Good day everyone and welcome to the KVH Third Quarter 2013 Earnings Conference Call. Today’s call is being recorded. At this time for opening remarks and introductions, I would like to turn the call over to Peter Rendall. Please go ahead.

Good morning. I’m Peter Rendall, the Chief Financial Officer of KVH Industries and with me today is Martin Kits van Heyningen, the Chief Executive Officer of KVH. This call will address the third quarter earnings release that we issued earlier today. Copies of the release are available on our website and also from our Investor Relations department. This call is being simulcast on the Internet, and will be archived on our website for future reference. If you are listening via the web, feel free to submit questions to ir@kvh.com, and we will answer them following this call. This conference call will contain certain forward-looking statements that involve risk and uncertainty. For example, statements regarding financial and product development goals are forward-looking. The Company’s future results may differ materially from the projections described in today’s discussion. Factors that might cause these differences include, but are not limited to those mentioned in today’s call and risk factors described in our most recent Form 10-Q, filed with the SEC on August 9, 2013. The Company’s SEC filings are directly available from us, from the SEC, or from the Investor Information section of our website. Now, I would like to turn it over to Martin for today’s discussion or results. Martin?

Thanks, Peter, and thank you all for joining us today. I’m pleased to report our third quarter revenues and EPS are right in line with our guidance coming in at $40.2 million and $0.09. The overall revenue growth, which was attributable to continued success in our Mobile Broadband business, which partially offset by the decline in our TACNAV sales having shipped all the product related to our record order last year to Saudi Arabia and lower than expected fiber optic gyros sales. Our maritime VSAT revenues were up 34% from the same period last year, and we’re pleased to see a 5% improvement in our maritime satellite TV business as well. As we had anticipated, our guidance and stabilization revenues were down about 33% year-over-year. Looking at each segment in greater detail, our overall mobile broadband revenues, not including Headland Media were $25.7 million that’s up 16% year-over-year. Headland Media’s contribution to revenues in the third quarter totaled $3.3 million. The mini-VSAT broadband portion of the business was up 25% overall year-over-year, reflecting strong airtime growth of 34% versus the third quarter of 2012 and a growth of 11% sequentially from the second quarter of this year. In the third quarter, monthly airtime revenues from our new dual-mode TracPhone V11 reach the level where they now cover the monthly cost of the three global C-band transponders release to provide the global service. Pretty remarkable that we’re able to enhance our network with global C-band coverage providing a major competitive advantage and then win enough customers to pay for this new service in less than a year. During the third quarter, we also began rolling out another upgrade to the transmission technology of the mini-VSAT Broadband network called ACSM or Adaptive Coding, Spreading and Modulation, which will increase the forward link…

Thank you, Martin. As Martin has already said, we’ve reported revenues of $40.2 million for the third quarter, which included $3.3 million from Headland Media, the acquisition we completed in the second quarter. Our mobile communication revenues, which include Headland Media were $29 million, representing a 31% increase year-over-year, when our guidance and stabilization business reported $11.2 million in revenues, which was a 33% lower than the same period from last year. Our VSAT business recorded $18.1 million in quarterly revenues of which airtime services represented $12.6 million, which was 34% higher than the third quarter last year. Total VSAT products and service revenues increased 25% year-over-year, while ARPUs for by-the-megabyte plans continue to be in the $600 to $700 per month range and ARPUs for our fixed rate plans continue to be around the $1,900 per month level. As Martin mentioned earlier, our TracPhone V3 has been selling very well. And as a result in the current quarter, V3 sales represented 48% of the total unit sales, while V7 sales were 40% and V11 were 12%. All other SATCOM revenue including TV Systems and Inmarsat Systems and airtime was $7.5 million. Within that amount, we saw 5% increase in satellite TV product sales year-over-year to $3.7 million while LAN based systems declined 24% to $1.2 million as we had previously anticipated. TACNAV product revenues of $2.6 million saw almost a 60% decline year-over-year as product shipments related to the Saudi Arabian National Guard Program ended in the second quarter. Until that program, we did record $2.2 million in service revenues, mainly related to equipment installations and program management services. FOG sales of $5.8 million were at the low end of our expectations and 17% lower than the same period last year. Almost all of the decrease can be attributed…

(Operator Instructions) And we will take our first question from Rich Valera with Needham & Company. Rich Valera – Needham & Company: Thanks, good morning gentlemen.

Good morning. Rich Valera – Needham & Company: Now I think you had a solid quarter on the mini-VSAT sub I’m just wondering Martin if you can confirm that the additions were within that kind of 25300 [ph] unit window. If any maybe could you give any color maybe on where they sell within that range if so?

Yeah, they’re we’re still in that range, we are at the low end of that range which is kind of where we’ve been running, so it’s been very steady and Q3 is typically not a big quarter for the marine market. So it’s we do expect to see sequential and year-over-year growth in that number in the Q4? Rich Valera – Needham & Company: Got you, and then just wondering what you’re seeing competitively out there if you’re seeing any change in the competitive landscape, as Global Express you obviously still far from operational but maybe getting closer are there any tactics trying to pre-sell that or anything that’s changing your competitive outlook?

I would say during the quarter we haven’t seen any change in the competitive landscape so the competitors have been out there doing what they have been doing that’s been fairly consistent, so we don’t feel that we’ve lost any big deals to competitors. So I think that the general our real concern I’d say concern is that this is a market overall continues to not improve. So market has been soft and our target customers they’ve been in a challenging economic environment for years. So it’s really more of an economic issue for them to invest more money into their fleets, I would say that’s our bigger challenge than competitors. So when we go and talk to target customers it’s all about economics and saving the money and today the budgets still to do it in and the horsepower to get it done. Rich Valera – Needham & Company: Right, right.

Really so much of the competitors prices or new satellites or something like that, I think we got a really compelling product line right now, we’ve got great features and people are excited about the new content we’re going to be providing, so I think that also I think will help because one of the strategies with the IP-MobileCast product is that we’re selling to HR department and the crew staffing department as opposed to selling to the IT department, with IT department as a cause and this is really a benefit to increasing their ability to retain people and to attract people to work on these vessels. Rich Valera – Needham & Company: Got it and sort of if you could give us an – and I didn’t really hear a update on kind of the timing of the rollout of the multicast service, can you give us, I mean it sounds like you are making progress there but is that going to be live in the fourth quarter or is that really a first quarter next year event for really going live?

We still anticipate that during this quarter we’ll be going live with transmissions to customers what we’re thinking is initially we will probably do a free trial, we push it out to customers getting 30 day trial that type of thing. So but the full service will go live in Q1 in terms of revenue service. Rich Valera – Needham & Company: Is that consistent with what you expected previously?

Yeah, we expected to launch in the fourth quarter and we still expect to launch so got you… Rich Valera – Needham & Company: Let’s see if we can just trying to change topics to the guidance and stabilization just trying to understand maybe the outlook here. You’ve talked about for a while that you had pretty low expectations for CROWS. You just had a fairly small amount in backlog this year and I thought that was kind of all you expected, clearly it doesn’t sound like things have gotten better there. But just wondering about the outlook for FOG, you’ve obviously got the new products, commercial products growing while you’ve got challenges on the defense side. So just wondering can we think about that business is kind of stable at Q3 levels? Do we think there could be any growth from Q3 levels, given the current spending environment and any help on that will be great?

Sure. So just to be clear the year-over-year decline was due to CROWS. But as you point out, we kind of already knew that that was going to be low. So in addition to that, yes that was kind of baked in and that still – so we don’t anticipate any impact from CROWS in Q4 because as you’ve said we had low expectations there. So but we did see we were disappointed with sales for FOG in Q3. So we baked into our guidance kind of this level or slightly better for Q4, which is about $1 million less than we would have expected. So and that’s really just based on what happened in Q3. Now year-to-date, our FOG sales are actually on plan because we’re ahead in both Q1 and Q2. So we’re being a little conservative with our Q4 forecast, but we think that’s prudent. But we don’t see any fundamental shift. We’ve got really good products. We’ve got more new products coming and higher level system products coming. So we feel pretty good about where we are and so we’re still optimistic overall in the FOG business. Rich Valera – Needham & Company: Okay. That’s helpful. A kind of a bookkeeping one, just cash flow from operations for the quarter?

So represented roughly $4 million, $4.5 million, which is similar to our EBITDA for the quarter. Rich Valera – Needham & Company: Okay. Well that’s it for me. I’ll get back in the queue. Thanks guys.

Thanks, Rich.

We will go next to Jim McIlree with Chardan. Jim McIlree – Chardan Capital: Yeah, thanks a lot and good morning.

Good morning, Jim. Jim McIlree – Chardan Capital: You talked about an increase in expenses in Q4 it’s a rollout in multicast product. Are you talking along the lines of like $0.5 million to $1 million bucks extra in Q4 versus Q3?

Will be at the lower end, I would suggest. Jim McIlree – Chardan Capital: And is that something that we’ll maintain throughout 2014 or is that more along the lines of one time expenses and then it drops back down to previous levels?

We would definitely tail off, but obviously as we launch more products and more services under the IP-MobileCast platform. There will be incremental costs, but the main development for launching this services going on at this time. Jim McIlree – Chardan Capital: Okay. Can you help me understand maybe my math is wrong, but can you help me understand the airtime revenues? If my math is right, you did $10.4 million, airtime for the mini-VSAT product in Q2, but $9.3 million in Q3. First of all is my math right and secondly if it is why the drop?

So we did use $11.3 million of VSAT airtime in Q2. Jim McIlree – Chardan Capital: Yeah, I’m sorry Peter. I’m excluding headwinds in both quarters. So if I look at…

Yes, I think that’s your math, you are taking the Headland out of the VSAT. VSAT airtime was up sequentially 11%, I believe the number was Q2 to Q3.

Right, but 11.3% to 12.6%. Jim McIlree – Chardan Capital: Okay. I’ll go with that. So let me ask in a different way. Was airtime revenue up quarter-to-quarter?

Yes. Correct.

It was up 11% sequentially and 34% year-over-year. Jim McIlree – Chardan Capital: Okay, fantastic. And then I’m just a little bit surprised about FOG business. That the FOG-X CROWS was also lower than you expected and lower quarter-to-quarter, is that right on both counts?

Yes. That’s correct. So this quarter, really the only surprise in our any part of our business was the FOG. The FOG was below our expectations and below our guidance for Q3. But as I mentioned, year-to-date is actually still ahead of internal plan and budget. So for Q3… Jim McIlree – Chardan Capital: Right and is that can you attribute that lower than expected amount to a customer or a product, or market. Can you just give us a little bit of detail…?

Yeah, the biggest area was in our CNS-5000 product line, which had been growing very rapidly and I think we’ve probably made some assumptions about run rate that included, because we’re selling this to GPS integrators and they are selling it to customers. We don’t have a lot of visibility there, because it’s not a DIREC customer sale. So that part of the business was disappointing in Q3. Jim McIlree – Chardan Capital: Okay. And I think finally obviously the government markets going to be in turmoil for Q4 as well. Is there any reason to think that 2014 wouldn’t have a similar kind of tumultuous outlook for it? That sequester may or may not be listed even if we did fiscal 2014 budget might be challenging for many vendors? When you’re putting together your plans for 2014 and the defense market, are you trying to be taking discount from cautiousness?

Yes, we are. But keep in mind that year-to-date, more than half of our business is actually not military for FOG and that a big part of our military business is international. So for example our TACNAV business is almost exclusively international. So – but you’re right, for the lot of our 1Z military business for FOG does get impacted by that. So we definitely will take that into account. Jim McIlree – Chardan Capital: Right. And I’m sorry, I just have one more. So in Q4 Saudi contract is expected to deliver how much? And I’m assuming that that’s going to be almost all services as well?

We expect it to deliver similar levels to what we saw in Q3. So approximately $2 million or so, and you’re correct. It is all service related. Jim McIlree – Chardan Capital: Okay, great. Thanks a lot. I appreciate.

Yeah. Jim McIlree – Chardan Capital: Appreciate the answers and good luck with everything.

Thank you.

(Operator Instructions) We’ll take our next question from Chris Quilty with Raymond James. Chris Quilty – Raymond James & Associates, Inc.: Martin, just a follow-up with the commercial FOG being really the biggest disappointment or a surprise in the quarter, was that the primary or the only issue leading you to lower the top end of your prior guidance?

Yes. Yes, the FOG is the only part of the business that we are being cautious about in Q4. Chris Quilty – Raymond James & Associates, Inc.: Okay. And the new 1760 that you announced, should that be meaningful one in our expectations?

I think it will not be meaningful in Q4, because these are OEM products. It gets designed into other people systems. So there is a time lag for that. But we have in the pipeline for 1750 IMUs in which is really the IMU in the integrated 1760. We have probably a 100 top prospects that are designing into it, everything from stabilized radars to undersea systems, products are involved in oil and gas is just a ton of opportunities there. So we’re more confident in that part of the business than ever. So as far as that particular product in Q4, no, I don’t think it will be meaningful in Q4. Chris Quilty – Raymond James & Associates, Inc.: Okay. I know you’re not providing guidance for 2014 yet, but based upon the product pipeline and things in the market. Is this still the type of business where you think on the commercial side, it should be a double-digit growing business?

Yes. I mean like the 1750 even sequentially was up 37%. So it’s becoming our best selling product very quickly and we’ve got improvements to that product coming that we expect to launch early in Q1, which will further enhance the overall product line. So as we mentioned in the script, we’re integrating it into our TACNAV business coming up with a new product there, which we think is going to be really game changers for our TACNAV business. So we’re using in our own products now as well. Chris Quilty – Raymond James & Associates, Inc.: And margins on the business are they still relatively the same or is there some opportunity for upside as you scale back or get greater leverage on all the R&D you’re spending?

Well, the good news on the part of the sales that are soft – are the low margin part of the FOG business because we’re integrating other peoples components for example with the CNS-5000, and the new 1750 IMU is our highest margin product. So we are moving towards higher margin systems and they are commanding premium prices in the market, even though they are less expensive than alternatives. So that’s very encouraging. Chris Quilty – Raymond James & Associates, Inc.: Okay. Peter, question for you with the roll out of the fiber backbone in the fourth quarter. Can you give us a sense of what that might add in the cost of service and I assume that’s where at lands?

Correct. So it will go against that airtime cost of goods, and it’s going to be less than a $100,000 for the quarter. Chris Quilty – Raymond James & Associates, Inc.: Okay. Not nearly as much as I had thought and just to…

So just – but at time goes on it will increase in the future quarters, but it’s not going to be material like adding an entire new C-band network for example, but so in Q4 it will be about 100K. Chris Quilty – Raymond James & Associates, Inc.: Gotcha. And the cost of assembling all these industry experts in visiting trade shows, all of that is baked into your guidance?

Yes. Yeah. Chris Quilty – Raymond James & Associates, Inc.: Okay. And a clarification on Jim’s question, I think that disconnect maybe when you provide the headwind revenues that’s as a separate line item not part of the mini-VSAT, is that correct?

Correct. It’s included within our mobile communications business. Chris Quilty – Raymond James & Associates, Inc.: Right.

So when we talk about 25.7 million of mobile comps revenue that includes the $3.3 million from Headland Media. So that is not included within the VSAT. Chris Quilty – Raymond James & Associates, Inc.: Okay. Give us some help on trending both the type of customer that signing up for mini-VSAT service commercial high-end leisure as well as some of the underlying trends towards the V11 product versus V3 and V7?

Yeah, I think there is two interesting trends going on and it’s a little bit puzzling to us. One is that the low end product is selling better and there is more interest in the high-end products. So most of our fleet quotes now are for V11, so it’s kind of little bit different from what we expected. But since the sell price in the V11 is higher and the ARPUs are higher that’s fine. But so it seems like the low-end of the market is doing well and the high-end of the market is doing well and the middle end of the market is not doing as well. Chris Quilty – Raymond James & Associates, Inc.: Gotcha. And any impact from recent Inmarsat price increases or are those price increases on the old E&E service just too far removed from part of the market you play in?

That it’s an interesting point, because as soon as you asked that question, I was thinking that that might have some impact on the V3 sales, which we definitely saw spike in Q3. So it could be that those customers are finally being pushed over because the V3, the nice thing about our V3 product is not going to be impacted by Global Express in anyway, because it’s volume product, it competes perfectly with the fleet broadband and it offers two megabits per second instead of 200 kilobits per second and it’s dramatically less expensive to use. So I think that that part of the market, thinking about it logically, there is 40,000 fleet broadband units out there that will it should be V3 customers. And those customers are not going to buy V11 and they’re not going to buy Global Express. Chris Quilty – Raymond James & Associates, Inc.: Gotcha. Actually shifting back to a prior question about Headland Media, if that is going, and this is just an accounting question in terms of how we model this. If you’re going to segregate that as a separate line item, will it have an impact on ARPUs on a go forward basis. I mean will you pull out the portion of that that impacts existing service plans and pull it into a single line.

So first of all, we just need to clarify Headland Media will not be pulled out of the separate line going forward. However, in the way we report our ARPUs then there will be some clarification around what is traditional VSAT airtime service revenue versus what is coming from content. It is not just Headland. There were other content services we’re delivering, which will have an impact on ARPUs. Chris Quilty – Raymond James & Associates, Inc.: Gotcha. Another fun thing to track, well good, I appreciate the details and good luck going into the end of the year.

Okay. Thanks Chris.

And at this time, we have no further questions in the queue.

Okay. And as always if anybody has any follow-up questions, feel free to call or e-mail us directly. Thank you.

Ladies and gentlemen, this does conclude today’s conference. We thank you for your participation.