KVH Announces Results for Third Quarter

KVH Industries, Inc., (Nasdaq: KVHI)

   --  Quarterly Revenue of $16.7 Million, Up 22% Year over Year

   --  Profit of $0.05 Per Diluted Share

   KVH Industries, Inc., (Nasdaq: KVHI), a leading provider of mobile
satellite products and defense navigation and guidance systems, today
reported its results for the third quarter ended September 30, 2005.
Revenue for the period was $16.7 million, up 22% from $13.8 million
for the third quarter ended September 30, 2004. Net profit for the
period was $0.7 million, or $0.05 per diluted share. By comparison,
KVH recorded a net loss of ($1.6) million, or ($0.11) per share for
the same period last year.
   For the nine months ended September 30, 2005, revenue increased
15% to $53.4 million from $46.3 million for the nine months ended
September 30, 2004. KVH reported a net profit of $1.9 million or $0.13
per diluted share for the 2005 period, versus a net loss of ($6.4)
million or ($0.46) per share in the year ago period.
   "Solid results from military, marine, automotive, and fiber optic
product sales offset the weakness in the recreational vehicle market
to produce 22% revenue growth and our fourth consecutive profitable
quarter," said Martin Kits van Heyningen, KVH's president and chief
executive officer.
   Third quarter and year-to-date sales of the company's mobile
satellite products increased 4% compared to the respective periods in
2004.
   "Strong marine sales led the way with a 30% increase over last
year's third quarter, with excellent growth in both our North American
and European markets," explained Mr. Kits van Heyningen. "Sales of our
TracVision(R) A5 automotive satellite TV system were up strongly both
on a sequential and year-over-year basis as we continue to build
momentum in the automotive market. Despite this, sales in the land
market declined 21% over the third quarter of last year as our RV
sales felt the effect of increased competition among mobile satellite
TV products, higher fuel prices, and a substantial reduction in sales
of Class A recreational vehicles, which has had a corresponding effect
on our sales of TracVision systems to RV manufacturers."
   For the third quarter of 2005, defense-related sales, including
those for KVH's TACNAV(R) military navigation systems and fiber optic
gyro (FOG) solutions, were up a combined 79% on a year-over-year
basis. Year to date, defense revenue was up 63% compared to the first
nine months of 2004.
   "Overall, our defense backlog remained steady compared to the end
of the second quarter of 2005 thanks to new orders for both our TACNAV
vehicle navigation system and our fiber optic gyro products," Mr. Kits
van Heyningen said. "Significantly, we announced a multi-year order
from Raytheon for our TG-6000 inertial measurement unit, which is an
integral component in the guidance system of the MK54 torpedo. The
value of the initial production order is roughly $3.2 million. If all
of the additional options are exercised, the total order is
potentially worth more than $15 million between now and 2009,
potentially making it the single largest order for any product in our
company's history."
   "Our operational improvement program continues to show results,"
remarked Patrick Spratt, KVH's chief financial officer. "We've
achieved tighter spending management, reductions in product costs,
higher productivity, and efficiency improvements in many areas of the
company. For the third quarter of 2005, gross margin was 42%, an
8-percentage point improvement on a year-over-year basis resulting in
a 51% year-over-year increase in gross profit. Our asset management
continued to improve, led by accounts receivable days sales
outstanding at 49, a decline of 1 day from the second quarter and 2
days from the prior year. Although our net inventory level was $0.2
million below the June level, inventory turns declined slightly to 4.9
on an annualized basis due to the sequential decline in cost of goods
sold. Together, all of these factors contributed to strong third
quarter positive cash flow from operations of $2.7 million."
   Commenting on the company's expected performance during the
remainder of the year, Mr. Spratt noted, "We expect that fourth
quarter revenue will continue to show solid year-over-year growth, in
the range of 10 to 15 percent. We also expect to achieve profitable
results in the fourth quarter with earnings per share roughly in line
with or slightly better than our third quarter results. We also have a
number of exciting new products in the pipeline and we plan to begin
introducing them over the course of the fourth quarter."
   "I am very pleased with our overall results for the third
quarter," concluded Mr. Kits van Heyningen. "Our defense business has
been growing, spurred on by several long-term program opportunities
that resulted in multi-year contracts. We have continued to build
momentum in the automotive market and marine satellite sales have
remained strong. I believe that our ongoing cost improvement and new
product efforts will help us maintain our leadership position in each
of our key business areas, including the RV market. We are well
positioned to achieve our goals for the fourth quarter and the year as
a whole."

   Recent Highlights:

   --  October 8, 2005 - Two autonomous vehicles developed by
        Carnegie Mellon University's Red Team and each equipped with
        KVH DSP fiber optic gyros, finished second and third in the
        Defense Advanced Research Projects Agency (DARPA) Grand
        Challenge.

   --  September 14, 2005 - Raytheon Integrated Defense Systems
        placed a $3.2 million production order for KVH's fiber optic
        gyro-based TG-6000 precision inertial measurement unit. The
        TG-6000 IMU will serve as a key component within the guidance
        system of the U.S. Navy's next-generation MK54 lightweight
        torpedoes.

   --  August 11, 2005 - KVH received three new orders for its TACNAV
        vehicle navigation systems and T-FOG(TM) fiber optic gyro
        upgrade. Together, the orders are valued at more than $2.4
        million.

   KVH is webcasting its third quarter conference call live at 10:30
a.m. Eastern Time today through the company's web site. The conference
call can be accessed via the company's web site at
http://www.kvh.com/InvRelations. The audio archive and an MP3 podcast
will also be available on the company web site within three hours of
the completion of the call.

   KVH Industries, Inc., designs and manufactures products that
enable mobile communication, navigation, and precision pointing
through the use of its proprietary mobile satellite antenna and fiber
optic technologies. The company is developing next-generation systems
with greater precision, durability, and versatility for
communications, navigation, and industrial applications. An ISO
9001-certified company, KVH has headquarters in Middletown, Rhode
Island, with a fiber optic and military navigation product
manufacturing facility in Tinley Park, Illinois, and a European sales,
marketing, and support office in Kokkedal, Denmark.
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                  KVH INDUSTRIES, INC. AND SUBSIDIARY
                    SELECTED FINANCIAL INFORMATION
            CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

                              Three Months Ended     Nine Months Ended
                                 September 30,         September 30,
                           ------------------------- -----------------
                                  2005         2004     2005     2004
                           ------------ ------------ -------- --------

Net sales                      $16,742      $13,762  $53,442  $46,291
TracVision A5 inventory
 and firm purchase 
 commitment revaluation 
 charge                              -            -        -    2,413
Cost of goods sold               9,642        9,072   31,454   30,044
                           ------------ ------------ -------- --------
 Gross profit                    7,100        4,690   21,988   13,834

Operating expenses:
      Research and
       development               1,783        1,356    5,659    4,975
      Sales and marketing        3,377        3,957   10,347   11,620
      General and
       administrative            1,556        1,222    4,322    3,849
                           ------------ ------------ -------- --------

Operating income                   384       (1,845)   1,660   (6,610)
      Other income
       (expense), net              303          184      513      267
      Income tax benefit
       (expense)                   (13)          64     (246)     (74)
                           ------------ ------------ -------- --------
Net earnings                   $   674      $(1,597) $ 1,927  $(6,417)
                           ============ ============ ======== ========

Net earnings per common
 share
      Basic and diluted        $  0.05      $ (0.11) $  0.13  $ (0.46)
                           ============ ============ ======== ========

Weighted average common
 shares outstanding
      Basic                     14,596       14,454   14,555   13,983
                           ============ ============ ======== ========
      Diluted                   14,765       14,454   14,740   13,983
                           ============ ============ ======== ========


                  KVH INDUSTRIES, INC. AND SUBSIDIARY
                    SELECTED FINANCIAL INFORMATION
                 CONSOLIDATED CONDENSED BALANCE SHEETS

                       (in thousands, unaudited)

                                       September 30,     December 31,
                                            2005             2004
                                      ---------------   --------------
ASSETS

   Cash, cash equivalents and
    marketable securities                 $   49,427      $    45,728
   Accounts receivable, net                    9,057            9,577
   Inventories                                 7,793            7,251
   Deferred income taxes                         440              645
   Other assets                                1,981            1,233
                                           ----------      -----------
           Total current assets               68,698           64,434

   Property and equipment, net                 8,282            8,218
   Deferred income taxes                       3,014            3,014
   Other non-current assets                      199              248
                                      ---------------   --------------

           Total assets                   $   80,193      $    75,914
                                      ===============   ==============

LIABILITIES AND STOCKHOLDERS' EQUITY
   Accounts payable and accrued
    expenses                              $    7,465      $     5,678
   Current portion of deferred
    revenue                                       10                -
   Current portion of debt
    obligations                                  111              107
                                           ----------      -----------
           Total current liabilities           7,586            5,785

   Deferred revenue                              111                -
   Debt obligations                            2,311            2,397
   Stockholders' equity                       70,185           67,732
                                      ---------------   --------------

           Total liabilities and
            stockholders' equity          $   80,193      $    75,914
                                      ===============   ==============
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   This press release contains forward-looking statements that
involve risks and uncertainties. For example, forward-looking
statements include statements regarding our financial and product
development goals for 2005, anticipated revenue growth, anticipated
profitability, anticipated orders for our satellite communications and
military products, and anticipated improvements in our product margins
and competitive position. The actual results we achieve could differ
materially from the statements made in this press release. Factors
that might cause these differences include, but are not limited to:
the unpredictability of the new and emerging market for mobile
satellite communications products in automobiles; failure to develop
and market products suitable for automotive manufacturer use; failure
to gain the acceptance of or orders from automotive manufacturers for
the TracVision A5; widespread consumer demand for satellite TV service
in cars may fail to develop; the appeal and acceptance of satellite
TV-equipped rental vehicles to consumers may be lacking; potential
difficulties in achieving additional significant cost reductions for
the TracVision A5; seasonal declines in demand for our mobile
satellite communication and television products; the unpredictability
and financial impact of purchasing schedules and priorities of the
relatively small number of customers for our defense products; the
risk of order cancellations, particularly for longer-term orders; the
risk that contract options may never be exercised, depriving us of
potential revenue; the potential termination of the multi-year SRWS or
MK54 torpedo programs; the impact of lengthy export license processes
on the timing of our international military product shipments;
potential reductions in our overall gross margins associated with a
general shift in product mix toward our mobile satellite
communications products; weather conditions that could disrupt
regional sales efforts, including the impact of recent hurricanes; our
dependence on single production lines for our products; our dependence
on sole or limited source suppliers; our dependence on third-party
satellite networks for programming and satellite services; challenges
in managing anticipated growth; the impact of continuing increases in
fuel prices on the sale and use of motor vehicles and marine vessels;
poor or delayed research and development results; currency
fluctuations, export restrictions and other international risks;
potential product liability claims; the difficulty in protecting our
proprietary technology; potential claims of intellectual property
infringement; and expenses associated with new corporate governance
requirements. These and other factors are discussed in more detail in
our Quarterly Report on Form 10-Q filed with the Securities and
Exchange Commission on August 9, 2005. Copies are available through
our Investor Relations department and web site, www.kvh.com. We assume
no obligation to update our forward-looking statements to reflect new
information and developments.