| Small & micro cap project / Activism insight
KVH Industries: Signs of moat
What does the company provide? It is a leading manufacturer of solutions that provide global high-speed internet, television and voice services via satellite to mobile users at sea and on land.
Migration to VSAT: VSAT is a two-way ground station that transmits and receives data from satellites. Sales of mini-VSAT Broadband airtime service accounted for 48% and 46% of total net sales for 2019 and 2018, respectively. The company has benefited from the industry-wide migration from L-Band satellite systems to VSAT. In spite of the migration, as per the company’s IR presentation, VSAT accounts for less than 10% of the market. To read more, click this article, which explains how KVH’s major competitor is working hard to prevent competition from KVH.
Signs of moat
- Growing subscription model: In April 2017, the company launched AgilePlans, an all-inclusive connectivity-as-a-service, the usage-based pricing model for its mini-VSAT broadband service. For a subscription cost, subscribers get satellite communication hardware, shipping and installation, maintenance and support, airtime and voice services, a service management portal, and certain basic content services. In 2019, AgilePlans’ revenue comprised 10% of the total revenue. Why is this subscription model disruptive? Fleets could deploy a complete solution with no CapEx, no installation, or maintenance costs and receive advanced hardware, airtime service, crew entertainment, operational content, all for a single monthly subscription, and with no long-term commitment.
- Netflix-style service subscription: The company also offers “KVH Link”, a content subscription service. The content and data files are transmitted using multicast technology across its global satellite networks to every vessel or mobile vehicle that has an active, compatible terminal. This delivery mechanism reduces the amount of bandwidth required to transmit large files to a large population of customers. The company’s CEO refers to this subscription service as “Netflix-style service.” The company uses its patented IP-MobileCast technology for content delivery.
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