Speaking about the company's financial results, Patrick Spratt, KVH's chief financial officer, said, "Our fourth quarter performance on both the top and bottom lines was within the range that we expected, but overall not quite as strong as we would have liked. Sales of our fiber gyro products exceeded our expectations. Gross margin for the quarter was lower than expected, due in part to product revenue mix, and also because we experienced a greater seasonality effect on our airtime activation and usage than we'd anticipated. Quarterly operating expenses were up year over year primarily as a result of ongoing investments for mini-VSAT Broadband sales and support, and also because of the addition of Virtek Communication in September. Our cash, cash equivalents, and marketable securities balance was roughly flat compared to September 30, 2010, at just over $37 million."
Looking ahead to 2011 and beyond, Mr. Spratt said, "We are on a solid path of executing our strategic plans to expand our VSAT, marine satellite TV, and FOG businesses. These efforts form the basis for building toward progressively stronger financial results with four- to five-year targets of annual revenue greater than $300 million, more than half of which would be generated by our VSAT business, along with operating margins of 15%."
In 2011, we plan to pursue our strategic initiatives aggressively, including the rollout of a number of exciting new products, the first of which will be introduced in four days at the Miami International Boat Show. We expect that 2011 will be a year of strong top line growth of 15% to 20% and an approximately 75% improvement in operating profit compared to the reported level in 2010. However, we do anticipate challenges in the first quarter. Among these are the continued slow pace of FOG sales for remote weapon stations during the CROWS II to CROWS III transition period, a delay in resumption of LiveTV shipments until the second half of 2011, and the full cost impact of the mini-VSAT Broadband network buildout, including Brazil and some additional capacity for the continental U.S. As a result, we expect first quarter revenue to decline 5% to 10% on a year-over-year basis as well as experience a loss of $0.05 to $0.10 per share before returning to profitability in the second quarter. We are determined not to allow these near-term business challenges to cause us to compromise on making strategic investments to achieve our long-term targets."
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