Good day and thank you for standing by. Welcome to the Q1 2023 KVH, Inc. Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Roger Kuebel. Please go ahead.

Thank you, Gigi. Good afternoon, everyone, and thank you for joining us today for KVH Industries' first quarter results, which are included in the earnings release we published earlier this afternoon. Joining me on the call are the company's Chief Executive Officer, Brent Bruun; and Chief Operating Officer, Bob Balog. Brent is actually calling in from Singapore, which is why we are having the call at this time of day instead of our usual morning time frame. Before we dive in, a couple of quick announcements. First, if you'd like a copy of the earnings release, it is available on our website and 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@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, a non-GAAP financial measure. You'll 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 2022 Form 10-K, which was filed on March 16. 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 first quarter, I'll turn the call over to Brent.

Thank you, Roger. Good afternoon, everyone. As Roger mentioned, I'm joining the call today with you from Singapore. One of our competitive advantages is the strength of our partner network, which includes marine electronic dealers and distributors, along with our airtime service providers, who sell our hardware and airtime while managing installations and technical support regionally. Much of our success stems from the health and commitment of that partner network. Illustrating this is a recent competitive win by one of our airtime service providers, which is now converting a 70-vessel fleet from a competing L-band service to our global HTS network. Over the last 2 months, I've been on the road a lot with our partners and customers worldwide. In March, I met with our premium EMEA dealers during a multi-day event in Madrid. During my current trip -- my current trip has brought me to our Asia Pacific headquarters in Singapore, after which, I'll travel to Manila, Hong Kong, Osaka and Tokyo. I'll meet with our most predominant partners and customers to reinforce our relationships and evaluate opportunities to expand global sales. Moving on to our financial results. Q1 was solid with revenue of $33.7 million. Although we recorded an operating loss of roughly $0.5 million given the seasonality of various income and expense items, this was in line with our expectations, and our guidance for the year is unchanged. Our airtime revenue was up 13% year-over-year to $27 million with airtime gross margin of 42%. We also increased our total subscriber base to more than 7,000. Our balance sheet is strong with quarter-end cash of $69 million and no debt. We are maintaining the solid financial foundation that we have worked hard to build over the last 12 months. Airtime remains the primary driver of our growth, and…

Thanks, Brent. First, I would like to note that unless specifically stated otherwise, my comments with respect to Q1 of last year relate to our continuing operations, which exclude the results of our inertial navigation business, which was sold on August 9. With that, as Brent mentioned earlier, our first quarter revenue came in at $33.7 million, increasing $0.5 million from the $33.2 million recorded in the first quarter of 2022. Our gross profit margin was 37% for the first quarter of this year as compared with 38% in the first quarter of last year. Service revenue for the first quarter was $28.7 million, an increase of $2.2 million or 8% from $26.6 million in the first quarter of 2022. This increase was primarily due to a $3.0 million increase in VSAT airtime revenue, primarily offset by a $0.8 million decrease in our content service sales, which was largely due to the sale of our radio business in April of last year. As Brent noted, airtime revenue grew to $27.0 million or approximately 13% over the first quarter of 2022, and total subscribers surpassed 7,000. As a reminder, total subscribers include those who have temporarily suspended their primary airtime service but continue to pay minimum maintenance fees as well as equipment fees for AgilePlans subscribers. Airtime gross margin was 42.0%, which is up slightly from 41.2% last year. We are very pleased with those results. However, we are not changing our target for airtime margins to be in the high 30s. Product revenue for the first quarter was $4.9 million, a decrease of $1.6 million or 25% from the first quarter of last year. This decrease in product sales was primarily due to a $1.5 million decrease in VSAT product sales. The decline in VSAT sales was a result of…

[Operator Instructions] Our first question comes from the line of Caleb Henry from Quilty Space.

A couple of questions from me. You mentioned this new VSAT program, where multiple different terminal providers will be able to use the KVH network. Maybe I missed it, but did you give a program start date for that? When does that begin?

It started loosely this year or in the first quarter, but it officially was launched as of May 1.

Okay. The H90 terminal that you announced as being Ku-band -- or dedicated to Ku-band, is that orbit-specific? Or is that able to work with satellite networks from multiple different orbits?

Yes, it's orbit-specific, not geosynchronous. It's VSAT but just Ku-band only. And the reason why we call that Ku-band -- it's geo. The reason why we called it out as Ku-band only is that we -- historically, we've provided a terminal by the name of the V11, which was both Ku-band and C-band. This is Ku-band only. And similar to -- in the Ku approach to competing systems from Cobham and Intellian, but it also has the integrated 5G as well as import WiFi capabilities.

Yes. It's operating on our standard Flex network that all of the other terminals operate on, so it has access to the entire constellation.

Okay. When you add your NGSO capacity, which you mentioned being pretty close too, is that something that you anticipate will replace the Starlink offering? Or is it something that you'll offer in tandem?

Well, it will be offered as an alternative, not necessarily in tandem but as an alternative.

Right. Right. Okay. And then my last question, you mentioned that -- an L-band customer or a maritime customer that was using L-band that is now switching to your network. I think listening to kind of the 2 main L-band providers, usually they talk about their customer base being sort of protected, and usually they add higher-throughput services, like Ku or Ka, in addition to L-band, not usually replacing it. So I'm just curious if you agree with that, if you disagree with that or if you're seeing a shift where more vessels are starting to ditch L-band in favor of higher-throughput services.

Well, to be very specific, when we talk about L-band, right, 2 providers, we're talking about Iridium or Inmarsat. Iridium, with their service offering, that's used to a large degree, from our perspective anyway, as backup. In regards to fleet broadband, there's been a number of conversions over the years to both our system as well as our competitor systems and to Inmarsat systems. So this is just yet another conversion of their L-band solutions.

[Operator Instructions] At this time, I'm showing no further questions. I would now like to turn the conference back over to Roger Kuebel for closing remarks.

Well, thank you all for joining us. Appreciate it. I know that we don't normally do these afternoon East Coast U.S. time, but appreciate everybody who was able to join in anytime. And I think that's it. So thank you all for joining, and we'll talk to everyone again when we announce Q2.

This concludes today's conference call. Thank you for participating. You may now disconnect.