KVH Industries: Niche Market Leader With Incremental Growth

John Barr of Needham Funds presented his in-depth investment thesis on KVH Industries (US: KVHI) at Best Ideas 2021.

Thesis summary:

KVH strives to improve the life of the seafarer and improve vessel operations. KVH’s Connectivity-as-a-Service Agile Plans connects seafarers to their families and lives on shore. The new KVH Watch IoT offering enables remote monitoring and maintenance for the many critical and complex systems on ships. KVH also supplies assured navigation products for military and commercial customers on land and sea. Military vehicles and autonomous vehicles need to know where they are when GPS is not available or accurate.

KVH has a stock price near $10 per share, a market capitalization of approximately $200 million, $41 million of cash, $7 million of PPP debt that is likely to be forgiven, and annual revenue of $160 million. KVH went public in 1996.

John believes KVH could earn $1.50 to $2 or more per share, based on $250 million of revenue, 45-50% gross margins, and 15-20% operating margins. There could also be $3-5 per share of cash. With a 15-20 multiple, John sees value potential of $25 to $45 per share.

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About the instructor:

John Barr is a Co-Manager of the Needham Growth Fund (NEEGX). He has been its Co-Manager since January 2010. He also manages the Needham Aggressive Growth Fund (NEAGX). John started on Wall Street in 1995 with Needham as a sell-side analyst following technical software companies, including electronic design automation (EDA) companies. John rejoined Needham in 2009 because of the culture, which lives and breathes growth companies and long-term investing.

From 2000-2002, John was a managing director and senior analyst at Robertson Stephens, following semiconductor technology companies. He was an Institutional Investor All-Star and was ranked by Reuters as leader of one of the top software teams. In 2002 John moved to the buy-side and joined Buckingham Capital Management where he served as a portfolio manager and analyst for their diversified industry long/short domestic equity hedge fund.

John’s first career was outside of Wall Street, where he spent 14 years in sales, marketing and management, primarily in the EDA industry. Working in these small companies makes him think like an owner and to look for that trait in his investments. John loves the challenge of identifying businesses with compounding characteristics and getting to know the companies over the course of years. From his industry experience, he looks to invest in companies that he would have liked to have been part of.

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