question, no, we don't expect any reason that it would go down. I think that as far as seasonality goes, Q3 it is not really seasonal business, but particularly a lot of commercial shipping in Europe. There is more vacations in July and August.

So, that tend to be slower than other times of the year just for that reason, but there really is no seasonality in our commercial maritime business. So, we don’t sort of - we do expect Q4 to be stronger than Q3 for our both for Agile and for general VSAT business..

Okay. From the take rate it is kind of like this is last several quarters you've been at I think 77, 69 now 70 so this is kind of 70 should continue..

That is right. Yes. So, we still have customers who prefer to purchase, which is obviously buying with us just because they make their CapEx versus OpEx decision. So, I don't think it is going to go 100%.

I think after two years I would say 70 is probably where it is going to stay, but the most important thing for us is subscriber growth was up 15% and where the purchase or lease or use Agile, we don't really care as long as we get the subscriber that is why we are doing this still..

It seems to be have struck a nerve or hit a sweet spot as far as getting interest going up..

Yes..

Second question, you guys mentioned how you have adjusted that FX but this time actually was a gain, any thoughts on reporting or providing EBITDA without adjusting or how do we get those FX numbers to kind of see on a non-adjusted FX basis kind of what EBITDA has been..

Well, since we started excluding FX gain or losses, which was about two years ago. There is been gains so we have been backing out EBITDA every quarter. So....

There actually might be a case to be made and one of the reasons that we did it is that, Videotel was selling in British pound. So it had an outside impact on our results. So, I think next year it might be something that we consider not doing, because the business had changed now almost all of our sales are in U.S. dollars.

So, but, I think Don didn't want to do that in midyear..

Sure..

So, I think we will consider fourth quarter, first quarter....

Right. So I think, you know, the good news is that you see from this accounting adjustment, we were overly conservative. I think this is a 2018 prior period adjustment. We didn't take it out of the EBITDA number. We didn't adjusted out. So I think we are being very conservative and clean with our interest parent with our reporting here.

So even though it didn’t help us..

Yes. didn't help this and hasn't helped for a little while, and it's Yes. And then obviously, the Board has authorized the stock buyback program. Can you talk a little bit about what triggered that and how you came up with the size. And, obviously, liquidity is not huge on your name.

But what were you trying to send a message with there? What do you hope to achieve?.

Yes, I think that, we have had a lot of shareholder interest in you know, in doing a buyback with the question we get all the time. And, the board looked at our current balance sheet. And the fact that agile plan is going cash flow positive now. So it will be generating cash instead of consuming cash.

So we felt that it was a good time to send a message to market, we feel the stock is undervalued, we like our prospects.We don't see a need for cash that is dramatic given the amount of cash that we have, we still have a bank line of credit.

Of course, that could change if there is an acquisition or for something else changes, the these programs can be adjusted along the way. But we just felt it was appropriate time to send a positive message about where we think the stocks going..

And how do you think the right way is to consider valuing the stock and the potential of the future of these growth initiatives?.

Well, I think that we are on the right path in terms of increasing our either done in Q4. I think 2020we are not giving guidance yet, but we think it's going to be a good year. So we see the direction of the Company as very strong, AgilePlan has been success. It continues to grow subscribers up 15%, inertial backlog is strong.

A-PNT, we think is going our way which is good. We still have these, foreign TACNAV orders in the pipeline. So overall, we are very happy with the direction of the business. I think, at some point we are going to get rewarded for that..

Anything that shows up on the EBITDA line that as well, fairly quickly?.

Yes, I mean, that is our goal. We have made the conscious decision here to - when we sold Videotel business. We got a great price for it. But we sold a very profitable marine business that we built up was generating $8 million to $9 million of EBITDA. So our goal is to quickly replace that, as the regular business grows through organic growth..

Great. Okay, thanks for the answers..

Okay..

Our final question comes from Chris Quilty with Quilty Analytics..

Hi guys, I was late to the call. So forgive me if you already addressed this. But you had talked last quarter about in addition to the photonic chipset going ahead and taking some of the electronics associated with that and developing a chipset around that.

Question is, how are you going on that development and could that be a gaiting factor on some of the product rollouts or is that done later on again, not impacting or form fitting function, a feature that you just work into the device design later..

That is a great question. So, when I say, we are going to releasing a product production, it will start in Q1, this is for our current products. It's not the new integrated automotive products. So, that product, if the automotive market is where we need the new electronics and the single-chip electronics that will replace today's press circuit boards.

So, that is on a different timescale, the qualification and everything after. That work is still ongoing, but that is going to take more time. So, that is probably at least a year away..

Got you. And I don't know if you had earlier comments about some of the automotive OEMs, but I think a couple quarters since your did a real deep dive on your thoughts on that market, and the types of technologies that the automakers are trending for.

How secure do you feel now relative to let's say a year ago or two years ago, when you undertook this effort that, FOG based solution will be a primary or secondary technology used for a majority or a significant portion of the automotive solution that get deployed..

Well, we know from the people that we are working with that they are happy with the performance and our planning on using it. I think that is going to be a multiple different solutions.

As time goes on, I think that people are now looking at level four and five autonomy for automotive general public type applications is being pushed out.But what we are saying is that, now people are focusing our delivery vehicles and people movers and other things actually being pulled forward a little bit.

So, I think there is going to be a good market for this product sooner than we thought, but the gigantic opportunity is probably later than we thought. So, I think it's kind of a mixed bag there in terms of timing..

Got you. If I also switch over again with the A-PNT opportunity, we are seeing the DoD talking about a lot of different solutions to address that market including premium back the all the brand network.

Again, you know, how secure are you in the programs that you are involved with that they're going to be fully funded and that there is institutional support behind them?.

Well, Dave, I don't know, if you caught the beginning, but they have made a select now. They have selected Collins Aerospace as a sole winner of that program. So, that is good news. It's moving forward.

As I mentioned earlier, 12 month schedule for protecting deployment and is that is up to 8,000 systems.So, I think that program is very secure, very solid. They have been working this for I would say decades.

So, I think that they are finally in the deployment phase on that, and unlike automotive there is really zero appetite for trying to find alternate solutions because the solution we have just absolutely delivers what it needs to for that application.And, we have delivered 20,000 TACNAV systems to armored vehicles around the world.

So, this is a very mature, very well-developed product that just absolutely works for their application, and can't be spoofed and it can be jammed..

Okay. I missed that earlier comments. So I will go back and check the transcript. Very good. Alright, thank you very much, guys..

Alright. Thanks..

Thanks Chris..

This concludes today's question-and-answer session. I would now turn the conference back over to Mr. Reilly..

Okay. Thanks everybody. Martin and I and Brent of course will be available for any questions you may have later or any questions that may come to our IR site. Thanks very much..

Thank you, everyone. This concludes today's teleconference. You may now disconnect..