Group 1 - The core investment strategy of Quipus Capital focuses on long-only investment, evaluating companies from an operational and buy-and-hold perspective rather than market-driven dynamics [1] - Quipus Capital emphasizes understanding the long-term earnings power of companies and the competitive dynamics within their industries [1] - The majority of recommendations from Quipus Capital will be holds, indicating a cautious approach to investment opportunities [1] Group 2 - The articles produced by Quipus Capital aim to provide valuable information for future investors while maintaining a skeptical view in a generally bullish market [1] - There is a clear indication that only a small fraction of companies are considered a buy at any given time, reflecting a selective investment approach [1]

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section presents KVH Industries, Inc.'s unaudited consolidated interim financial statements and detailed notes for the periods ended June 30, 2025 and 2024 [ITEM 1. INTERIM FINANCIAL STATEMENTS](index=3&type=section&id=ITEM%201.%20INTERIM%20FINANCIAL%20STATEMENTS) This section provides KVH Industries, Inc.'s unaudited consolidated interim financial statements and related notes for the specified periods [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) This section presents the company's consolidated financial position, detailing assets, liabilities, and equity as of June 30, 2025, and December 31, 2024 Consolidated Balance Sheet Highlights (in thousands) | Item | June 30, 2025 | December 31, 2024 | Change (2025 vs 2024) | | :-------------------------------- | :------------ | :---------------- | :-------------------- | | Cash and cash equivalents | $55,931 | $50,572 | +$5,359 | | Accounts receivable, net | $25,350 | $21,624 | +$3,726 | | Inventories | $20,258 | $22,953 | -$2,695 | | Total current assets | $122,999 | $122,575 | +$424 | | Total assets | $152,041 | $155,081 | -$3,040 | | Total current liabilities | $13,092 | $15,872 | -$2,780 | | Total liabilities | $13,657 | $16,456 | -$2,799 | | Total stockholders' equity | $138,384 | $138,625 | -$241 | [Consolidated Statements of Operations](index=4&type=section&id=Consolidated%20Statements%20of%20Operations) This section details the company's financial performance, including net sales, operating loss, and net income (loss) for the interim periods Consolidated Statements of Operations Highlights (in thousands, except EPS) | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net sales | $26,623 | $28,673 | $52,037 | $57,940 | | Loss from operations | $(370) | $(2,889) | $(2,613) | $(6,687) | | Net income (loss) | $930 | $(2,376) | $(780) | $(5,539) | | Basic EPS | $0.05 | $(0.12) | $(0.04) | $(0.29) | | Diluted EPS | $0.05 | $(0.12) | $(0.04) | $(0.29) | [Consolidated Statements of Comprehensive Income (Loss)](index=5&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) This section presents the company's comprehensive income (loss), including net income (loss) and other comprehensive income items Consolidated Statements of Comprehensive Income (Loss) (in thousands) | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) | $930 | $(2,376) | $(780) | $(5,539) | | Foreign currency translation adjustment | $278 | $(35) | $1,000 | $194 | | Total comprehensive income (loss) | $1,208 | $(2,411) | $220 | $(5,345) | [Consolidated Statements of Stockholders' Equity](index=6&type=section&id=Consolidated%20Statements%20of%20Stockholders'%20Equity) This section outlines changes in the company's stockholders' equity, reflecting net income, stock-based compensation, and other adjustments - Total stockholders' equity decreased slightly from **$138,625 thousand** at December 31, 2024, to **$138,384 thousand** at June 30, 2025, primarily due to a net loss of **$780 thousand** and treasury stock acquisitions of **$1,256 thousand**, partially offset by other comprehensive income of **$1,000 thousand** and stock-based compensation of **$771 thousand**[18](index=18&type=chunk) [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This section details the company's cash inflows and outflows from operating, investing, and financing activities for the interim periods Consolidated Statements of Cash Flows Highlights (in thousands) | Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by (used in) operating activities | $3,819 | $(15,457) | | Net cash provided by investing activities | $2,611 | $14,448 | | Net cash (used in) provided by financing activities | $(1,228) | $96 | | Net increase (decrease) in cash and cash equivalents | $5,359 | $(937) | | Cash and cash equivalents at end of period | $55,931 | $10,357 | [Notes to Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) This section provides detailed explanations of significant accounting policies, business operations, and financial performance disclosures [(1) Description of Business](index=8&type=section&id=(1)%20Description%20of%20Business) This note describes KVH Industries, Inc.'s core business, service offerings, and strategic shift in manufacturing operations - KVH Industries, Inc. develops, markets, and supports mobile connectivity and managed services and products for marine and land markets[23](index=23&type=chunk) - Service sales primarily derive from satellite Internet airtime services via KVH's global HTS network, supplemented by cellular airtime through the KVH ONE® hybrid network and third-party LEO services (Starlink, OneWeb)[24](index=24&type=chunk)[25](index=25&type=chunk) - The company announced a staged wind-down of product manufacturing operations at its Middletown, Rhode Island location, expected to cease substantially all manufacturing by the end of **2026**, extending from the end of **2025** due to prioritizing LEO product orders and AgilePlan terminal refurbishments[29](index=29&type=chunk) [(2) Summary of Significant Accounting Policies](index=9&type=section&id=(2)%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines the key accounting principles and estimates used in preparing the interim financial statements - The interim financial statements are unaudited and include normal recurring adjustments, prepared in accordance with GAAP[31](index=31&type=chunk) - Management's estimates and assumptions impact revenue recognition, valuation of accounts receivable, inventory, long-lived assets, accrued expenses, stock-based compensation, warranty obligations, and tax reserves[32](index=32&type=chunk) - Foreign currency exchange gains and losses for subsidiaries using USD as functional currency are recognized in 'other expense, net'; for subsidiaries using local currencies, gains and losses from translation are credited/charged to accumulated other comprehensive loss[35](index=35&type=chunk)[36](index=36&type=chunk) [(3) Recently Issued Accounting Standards and Accounting Standards Not yet Adopted](index=10&type=section&id=(3)%20Recently%20Issued%20Accounting%20Standards%20and%20Accounting%20Standards%20Not%20yet%20Adopted) This note discusses recently issued and not-yet-adopted accounting standards and their expected impact on financial statements - ASU No. 2023-09 (Income Taxes) effective for annual periods after December 15, 2024, requires enhanced tax rate reconciliation and income taxes paid disclosures, not expected to materially impact financial statements[37](index=37&type=chunk) - ASU No. 2024-03 (Expense Disaggregation) effective for annual periods after December 15, 2026, requires further disaggregated income statement expense information, resulting only in disclosure changes[38](index=38&type=chunk) [(4) Marketable Securities](index=10&type=section&id=(4)%20Marketable%20Securities) This note details the company's marketable securities holdings and related interest income, noting their liquidation in Q4 2024 - The company liquidated all marketable securities in Q4 2024, transferring funds to an interest-bearing account; no marketable securities were held as of June 30, 2025, or December 31, 2024[40](index=40&type=chunk)[41](index=41&type=chunk) Interest Income from Marketable Securities (in thousands) | Period | 2025 | 2024 | | :------------------------------- | :--- | :--- | | Three Months Ended June 30, | $0 | $706 | | Six Months Ended June 30, | $0 | $1,426 | [(5) Stockholder's Equity](index=11&type=section&id=(5)%20Stockholder's%20Equity) This note provides details on stock-based compensation expense, unrecognized compensation, and accumulated other comprehensive loss Stock-Based Compensation Expense (in thousands) | Expense Category | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Cost of service sales | $6 | $7 | $13 | $14 | | Cost of product sales | $5 | $5 | $10 | $14 | | Research and development | $41 | $174 | $(8) | $263 | | Sales, marketing and support | $77 | $74 | $154 | $145 | | General and administrative | $305 | $462 | $602 | $808 | | **Total** | **$434** | **$722** | **$771** | **$1,244** | - As of June 30, 2025, unrecognized compensation expense for stock options was **$1,808 thousand** (weighted-average period of **3.12 years**) and for restricted stock awards was **$935 thousand** (weighted-average period of **2.06 years**)[42](index=42&type=chunk) - Accumulated Other Comprehensive Loss (AOCL) improved, showing a net other comprehensive income of **$278 thousand** for the three months ended June 30, 2025, and **$1,000 thousand** for the six months ended June 30, 2025, primarily due to foreign currency translation adjustments[51](index=51&type=chunk) [(6) Net Income (Loss) per Common Share](index=13&type=section&id=(6)%20Net%20Income%20(Loss)%20per%20Common%20Share) This note presents the calculation of basic and diluted net income (loss) per common share for the interim periods Weighted Average Common Shares Outstanding (in thousands) | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Basic | 19,401 | 19,381 | 19,446 | 19,333 | | Dilutive common shares | 40 | — | — | — | | Diluted | 19,441 | 19,381 | 19,446 | 19,333 | - For periods with net losses (six months ended June 30, 2025 and both periods in 2024), outstanding stock options and non-vested restricted shares were excluded from diluted EPS calculations as their inclusion would be anti-dilutive[52](index=52&type=chunk) [(7) Inventories](index=14&type=section&id=(7)%20Inventories) This note details the components of the company's inventory, including raw materials, work in process, and finished goods Inventory Components (in thousands) | Item | June 30, 2025 | December 31, 2024 | | :---------------- | :------------ | :---------------- | | Raw materials | $13,651 | $15,379 | | Work in process | $2,176 | $2,469 | | Finished goods | $4,431 | $5,105 | | **Total** | **$20,258** | **$22,953** | [(8) Prepaid Expenses and Other Current Assets](index=14&type=section&id=(8)%20Prepaid%20Expenses%20and%20Other%20Current%20Assets) This note outlines the company's prepaid expenses and other current assets, including prepaid Starlink pooled data Prepaid Expenses and Other Current Assets (in thousands) | Item | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Prepaid Starlink pooled data | $8,331 | $14,137 | | Other prepaid expenses and other current assets | $5,296 | $1,879 | | **Total** | **$13,627** | **$16,016** | - In Q2 2024, KVH prepaid for a large block of Starlink Global Priority data at favorable rates, enhancing flexibility for custom airtime plans[55](index=55&type=chunk) [(9) Property and Equipment](index=15&type=section&id=(9)%20Property%20and%20Equipment) This note details the company's property and equipment, net of depreciation, and significant asset sales Property and Equipment, Net (in thousands) | Item | June 30, 2025 | December 31, 2024 | | :------------------------ | :------------ | :---------------- | | Total gross property and equipment | $73,164 | $78,329 | | Less accumulated depreciation | $(49,093) | $(51,315) | | **Property and equipment, net** | **$24,071** | **$27,014** | - Depreciation expense for the six months ended June 30, 2025, was **$5,284 thousand**, down from **$6,784 thousand** in the prior year[56](index=56&type=chunk) - The company sold **50 Enterprise Center** in June 2025 for **$5.3 million**, recognizing a **$1.3 million** gain; **75 Enterprise Center** was classified as held for sale in Q3 2024, with an impairment charge of **$1.1 million** recorded in 2024[58](index=58&type=chunk)[59](index=59&type=chunk) [(10) Product Warranty](index=16&type=section&id=(10)%20Product%20Warranty) This note provides information on the company's product warranty accruals and related activity for the interim periods Product Warranty Activity (in thousands) | Item | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------- | :----------------------------- | :----------------------------- | | Beginning balance | $607 | $828 | | Charges to expense | $517 | $465 | | Costs incurred | $(296) | $(657) | | Ending balance | $828 | $636 | - Accrued product warranty costs increased to **$828 thousand** as of June 30, 2025, from **$607 thousand** at December 31, 2024[60](index=60&type=chunk) [(11) Legal Matters](index=16&type=section&id=(11)%20Legal%20Matters) This note confirms the company is not party to any material lawsuits or proceedings that could significantly harm its financial position - The Company is not a party to any lawsuit or proceeding that, in management's opinion, is likely to materially harm its business, results of operations, financial condition, or cash flows[62](index=62&type=chunk) [(12) Fair Value Measurements](index=16&type=section&id=(12)%20Fair%20Value%20Measurements) This note discusses the fair value of financial assets and liabilities, noting that carrying amounts approximate fair value - No financial assets or liabilities were measured at fair value based on the ASC 820 hierarchy as of June 30, 2025, or December 31, 2024[64](index=64&type=chunk) - The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses, and operating/financing lease liabilities approximate fair value due to their short-term or market-rate nature[65](index=65&type=chunk) [(13) Intangible Assets](index=17&type=section&id=(13)%20Intangible%20Assets) This note details the company's intangible assets, including subscriber relationships and distribution rights, and related amortization Intangible Assets, Net (in thousands) | Item | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Subscriber relationships | $44 | $38 | | Distribution rights | $592 | $790 | | Intellectual property | $0 | $0 | | **Total Net Carrying Value** | **$636** | **$828** | - Amortization expense for intangible assets was **$210 thousand** for the six months ended June 30, 2025, categorized as general and administrative expense[71](index=71&type=chunk) - The total weighted average remaining useful life of definite-lived intangible assets was **1.5 years** as of June 30, 2025[72](index=72&type=chunk) [(14) Revenue from Contracts with Customers](index=18&type=section&id=(14)%20Revenue%20from%20Contracts%20with%20Customers) This note disaggregates net sales by revenue type and geographic region, highlighting service and product sales trends Net Sales from Contracts with Customers (in thousands) | Revenue Type | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Service - over time | $23,049 | $24,674 | $44,691 | $49,712 | | Product - point in time | $3,574 | $3,999 | $7,346 | $8,228 | | **Total net sales** | **$26,623** | **$28,673** | **$52,037** | **$57,940** | - Service sales (primarily airtime) accounted for **79%** of consolidated net sales for both the three and six months ended June 30, 2025 and 2024[77](index=77&type=chunk) - International revenues represented **78%** and **79%** of consolidated net sales for the three and six months ended June 30, 2025, respectively, with Singapore customers accounting for **21-22%** of consolidated net sales[79](index=79&type=chunk) [(15) Income Taxes](index=19&type=section&id=(15)%20Income%20Taxes) This note provides information on effective tax rates, deferred tax assets, and reserves for uncertain tax positions Effective Tax Rates | Period | June 30, 2025 | June 30, 2024 | | :-------------------- | :------------ | :------------ | | Three Months Ended | 10.1% | 0.1% | | Six Months Ended | (20.0)% | (1.4)% | - The effective tax rates differed from the statutory rate primarily due to a valuation allowance reserve on U.S. deferred tax assets, discrete tax adjustments, and income composition from foreign jurisdictions taxed at lower rates[84](index=84&type=chunk) - Reserves for uncertain tax positions were **$767 thousand** as of June 30, 2025, with a possible decrease of **$16 thousand** in the next twelve months due to statute of limitations lapses and settlements[85](index=85&type=chunk)[86](index=86&type=chunk) [(16) Leases](index=20&type=section&id=(16)%20Leases) This note details operating lease liabilities maturities and interest income from sales-type leases for VSAT systems Operating Lease Liabilities Maturities (in thousands) as of June 30, 2025 | Year | Amortization Expense | | :-------------------- | :------------------- | | Remainder of 2025 | $468 | | 2026 | $406 | | 2027 | $251 | | 2028 and thereafter | $164 | | **Total minimum lease payments** | **$1,289** | | Present value of net minimum operating lease payments | $1,213 | | Weighted-average remaining lease term | 2.16 years | | Weighted-average discount rate | 5.50% | - The company has sales-type leases for TracPhone and TracNet VSAT systems, recognizing product revenue upon delivery and interest income over the lease term; interest income from sales-type leases was **$203 thousand** for the six months ended June 30, 2025[89](index=89&type=chunk)[92](index=92&type=chunk) [(17) Restructuring](index=21&type=section&id=(17)%20Restructuring) This note describes the company's manufacturing wind-down and workforce reduction, including associated severance charges - KVH initiated a staged wind-down of its manufacturing activities in Middletown, Rhode Island, in February 2024, driven by reduced demand and intensifying competition for hardware products; the wind-down is now expected to cease substantially all manufacturing by the end of **2026**, extended from **2025**[94](index=94&type=chunk)[95](index=95&type=chunk) - The restructuring included a headcount reduction of approximately **75 employees** (**20%** of the workforce) in 2024, incurring aggregate severance charges of approximately **$3.9 million** (**$3.6 million** cash, **$0.3 million** non-cash)[96](index=96&type=chunk) [(18) Segment Information](index=21&type=section&id=(18)%20Segment%20Information) This note clarifies that the company operates as a single segment and provides key consolidated sales and cost data - The Company manages its operations as a single operating segment, with the CEO acting as the Chief Operating Decision Maker (CODM) who reviews consolidated financial information[97](index=97&type=chunk)[98](index=98&type=chunk) Key Segment Sales and Costs (in thousands) | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net Sales | $26,623 | $28,673 | $52,037 | $57,940 | | Cost of service sales | $14,210 | $15,469 | $28,445 | $29,513 | | Cost of product sales | $3,277 | $4,299 | $7,017 | $9,607 | | Research and development | $916 | $2,326 | $2,103 | $5,364 | | Sales, marketing and support | $5,010 | $5,334 | $9,970 | $10,718 | | General and administrative | $3,580 | $4,134 | $7,115 | $9,425 | | Net income (loss) | $930 | $(2,376) | $(780) | $(5,539) | [(19) Share Buyback Program](index=23&type=section&id=(19)%20Share%20Buyback%20Program) This note details the Board-authorized share repurchase program and the shares bought back during the interim periods - The Board of Directors authorized a share repurchase program on December 9, 2024, allowing the company to purchase up to **$10 million** of common stock[101](index=101&type=chunk) - During the three months ended June 30, 2025, the company repurchased **211 thousand shares** for approximately **$1.1 million**; for the six months ended June 30, 2025, **242 thousand shares** were repurchased for approximately **$1.3 million**[103](index=103&type=chunk) [(20) Subsequent Events](index=23&type=section&id=(20)%20Subsequent%20Events) This note discloses significant events occurring after the reporting period, including tax law changes and new lease agreements - On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) was enacted, making permanent key elements of the Tax Cuts and Jobs Act, including **100% bonus depreciation** and domestic research cost expensing; the company is assessing its impact[104](index=104&type=chunk) - On July 23, 2025, the company entered a new lease agreement for **32,000 sq ft** of office and warehouse space in Bristol, RI, planning to migrate operations by spring 2026, with initial annual lease expense of approximately **$0.6 million**[105](index=105&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=23&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management discusses KVH Industries, Inc.'s financial condition and results of operations, covering sales, costs, and liquidity for interim periods [Introduction](index=23&type=section&id=Introduction) This introduction highlights forward-looking statements and the inherent risks and uncertainties in the company's financial outlook - The discussion includes forward-looking statements regarding future financial results, business strategies, and competitive positions, subject to risks and uncertainties outlined in the 'Risk Factors' section[106](index=106&type=chunk) [Overview](index=24&type=section&id=Overview) This overview describes KVH's connectivity solutions, strategic transition to multi-channel services, and key operational initiatives - KVH is a global provider of connectivity solutions for maritime commercial, leisure, and military/government customers, generating most revenue from satellite Internet airtime services[107](index=107&type=chunk)[108](index=108&type=chunk) - The company is transitioning from traditional Ku-band VSAT to a multi-channel, integrated communications solution model, including LEO services (Starlink, OneWeb) and cellular, driven by increased competition and reduced demand for hardware[108](index=108&type=chunk)[110](index=110&type=chunk)[111](index=111&type=chunk) - Strategic actions include a staged wind-down of manufacturing by end of **2026**, a **20%** workforce reduction (**75 employees**) in 2024, a **$17.0 million** prepayment for Starlink data, and the sale of **50 Enterprise Center** for a **$1.3 million** gain[111](index=111&type=chunk)[112](index=112&type=chunk)[113](index=113&type=chunk)[116](index=116&type=chunk) [Critical Accounting Estimates](index=25&type=section&id=Critical%20Accounting%20Estimates) This section identifies critical accounting estimates, particularly for intangible and long-lived assets, due to their significant uncertainty - The company identifies accounting estimates for intangible assets and other long-lived assets as critical, involving significant uncertainty and potential impact on financial results[118](index=118&type=chunk) [Results of Operations](index=26&type=section&id=Results%20of%20Operations) This section analyzes the company's financial performance, including net sales, costs, and operating expenses for the interim periods Net Sales and Profitability as % of Net Sales | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net sales | 100.0% | 100.0% | 100.0% | 100.0% | | Costs of service sales | 53.4% | 53.9% | 54.7% | 50.9% | | Costs of product sales | 12.3% | 15.0% | 13.5% | 16.6% | | Research and development | 3.4% | 8.1% | 4.0% | 9.3% | | Sales, marketing and support | 18.8% | 18.6% | 19.2% | 18.5% | | General and administrative | 13.4% | 14.4% | 13.7% | 16.3% | | Loss from operations | (1.3)% | (10.0)% | (5.1)% | (11.6)% | | Net income (loss) | 3.6% | (8.2)% | (1.5)% | (9.6)% | [Three months ended June 30, 2025 and 2024](index=26&type=section&id=Three%20months%20ended%20June%2030,%202025%20and%202024) This section provides a detailed comparison of net sales, costs, and operating expenses for the three months ended June 30 Net Sales (in thousands) | Category | June 30, 2025 | June 30, 2024 | Change ($) | Change (%) | | :------- | :------------ | :------------ | :--------- | :--------- | | Service | $23,049 | $24,674 | $(1,625) | (7)% | | Product | $3,574 | $3,999 | $(425) | (11)% | | **Total** | **$26,623** | **$28,673** | **$(2,050)** | **(7)%** | - Service sales decreased primarily due to a **$1.9 million** reduction in airtime service sales, including a **$2.5 million** decrease from the U.S. Coast Guard contract downgrade, partially offset by increased LEO service sales (over **30%** of airtime sales in 2025 vs. <**10%** in 2024)[120](index=120&type=chunk) - Costs of sales decreased by **$2.3 million** (**12%**) to **$17.5 million**, driven by a **$1.3 million** decrease in service costs and a **$1.0 million** decrease in product costs; product cost of sales as a percentage of product sales improved from **108%** to **92%**[122](index=122&type=chunk)[123](index=123&type=chunk)[124](index=124&type=chunk) - Operating expenses significantly decreased: R&D by **$1.4 million** (**61%**), Sales, Marketing & Support by **$0.3 million** (**6%**), and G&A by **$0.6 million** (**13%**), largely due to reduced personnel costs from workforce reductions and lower depreciation[125](index=125&type=chunk)[126](index=126&type=chunk)[127](index=127&type=chunk) - Other income (expense), net improved by **$1.2 million** to **$0.8 million** income, primarily due to a **$1.3 million** gain on the sale of **50 Enterprise Center**[128](index=128&type=chunk) [Six months ended June 30, 2025 and 2024](index=29&type=section&id=Six%20months%20ended%20June%2030,%202025%20and%202024) This section provides a detailed comparison of net sales, costs, and operating expenses for the six months ended June 30 Net Sales (in thousands) | Category | June 30, 2025 | June 30, 2024 | Change ($) | Change (%) | | :------- | :------------ | :------------ | :--------- | :--------- | | Service | $44,691 | $49,712 | $(5,021) | (10)% | | Product | $7,346 | $8,228 | $(882) | (11)% | | **Total** | **$52,037** | **$57,940** | **$(5,903)** | **(10)%** | - Service sales decreased by **$5.0 million** (**10%**), mainly due to a **$5.4 million** decrease in airtime service sales, including **$4.9 million** from the U.S. Coast Guard contract downgrade, partially offset by increased LEO service sales (over **25%** of airtime sales in 2025 vs. <**10%** in 2024)[130](index=130&type=chunk) - Costs of sales decreased by **$3.7 million** (**9%**) to **$35.5 million**, with product costs decreasing by **$2.6 million** (**27%**) and service costs by **$1.1 million** (**4%**); product cost of sales as a percentage of product sales improved from **117%** to **96%**[132](index=132&type=chunk)[133](index=133&type=chunk)[134](index=134&type=chunk) - Operating expenses saw significant reductions: R&D by **$3.3 million** (**61%**), Sales, Marketing & Support by **$0.7 million** (**7%**), and G&A by **$2.3 million** (**25%**), primarily due to lower personnel costs from workforce reductions and decreased depreciation[135](index=135&type=chunk)[136](index=136&type=chunk)[137](index=137&type=chunk) - Other income (expense), net improved by **$1.4 million** to **$0.8 million** income, driven by a **$1.3 million** gain on the sale of **50 Enterprise Center**[138](index=138&type=chunk) [Liquidity and Capital Resources](index=30&type=section&id=Liquidity%20and%20Capital%20Resources) This section assesses the company's cash position, working capital, and cash flow activities from operations, investing, and financing - As of June 30, 2025, KVH had **$55.9 million** in cash and cash equivalents and **$109.9 million** in working capital, expecting sufficient funds for short-term and long-term needs for at least twelve months[142](index=142&type=chunk)[143](index=143&type=chunk) Cash Flow Activities (in thousands) for Six Months Ended June 30 | Activity | 2025 | 2024 | Change ($) | | :-------------------------------- | :----- | :----- | :--------- | | Net cash provided by (used in) operating activities | $3,819 | $(15,457) | +$19,276 | | Net cash provided by investing activities | $2,611 | $14,448 | -$11,837 | | Net cash (used in) provided by financing activities | $(1,228) | $96 | -$1,324 | - The **$19.3 million** improvement in operating cash flow was primarily due to decreased cash outflows from prepaid expenses (including a **$17.0 million** Starlink data pool purchase in 2024) and inventories, and a reduced net loss[144](index=144&type=chunk) - The **$11.8 million** decrease in investing cash flow was mainly due to a **$19.6 million** decrease in proceeds from marketable securities sales (liquidation in 2024), partially offset by **$4.9 million** from the **50 Enterprise Center** sale[145](index=145&type=chunk) - The **$1.3 million** increase in cash used in financing activities was primarily due to **$1.3 million** in treasury stock purchases[146](index=146&type=chunk) [Other Matters](index=31&type=section&id=Other%20Matters) This section discusses other significant financial matters, including the company's share repurchase program - The Board authorized a **$10 million** share repurchase program on December 9, 2024; as of June 30, 2025, the company repurchased **242,348 shares** for approximately **$1.3 million**[147](index=147&type=chunk)[149](index=149&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=32&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) This section evaluates the effectiveness of KVH Industries, Inc.'s disclosure controls and internal control over financial reporting [Evaluation of Disclosure Controls and Procedures](index=32&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2025 - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of June 30, 2025[151](index=151&type=chunk) [Evaluation of Changes in Internal Control over Financial Reporting](index=32&type=section&id=Evaluation%20of%20Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) No material changes in internal control over financial reporting were identified during the second quarter of 2025 - No material changes in internal control over financial reporting were identified during the second quarter of 2025[152](index=152&type=chunk) [Important Considerations](index=32&type=section&id=Important%20Considerations) This section notes that control effectiveness is subject to inherent limitations, including cost, human error, and fraud risk - The effectiveness of controls is subject to inherent limitations, including cost, human error, and fraud risk, meaning no system can prevent all errors or fraud[153](index=153&type=chunk) [PART II. OTHER INFORMATION](index=33&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section provides additional information, including significant risk factors, equity security sales, and required exhibits [ITEM 1A. RISK FACTORS](index=33&type=section&id=ITEM%201A.%20RISK%20FACTORS) This section outlines significant risks impacting KVH Industries, Inc.'s business, financial condition, and results of operations [Risks related to our financial performance](index=33&type=section&id=Risks%20related%20to%20our%20financial%20performance) This section details risks associated with the company's financial performance, including profitability challenges and market disruptions - The company has a history of losses and faces challenges in achieving sustained profitability due to intense competition, insufficient cost-reduction measures, and inflation[156](index=156&type=chunk) - Rapid transition to less expensive LEO services and increased reliance on Wi-Fi/cellular data are disrupting the traditional satellite communications industry, potentially increasing losses if KVH cannot efficiently manage the transition[157](index=157&type=chunk) - Quarterly net sales and results of operations are subject to significant fluctuations, and a decline in net sales could harm operating margins due to relatively fixed expenses[158](index=158&type=chunk)[159](index=159&type=chunk) - A material increase in sales of lower-margin third-party airtime services and products could reduce gross margins and profitability, especially if the mix shifts away from higher-margin VSAT services[160](index=160&type=chunk) [Risks related to our operations](index=34&type=section&id=Risks%20related%20to%20our%20operations) This section covers operational risks, including manufacturing transition, talent retention, strategic disruptions, and service margin maintenance - The planned transition to reliance on third-party hardware products by discontinuing manufacturing by the end of **2026** carries significant risks, including loss of competitive differentiation, manufacturing expertise, and potentially lower profit margins on resales[161](index=161&type=chunk) - Future success depends on retaining executive officers and key employees, and the recent workforce reductions have increased dependence on continuing personnel, making talent retention and attraction challenging[162](index=162&type=chunk)[164](index=164&type=chunk) - Strategic activities, such as the manufacturing wind-down and asset sales, could disrupt business, incur significant expenses (e.g., **$14.8 million** in charges related to manufacturing wind-down), and may not improve profitability[165](index=165&type=chunk) - The company must generate a certain level of service sales to maintain or improve service gross margins due to fixed network infrastructure costs, and failure to consume prepaid Starlink data could negatively impact margins[166](index=166&type=chunk)[167](index=167&type=chunk) - The leisure marine business is highly seasonal and affected by weather, leading to potential decreases in new airtime activations and increases in service cancellations during winter months[169](index=169&type=chunk) [Risks related to our dependence on third parties and third-party technology](index=38&type=section&id=Risks%20related%20to%20our%20dependence%20on%20third%20parties%20and%20third-party%20technology) This section addresses risks from reliance on third-party satellite services, cloud data, content licensing, and cybersecurity threats - KVH's mobile satellite communications solutions rely heavily on third-party satellite services (Intelsat, Starlink, OneWeb, Iridium), gateway teleports, and terrestrial networks, over which it has little control; disruptions could harm customer relationships and financial results[180](index=180&type=chunk)[181](index=181&type=chunk)[183](index=183&type=chunk) - Dependence on cloud-based data services operated by third parties means any failure or downtime could affect a significant percentage of customers and incur substantial costs for data transfer or service interruptions[185](index=185&type=chunk) - The media and entertainment business relies on non-exclusive licensing arrangements with content providers, and termination or adverse modification of these agreements could negatively impact revenues and offerings[186](index=186&type=chunk) - Cybersecurity breaches could disrupt operations, expose the company to liability, damage its reputation, and require significant costs, despite protective measures[187](index=187&type=chunk) [Risks related to economic conditions and trade relations](index=40&type=section&id=Risks%20related%20to%20economic%20conditions%20and%20trade%20relations) This section covers risks from economic turmoil, trade policy changes, and foreign currency fluctuations impacting international sales - Economic turmoil, war, political instability, and declines in consumer/enterprise spending can adversely impact revenues, results of operations, and financial condition, with international sales being particularly vulnerable[188](index=188&type=chunk) - Changes in U.S. trade policy, including tariffs, could substantially reduce demand for products/services, increase costs, and negatively impact profitability, especially given that a majority of revenues are from international sales[189](index=189&type=chunk) - Fluctuations in foreign currency exchange rates, particularly the U.S. dollar against the pound sterling and euro, can negatively affect reported revenues, asset values, and operating results, and increase costs[190](index=190&type=chunk)[191](index=191&type=chunk) [Risks related to intellectual property and technological innovation](index=41&type=section&id=Risks%20related%20to%20intellectual%20property%20and%20technological%20innovation) This section addresses risks concerning R&D success, intellectual property protection, and potential infringement claims - Unsuccessful research and development efforts or failure to innovate and integrate third-party solutions could lead to declining sales and market share in a rapidly changing technological market, especially with decreasing R&D financial resources[192](index=192&type=chunk)[193](index=193&type=chunk) - Inability to protect proprietary technology (patents, copyrights, source code) could allow competitors to use KVH's technology, harming its competitive position and potentially leading to substantial revenue reduction[194](index=194&type=chunk) - Claims of intellectual property infringement by others could harm the business and financial condition, given the industry's high number of patents and frequent litigation[195](index=195&type=chunk) [Risks related to government regulation](index=42&type=section&id=Risks%20related%20to%20government%20regulation) This section outlines risks from international regulations, export controls, FCC rules, and evolving privacy laws affecting operations - International operations expose KVH to multiple regulatory environments, increasing costs and requiring significant management attention, with **79%** of revenues from foreign customers in the six months ended June 30, 2025[196](index=196&type=chunk) - Non-compliance with U.S. and international laws (e.g., FCPA, UK Bribery Act, export controls, satellite licensing) could lead to legal penalties, fines, loss of licenses, and restrictions on operations[197](index=197&type=chunk) - Subject to FCC rules and regulations, non-compliance could result in enforcement actions, substantial fines, and damage to reputation or ability to offer services[198](index=198&type=chunk) - Evolving domestic and international privacy laws (e.g., GDPR) may reduce demand for services, increase costs, and lead to significant remediation expenses or penalties for non-compliance[199](index=199&type=chunk)[200](index=200&type=chunk) [Risks related to owning our common stock](index=43&type=section&id=Risks%20related%20to%20owning%20our%20common%20stock) This section discusses the historical volatility of the company's common stock market price due to various internal and external factors - The market price of KVH's common stock has historically been volatile, with a trading range of **$4.17** to **$15.29** from January 1, 2020, to June 30, 2025, influenced by various internal and external factors[201](index=201&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=43&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) This section details the company's share repurchase program, including authorization and shares bought back during interim periods [Share Repurchase Program Details](index=44&type=section&id=Share%20Repurchase%20Program%20Details) This section provides specifics on the Board-authorized share repurchase program and the volume and cost of shares repurchased - The Board authorized a share repurchase program on December 9, 2024, for up to **$10 million** of common stock, allowing repurchases through various means including open market transactions[202](index=202&type=chunk)[203](index=203&type=chunk) Common Stock Repurchases (Three Months Ended June 30, 2025) | Period | Total Shares Purchased | Average Price Paid per Share | Total Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program | | :---------------- | :--------------------- | :--------------------------- | :------------------------------------------------------------------- | :----------------------------------------------------------------------------- | | April 1 - April 30 | 112,569 | $5.08 | 112,569 | $9,261,476 | | May 1 - May 31 | 68,338 | $5.17 | 68,338 | $8,905,931 | | June 1 - June 30 | 30,623 | $5.26 | 30,623 | $8,743,975 | | **Total** | **211,530** | **$5.14** | **211,530** | | - For the six months ended June 30, 2025, the company repurchased **242,348 shares** of common stock at a cost of approximately **$1.3 million**[204](index=204&type=chunk) [ITEM 6. EXHIBITS](index=44&type=section&id=ITEM%206.%20EXHIBITS) This section lists the exhibits filed with the Form 10-Q, including organizational documents, certifications, and financial data - Exhibits include Amended and Restated Certificate of Incorporation, Bylaws, Specimen Common Stock Certificate, Rule 13a-14(a)/15d-14(a) certifications from principal executive and financial officers, Section 1350 certifications, and Inline XBRL financial information[208](index=208&type=chunk) [SIGNATURE](index=45&type=section&id=SIGNATURE) This section contains the signature of the Chief Financial Officer, certifying the filing of the Form 10-Q - The report was signed by Anthony F. Pike, Chief Financial Officer of KVH Industries, Inc., on August 7, 2025[210](index=210&type=chunk)

Financial Data and Key Metrics Changes - Revenue for the second quarter declined year over year to $26.6 million, primarily due to the loss of revenue from the VSAT airtime service [6][7] - Adjusted EBITDA rose to $2.7 million, a $1.7 million increase compared to the first quarter [7][15] - Airtime gross margin increased to 35.8%, up more than 4% sequentially from 31.5% [14] - Total subscribing vessels reached just above 8,000, an increase of 8.3% from the prior quarter and 13.5% from the beginning of the year [14] Business Line Data and Key Metrics Changes - LEO revenue growth for the first time offset the decline in revenue from the legacy VSAT business [8][12] - The company shipped over 1,300 communication terminals for the second consecutive quarter, including Starlink and OneWeb terminals [7][8] - Commvox Edge subscribers increased by 24% compared to the previous year, with over 1,000 vessels subscribing to the KVH Link service [11] Market Data and Key Metrics Changes - Strong demand for Starlink terminals and services was noted across commercial maritime and leisure marine markets [8] - The company is rapidly expanding Starlink land sales in Latin America to support various facilities [8] Company Strategy and Development Direction - The company is transitioning from a geo-based hardware and service provider to a multi-orbit LEO-focused service provider [8][12] - The sale of headquarters and factory facilities is part of a strategic move to optimize operations, with a new combined facility planned for early 2026 [11][12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ongoing transformation and noted that the LEO business continues to grow, with revenue and gross margins improving [16] - The company updated its guidance for 2025, projecting revenue between $107 million and $114 million and adjusted EBITDA between $8 million and $12 million [17] Other Important Information - The company completed the sale of its headquarters facility and expects to finalize the sale of its factory facility soon [11] - A stock repurchase program was executed, with over 242,000 shares bought back at a cost of approximately $1.25 million [12] Q&A Session Summary Question: Total number of activated Starlink terminals - The company reported approximately 2,500 standalone Starlink additions, with total net adds just short of 4,000 [20][22] Question: Differences between OneWeb and Starlink customers - Customers are seeking diversity between Starlink and OneWeb, with no significant preference noted [26] Question: GEO costs in the second half of the year - GEO costs are broadly fixed, but a slight increase is anticipated in Q3 and Q4 compared to Q2 [28] Question: Service margin outlook - The company aims to maintain service margins in the 35% to 40% range, with LEO revenue growth positively impacting margins [29] Question: Renewal discussions with Starlink and OneWeb - The company is in discussions regarding renewal with Starlink but could not disclose specific details about OneWeb [30][31] Question: Changes in customer demand patterns - No significant impact from tariffs or changes in global shipping demand has been observed [45]

[Executive Summary and Key Highlights](index=1&type=section&id=Executive%20Summary%20and%20Key%20Highlights) This section provides an overview of KVH Industries' second quarter 2025 performance, highlighting key financial results, strategic shifts, and CEO commentary on the company's transformation [Second Quarter 2025 Highlights](index=1&type=section&id=Second%20Quarter%202025%20Highlights) KVH Industries reported a significant turnaround in Q2 2025, achieving net income of $0.9 million compared to a net loss in the prior year, driven by increased revenues and a strategic shift towards LEO services, also completing the sale of 50 Enterprise Center, generating a gain and net cash Second Quarter 2025 Key Metrics | Metric | Q2 2025 | Q2 2024 | Change (YoY) | Q1 2025 | Change (QoQ) | | :--------------------- | :------ | :------ | :----------- | :------ | :----------- | | Total Revenues | $26.6M | $28.7M | -7% | $25.4M | +5% | | Net Income (Loss) | $0.9M | ($2.4M) | N/A | N/A | N/A | | Net Income (Loss) per Share | $0.05 | ($0.12) | N/A | N/A | N/A | | Non-GAAP Adjusted EBITDA | $2.7M | $2.6M | +3.8% | N/A | N/A | - Completed the sale of 50 Enterprise Center in June 2025, resulting in a gain of **$1.3 million** and net cash of **$4.9 million**[7](index=7&type=chunk) [CEO Commentary](index=1&type=section&id=CEO%20Commentary) CEO Brent C. Bruun highlighted the company's ongoing business model transformation, noting a sequential increase in revenues, adjusted EBITDA, and cash compared to Q1 2025, emphasizing reaching an inflection point in the transition to a multi-orbit, LEO-focused service provider, with LEO revenue growth offsetting declines in legacy GEO-based VSAT business, alongside an 8% sequential growth in maritime airtime subscribers exceeding 8,000 vessels, and a 24% increase in CommBox Edge Communications Gateway activations - Revenues increased **$1.2 million**, adjusted EBITDA increased **$1.7 million**, and cash grew by **$7.3 million** compared to Q1 2025[5](index=5&type=chunk) - Reached an inflection point in the transition from a GEO-based hardware and services company to a multi-orbit, LEO-focused service provider, with LEO revenue growth offsetting legacy GEO VSAT decline[6](index=6&type=chunk) - Maritime airtime subscribers grew **8% sequentially** from Q1 2025, reaching over **8,000 subscribing vessels**, primarily driven by Starlink and increasing demand for OneWeb service[6](index=6&type=chunk) - CommBox Edge Communications Gateway subscriber base expanded with activations increasing by over **24%** from Q1 2025[6](index=6&type=chunk) [Financial Performance Overview](index=2&type=section&id=Financial%20Performance%20Overview) This section details KVH Industries' financial performance for the second quarter and six months ended June 30, 2025, including revenue analysis, operating expenses, and an explanation of non-GAAP financial measures [Second Quarter 2025 Financial Summary](index=2&type=section&id=Second%20Quarter%202025%20Financial%20Summary) KVH Industries reported a 7% year-over-year decrease in total revenue for Q2 2025, primarily due to a U.S. Coast Guard contract downgrade and the ongoing customer transition to LEO services, with service revenues declining largely from airtime services despite a significant increase in LEO service sales, which now represent over 30% of airtime sales, and product revenues also decreasing, impacted by lower Starlink and TracVision sales, partially offset by growth in OneWeb and VSAT Broadband products Second Quarter 2025 Revenue Summary | Metric | Q2 2025 (in millions) | Q2 2024 (in millions) | YoY Change | | :------------------ | :-------------------- | :-------------------- | :--------- | | Total Revenue | $26.6 | $28.7 | -7% | | Service Revenues | $23.0 | $24.6 | -$1.6M | | Product Revenues | $3.6 | $4.0 | -11% | - Airtime service sales decreased by **$1.9 million**, including a **$2.5 million** reduction from the U.S. Coast Guard contract downgrade[10](index=10&type=chunk) - LEO services sales represented over **30%** of airtime services sales in Q2 2025, up from less than **10%** in Q2 2024, driven by substantial increases in LEO sales and decreases in VSAT sales[10](index=10&type=chunk) - Product sales decrease was primarily due to a **$0.5 million** decrease in Starlink product sales and a **$0.2 million** decrease in TracVision product sales, partially offset by a **$0.3 million** increase in OneWeb product sales and a **$0.2 million** increase in VSAT Broadband product sales[11](index=11&type=chunk) [Revenue Analysis](index=2&type=section&id=Revenue%20Analysis_Q2) This subsection provides a detailed breakdown of service and product revenues for the second quarter of 2025, highlighting key drivers of change Q2 2025 Revenue Breakdown | Revenue Type | Q2 2025 (in millions) | Q2 2024 (in millions) | YoY Change | | :----------- | :-------------------- | :-------------------- | :--------- | | Service | $23.0 | $24.6 | -$1.6M |\ | Product | $3.6 | $4.0 | -$0.4M | - LEO services sales increased significantly, now comprising over **30%** of total airtime services sales, compared to less than **10%** in Q2 2024[10](index=10&type=chunk) - Starlink product sales decreased by **$0.5 million** due to discounted pricing, and TracVision product sales decreased by **$0.2 million** due to competition from low-cost alternatives[11](index=11&type=chunk) [Operating Expenses](index=2&type=section&id=Operating%20Expenses_Q2) This subsection details the operating expenses for Q2 2025, noting a significant year-over-year decrease primarily due to reduced salaries, benefits, and taxes Q2 2025 Operating Expenses | Metric | Q2 2025 (in millions) | Q2 2024 (in millions) | YoY Change | | :---------------------- | :-------------------- | :-------------------- | :--------- | | Operating Expenses | $9.5 | $11.8 | -$2.3M |\ | Salaries, benefits, taxes | N/A | N/A | -$2.0M | - The decrease in operating expenses was primarily due to a **$2.0 million** decrease in salaries, benefits, and taxes, after accounting for **$0.7 million** in workforce reduction costs incurred in Q2 2024[12](index=12&type=chunk) [Six Months Ended June 30, 2025 Financial Summary](index=3&type=section&id=Six%20Months%20Ended%20June%2030%2C%202025%20Financial%20Summary) For the first six months of 2025, KVH Industries experienced a 10% year-over-year decline in total revenue, with service revenues decreasing due to a significant reduction in airtime sales, largely from the U.S. Coast Guard contract downgrade, though partially offset by increased LEO service sales, and product revenues also falling, primarily driven by lower TracVision and Starlink sales, influenced by product mix and discounted pricing Six Months Ended June 30, 2025 Revenue Summary | Metric | 6 Months 2025 (in millions) | 6 Months 2024 (in millions) | YoY Change | | :------------------ | :-------------------------- | :-------------------------- | :--------- | | Total Revenue | $52.0 | $57.9 | -10% |\ | Service Revenues | $44.7 | $49.7 | -10% |\ | Product Revenues | $7.3 | $8.2 | -11% | - Service sales decreased by **$5.4 million**, with **$4.9 million** related to the U.S. Coast Guard contract downgrade[14](index=14&type=chunk) - LEO services sales represented over **25%** of airtime services sales for the six months ended June 30, 2025, compared to less than **10%** for the same period in 2024[14](index=14&type=chunk) [Revenue Analysis](index=3&type=section&id=Revenue%20Analysis_6M) This subsection provides a detailed breakdown of service and product revenues for the six months ended June 30, 2025, identifying key factors influencing changes 6 Months 2025 Revenue Breakdown | Revenue Type | 6 Months 2025 (in millions) | 6 Months 2024 (in millions) | YoY Change | | :----------- | :-------------------------- | :-------------------------- | :--------- | | Service | $44.7 | $49.7 | -$5.0M |\ | Product | $7.3 | $8.2 | -$0.9M | - Product sales decline was primarily due to a **$0.7 million** decrease in TracVision product sales, a **$0.4 million** decrease in Starlink product sales, and a **$0.3 million** decrease in accessory and service parts product sales[15](index=15&type=chunk) - Partially offset by a **$0.3 million** increase in OneWeb product sales and a **$0.2 million** increase in VSAT Broadband product sales[15](index=15&type=chunk) [Operating Expenses](index=3&type=section&id=Operating%20Expenses_6M) This subsection details the operating expenses for the six months ended June 30, 2025, highlighting a substantial reduction primarily from lower personnel costs 6 Months 2025 Operating Expenses | Metric | 6 Months 2025 (in millions) | 6 Months 2024 (in millions) | YoY Change | | :---------------------- | :-------------------------- | :-------------------------- | :--------- |\ | Operating Expenses | $19.2 | $25.5 | -$6.3M |\ | Salaries, benefits, taxes | N/A | N/A | -$5.6M | - The decrease in operating expenses was primarily due to a **$5.6 million** decrease in salaries, benefits, and taxes, after accounting for **$2.4 million** in workforce reduction costs incurred in the prior year period[16](index=16&type=chunk) [Non-GAAP Financial Measures Explanation](index=3&type=section&id=Non-GAAP%20Financial%20Measures%20Explanation) KVH Industries provides non-GAAP financial measures, such as adjusted EBITDA, to supplement GAAP financial statements, with management using these measures internally for operational performance assessment, financial decision-making, and comparison to competitors, excluding highly variable or difficult-to-predict items like interest income, taxes, depreciation, amortization, stock-based compensation, gains on asset sales, and employee termination costs, among others, to offer a clearer view of core operations - Non-GAAP financial measures are used internally by management to analyze financial results, assess operational performance, and facilitate financial and operational decision-making[19](index=19&type=chunk) - Non-GAAP adjusted EBITDA excludes items such as interest income, income tax expense, depreciation, amortization, stock-based compensation, gains on sales of real estate, and employee termination costs[20](index=20&type=chunk) - Investors are encouraged to review consolidated financial statements and publicly filed reports in their entirety, as non-GAAP measures may be calculated differently by other companies[22](index=22&type=chunk) [Detailed Financial Statements](index=6&type=section&id=Detailed%20Financial%20Statements) This section presents the condensed consolidated statements of operations and balance sheets, along with a reconciliation of GAAP to non-GAAP adjusted EBITDA, providing a comprehensive view of the company's financial position and performance [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The Condensed Consolidated Statements of Operations show a net income of $0.9 million for Q2 2025, a significant improvement from a net loss of $2.4 million in Q2 2024, and for the six months ended June 30, 2025, the company reported a net loss of $0.8 million, narrower than the $5.5 million loss in the prior year period, largely attributed to reduced operating expenses and a gain from other income, net Condensed Consolidated Statements of Operations (in thousands) | Metric (in thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net sales | $26,623 | $28,673 | $52,037 | $57,940 |\ | Loss from operations | ($370) | ($2,889) | ($2,613) | ($6,687) |\ | Net income (loss) | $930 | ($2,376) | ($780) | ($5,539) |\ | Net income (loss) per common share (Basic) | $0.05 | ($0.12) | ($0.04) | ($0.29) | - Total costs and expenses decreased to **$26.99 million** in Q2 2025 from **$31.56 million** in Q2 2024, contributing to the improved operating loss[27](index=27&type=chunk) - Other income (expense), net, showed a positive **$0.83 million** in Q2 2025 compared to a negative **$0.37 million** in Q2 2024[27](index=27&type=chunk) [Condensed Consolidated Balance Sheets](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The Condensed Consolidated Balance Sheets show a slight decrease in total assets from $155.08 million at December 31, 2024, to $152.04 million at June 30, 2025, with cash and cash equivalents increasing, while inventories and current assets held for sale decreased, and total current liabilities also saw a reduction, contributing to a stable stockholders' equity Condensed Consolidated Balance Sheets (in thousands) | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Cash and cash equivalents | $55,931 | $50,572 |\ | Accounts receivable, net | $25,350 | $21,624 |\ | Inventories, net | $20,258 | $22,953 |\ | Total current assets | $122,999 | $122,575 |\ | Total assets | $152,041 | $155,081 |\ | Total current liabilities | $13,092 | $15,872 |\ | Stockholders' equity | $138,384 | $138,625 | - Cash and cash equivalents increased by **$5.36 million** from December 31, 2024, to June 30, 2025[30](index=30&type=chunk) - Current assets held for sale decreased from **$11.41 million** to **$7.83 million**, reflecting the sale of assets[30](index=30&type=chunk) [Reconciliation of GAAP to Non-GAAP Adjusted EBITDA](index=8&type=section&id=Reconciliation%20of%20GAAP%20to%20Non-GAAP%20Adjusted%20EBITDA) The reconciliation shows that Non-GAAP Adjusted EBITDA for Q2 2025 was $2.66 million, slightly up from $2.64 million in Q2 2024, while for the six-month period, Adjusted EBITDA decreased to $3.67 million from $4.61 million, with key adjustments including adding back depreciation and amortization, stock-based compensation, and employee termination costs, while subtracting the gain on sale of fixed assets Reconciliation of GAAP to Non-GAAP Adjusted EBITDA (in thousands) | Metric (in thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) - GAAP | $930 | ($2,376) | ($780) | ($5,539) |\ | Non-GAAP EBITDA | $3,062 | $483 | $3,698 | ($266) |\ | Non-GAAP adjusted EBITDA | $2,658 | $2,636 | $3,665 | $4,607 | - Adjustments for Q2 2025 included adding back **$2.61 million** for depreciation and amortization, **$0.43 million** for stock-based compensation, and **$0.03 million** for employee termination costs, while subtracting a **$1.33 million** gain on sale of fixed assets[32](index=32&type=chunk) - Employee termination and other variable costs significantly decreased from **$1.18 million** in Q2 2024 to **$0.03 million** in Q2 2025[32](index=32&type=chunk) [Company Information and Outlook](index=3&type=section&id=Company%20Information%20and%20Outlook) This section provides information on recent company announcements, an overview of KVH Industries, and a discussion of forward-looking statements and associated risks [Other Recent Announcement](index=3&type=section&id=Other%20Recent%20Announcement) KVH Industries recently launched the CommBox Edge Secure Suite in May 2025, enhancing its offerings with advanced cybersecurity threat detection and response capabilities - On May 7, 2025, KVH launched CommBox Edge Secure Suite for Advanced Cybersecurity Threat Detection & Response[17](index=17&type=chunk) [About KVH Industries, Inc.](index=5&type=section&id=About%20KVH%20Industries%2C%20Inc.) KVH Industries, Inc., founded in 1982 and based in Middletown, RI, is a global leader in maritime and mobile connectivity, providing solutions for commercial maritime, leisure marine, military/government, and land mobile applications through its KVH ONE network and product lines like TracNet, TracPhone, and TracVision, along with services such as AgilePlans Connectivity as a Service (CaaS) and KVH Link - KVH Industries, Inc. is a global leader in maritime and mobile connectivity delivered via the KVH ONE network[23](index=23&type=chunk) - Provides connectivity solutions for commercial maritime, leisure marine, military/government, and land mobile applications[23](index=23&type=chunk) - Key product lines include TracNet, TracPhone, and TracVision, with services like KVH ONE OpenNet Program, AgilePlans CaaS, and KVH Link[23](index=23&type=chunk) [Forward-Looking Statements](index=5&type=section&id=Forward-Looking%20Statements) This section outlines various risks and uncertainties that could cause actual results to differ materially from forward-looking statements, including increasing competition, particularly from lower-cost and LEO satellite providers, the impact of reduced revenue from the U.S. Coast Guard contract, potential slowdowns in Starlink terminal sales, and challenges related to new product offerings and market consolidation, alongside other risks involving supply chain disruptions, inflation, geopolitical tensions, and the ability to retain employees and manage new business strategies - Forward-looking statements involve risks and uncertainties, including projected financial results, anticipated benefits of restructuring, and investment plans[24](index=24&type=chunk) - Factors causing differences in actual results include increasing competition from lower-cost providers and LEO satellite systems, reduced demand for geosynchronous satellite services, and the impact of lower revenue from the U.S. Coast Guard[24](index=24&type=chunk) - Other risks include potential slowdowns in Starlink sales, hardware/software competition for CommBox, unanticipated costs from manufacturing wind-down, increased customer reliance on third-party hardware, and the uncertain impact of industry consolidation, supply chain disruptions, inflation, and geopolitical events[24](index=24&type=chunk) [Supplemental Information](index=1&type=section&id=Supplemental%20Information) This section provides details on the conference call for Q2 2025 results and lists the company's trademarks [Conference Call Details](index=1&type=section&id=Conference%20Call%20Details) KVH Industries held a conference call on August 7, 2025, at 9:00 a.m. ET to discuss the Q2 2025 financial results, with the webcast and an audio archive accessible via the company's investor relations website, and questions submittable via email - Conference call held on **August 7, 2025**, at **9:00 a.m. ET** to discuss Q2 2025 results[3](index=3&type=chunk)[18](index=18&type=chunk) - Accessible at investors.kvh.com, with a replay available on the company's website[3](index=3&type=chunk)[18](index=18&type=chunk) - Listeners could submit questions to ir@kvh.com[18](index=18&type=chunk) [Trademarks](index=5&type=section&id=Trademarks) KVH Industries, Inc. has registered or applied to register several trademarks globally, including KVH, KVH ONE, TracPhone, TracVision, AgilePlans, CommBox, and TracNet, while acknowledging other trademarks belong to their respective companies - KVH Industries, Inc. has registered or applied to register trademarks such as KVH, KVH ONE, TracPhone, TracVision, AgilePlans, CommBox, and TracNet[25](index=25&type=chunk) - Other trademarks mentioned in the report are the property of their respective companies[25](index=25&type=chunk)

Company Overview - KVH Industries, Inc. is a global leader in maritime and mobile connectivity, operating through the KVH ONE network [3] - The company was founded in 1982 and is headquartered in Middletown, RI, with research, development, and manufacturing operations also in Middletown and over a dozen offices worldwide [3] - KVH provides connectivity solutions for various sectors including commercial maritime, leisure marine, military/government, and land mobile applications, featuring product lines such as TracNet, TracPhone, and TracVision [3] Financial Results Announcement - KVH Industries will announce its financial results for the second quarter ending June 30, 2025, on August 7, 2025 [1] - An investor conference call will be held at 9:00 a.m. ET, hosted by CEO Brent Bruun and CFO Anthony Pike [1] Investor Engagement - A live broadcast of the conference call will be available online at investors.kvh.com, with an audio replay accessible for at least two weeks post-call [2] - Investors can submit questions during or after the call via email to IR@kvh.com [2]

[PART I. FINANCIAL INFORMATION](index=2&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section provides the unaudited consolidated financial statements and management's discussion and analysis for the quarter ended March 31, 2025 [ITEM 1. INTERIM FINANCIAL STATEMENTS](index=3&type=section&id=ITEM%201.%20INTERIM%20FINANCIAL%20STATEMENTS) This section presents the unaudited consolidated financial statements of KVH Industries, Inc. and its subsidiaries for the quarter ended March 31, 2025, compared to prior periods, including balance sheets, statements of operations, comprehensive loss, stockholders' equity, and cash flows, along with detailed notes explaining significant accounting policies, business operations, and financial changes [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets%20as%20of%20March%2031%2C%202025%20(unaudited)%20and%20December%2031%2C%202024) This section presents the unaudited consolidated balance sheets of KVH Industries, Inc. as of March 31, 2025, and December 31, 2024 Consolidated Balance Sheet Highlights (in thousands) | Metric | March 31, 2025 | December 31, 2024 | Change ($) | Change (%) | |:---|:---|:---|:---|:---| | Total assets | $151,434 | $155,081 | $(3,647) | (2.3)% | | Total liabilities | $13,623 | $16,456 | $(2,833) | (17.2)% | | Total stockholders' equity | $137,811 | $138,625 | $(814) | (0.6)% | [Consolidated Statements of Operations](index=4&type=section&id=Consolidated%20Statements%20of%20Operations%20for%20the%20three%20months%20ended%20March%2031%2C%202025%20and%202024%20(unaudited)) This section details the unaudited consolidated statements of operations for the three months ended March 31, 2025 and 2024, highlighting net sales, costs, and net loss Consolidated Statements of Operations Highlights (in thousands, except per share) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Change ($) | Change (%) | |:---|:---|:---|:---|:---|\n| Net sales | $25,414 | $29,267 | $(3,853) | (13.2)% | | Total costs and expenses | $27,657 | $33,065 | $(5,408) | (16.4)% | | Loss from operations | $(2,243) | $(3,798) | $1,555 | 40.9% | | Net loss | $(1,710) | $(3,163) | $1,453 | 45.9% | | Net loss per common share - Basic | $(0.09) | $(0.16) | $0.07 | 43.8% | | Net loss per common share - Diluted | $(0.09) | $(0.16) | $0.07 | 43.8% | [Consolidated Statements of Comprehensive Loss](index=5&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Loss%20for%20the%20three%20months%20ended%20March%2031%2C%202025%20and%202024%20(unaudited)) This section presents the unaudited consolidated statements of comprehensive loss for the three months ended March 31, 2025 and 2024, including net loss and other comprehensive income components Consolidated Statements of Comprehensive Loss Highlights (in thousands) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Change ($) | Change (%) | |:---|:---|:---|:---|:---|\n| Net loss | $(1,710) | $(3,163) | $1,453 | 45.9% | | Foreign currency translation adjustment | $722 | $229 | $493 | 215.3% | | Total comprehensive loss | $(988) | $(2,934) | $1,946 | 66.3% | [Consolidated Statements of Stockholders' Equity](index=6&type=section&id=Consolidated%20Statements%20of%20Stockholders'%20Equity%20for%20the%20three%20months%20ended%20March%2031%2C%202025%20and%202024%20(unaudited)) This section outlines the changes in stockholders' equity for the three months ended March 31, 2025 and 2024, reflecting net loss, comprehensive income, and stock-based compensation Changes in Stockholders' Equity (in thousands) | Metric | Balance at Dec 31, 2024 | Net Loss | Other Comprehensive Income | Stock-based Compensation | Acquisition of Treasury Stock | Balance at Mar 31, 2025 | |:---|:---|:---|:---|:---|:---|:---|\n| Total Stockholders' Equity | $138,625 | $(1,710) | $722 | $337 | $(163) | $137,811 | [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows%20for%20the%20three%20months%20ended%20March%2031%2C%202025%20and%202024%20(unaudited)) This section provides the unaudited consolidated statements of cash flows for the three months ended March 31, 2025 and 2024, detailing cash movements from operating, investing, and financing activities Consolidated Statements of Cash Flows Highlights (in thousands) | Activity | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Change ($) | |:---|:---|:---|:---|\n| Net cash used in operating activities | $(1,277) | $(792) | $(485) | | Net cash (used in) provided by investing activities | $(557) | $871 | $(1,428) | | Net cash (used in) provided by financing activities | $(162) | $96 | $(258) | | Net (decrease) increase in cash and cash equivalents | $(1,972) | $147 | $(2,119) | | Cash and cash equivalents at end of period | $48,600 | $11,441 | $37,159 | [Notes to Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements%20(unaudited)) This section provides detailed explanations and disclosures supporting the unaudited consolidated financial statements, covering accounting policies, business operations, and specific financial components [(1) Description of Business](index=8&type=section&id=(1)%20Description%20of%20Business) KVH Industries designs, develops, manufactures, and markets mobile connectivity services and products for marine and land markets, primarily generating revenue from satellite Internet airtime services, including its KVH ONE hybrid network and reseller agreements for Starlink and OneWeb, and is undergoing a staged wind-down of its product manufacturing operations by the end of 2025 to focus on integrated communications solutions - KVH's core business involves mobile connectivity services and products for marine and land markets, with primary revenue from satellite Internet airtime services[26](index=26&type=chunk)[27](index=27&type=chunk) - The Company has expanded its service offerings to include the KVH ONE® hybrid network, Starlink, and OneWeb services, and offers 'AgilePlans' as a connectivity-as-a-service model[27](index=27&type=chunk)[28](index=28&type=chunk) - A staged wind-down of product manufacturing operations at its Middletown, RI facility is expected to cease substantially by the end of **2025**, shifting focus to integrated communications solutions[33](index=33&type=chunk)[34](index=34&type=chunk) [(2) Summary of Significant Accounting Policies](index=9&type=section&id=(2)%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines the accounting principles used in preparing the interim financial statements, emphasizing the basis of presentation, the necessity of management estimates and assumptions, and the policies for classifying assets held for sale and foreign currency translation - Interim financial statements are prepared in accordance with GAAP and include management's estimates and assumptions affecting various financial statement items[35](index=35&type=chunk)[37](index=37&type=chunk) - Assets are classified as held for sale when specific criteria are met, measured at the lower of carrying amount or fair value less costs to sell, and are not depreciated[39](index=39&type=chunk) - Foreign currency translation policies vary based on the functional currency of foreign subsidiaries, impacting where gains and losses are recognized (income statement or OCI)[40](index=40&type=chunk)[41](index=41&type=chunk) [(3) Recently Issued Accounting Standards and Accounting Standards Not yet Adopted](index=10&type=section&id=(3)%20Recently%20Issued%20Accounting%20Standards%20and%20Accounting%20Standards%20Not%20yet%20Adopted) The Company reviewed recently issued accounting standards, specifically ASU No. 2023-09 (Income Taxes) and ASU No. 2024-03 (Expense Disaggregation Disclosures), and expects no material impact on its financial statements from their adoption, with ASU 2024-03 only resulting in disclosure changes - ASU No. 2023-09 (Income Taxes) is effective for annual periods beginning after December 15, **2024**, and is not expected to have a material impact[42](index=42&type=chunk) - ASU No. 2024-03 (Expense Disaggregation Disclosures) is effective for annual periods beginning after December 15, **2026**, and will result in disclosure changes only[43](index=43&type=chunk) [(4) Marketable Securities](index=10&type=section&id=(4)%20Marketable%20Securities) The Company liquidated its marketable securities in Q4 2024, transferring the balance to an interest-bearing account, and held no marketable securities as of March 31, 2025, resulting in no interest income from marketable securities for the current quarter - The balance of marketable securities was liquidated in the fourth quarter of **2024** and transferred to an interest-bearing account[45](index=45&type=chunk) - No marketable securities were held as of March 31, **2025**, or December 31, **2024**[46](index=46&type=chunk) - Interest income from marketable securities was **$0** for the three months ended March 31, **2025**, compared to **$720 thousand** for the same period in **2024**[45](index=45&type=chunk) [(5) Stockholder's Equity](index=11&type=section&id=(5)%20Stockholder's%20Equity) This note details stock-based compensation expenses, activity related to stock options and restricted stock awards, and the Employee Stock Purchase Plan (ESPP), along with the components of Accumulated Other Comprehensive Loss (AOCL) Stock-Based Compensation Expense (in thousands) | Category | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | |:---|:---|:---|\n| Cost of service sales | $7 | $7 | | Cost of product sales | $5 | $9 | | Research and development | $(49) | $89 | | Sales, marketing and support | $77 | $71 | | General and administrative | $297 | $346 | | **Total** | **$337** | **$522** | - Unrecognized compensation expense as of March 31, **2025**, was **$2.005 million** for stock options (over **3.20 years**) and **$1.227 million** for restricted stock awards (over **1.83 years**)[47](index=47&type=chunk) - Accumulated Other Comprehensive Loss improved from **$(4.032) million** at December 31, **2024**, to **$(3.310) million** at March 31, **2025**, primarily due to a **$722 thousand** foreign currency translation adjustment[54](index=54&type=chunk) [(6) Net Loss per Common Share](index=12&type=section&id=(6)%20Net%20Loss%20per%20Common%20Share) This note explains the calculation of basic and diluted net loss per common share, noting that potential dilutive securities were excluded from the diluted EPS calculation for both periods due to the net loss, as their inclusion would have been anti-dilutive - Basic and diluted net loss per common share was **$(0.09)** for the three months ended March 31, **2025**, an improvement from **$(0.16)** in the prior year[13](index=13&type=chunk) - **1,141 thousand** (**2025**) and **1,584 thousand** (**2024**) outstanding stock options and non-vested restricted shares were excluded from diluted EPS calculation as their inclusion would have been anti-dilutive due to the net loss[55](index=55&type=chunk) [(7) Inventories](index=13&type=section&id=(7)%20Inventories) Inventories are valued at the lower of cost or net realizable value using the first-in first-out method, and the total inventory balance decreased slightly from December 31, 2024, to March 31, 2025, with reductions across raw materials, work in process, and finished goods Inventory Components (in thousands) | Component | March 31, 2025 | December 31, 2024 | Change ($) | Change (%) | |:---|:---|:---|:---|:---|\n| Raw materials | $14,954 | $15,379 | $(425) | (2.8)% | | Work in process | $2,066 | $2,469 | $(403) | (16.3)% | | Finished goods | $4,962 | $5,105 | $(143) | (2.8)% | | **Total Inventories** | **$21,982** | **$22,953** | **$(971)** | **(4.2)%** | [(8) Prepaid Expenses and Other Current Assets](index=13&type=section&id=(8)%20Prepaid%20Expenses%20and%20Other%20Current%20Assets) Prepaid expenses and other current assets increased slightly, primarily due to a significant rise in 'other prepaid expenses,' partially offset by a decrease in prepaid Starlink pooled data as the Company began drawing from its bulk data distribution agreement Prepaid Expenses and Other Current Assets (in thousands) | Component | March 31, 2025 | December 31, 2024 | Change ($) | Change (%) | |:---|:---|:---|:---|:---|\n| Prepaid Starlink pooled data | $11,897 | $14,137 | $(2,240) | (15.8)% | | Other prepaid expenses and other current assets | $4,493 | $1,879 | $2,614 | 139.1% | | **Total** | **$16,390** | **$16,016** | **$374** | **2.3%** | - KVH expanded its relationship with Starlink in Q2 **2024** through a bulk data distribution agreement, prepaying for Global Priority data at favorable rates, and began drawing from this pooled data in Q3 **2024**[58](index=58&type=chunk) [(9) Property and Equipment](index=14&type=section&id=(9)%20Property%20and%20Equipment) Net property and equipment decreased, primarily due to accumulated depreciation, while the Company continued plans to sell two properties in Middletown, Rhode Island, with one sale agreement signed in March 2025 Property and Equipment, Net (in thousands) | Metric | March 31, 2025 | December 31, 2024 | Change ($) | Change (%) | |:---|:---|:---|:---|:---|\n| Gross property and equipment | $77,710 | $78,329 | $(619) | (0.8)% | | Less accumulated depreciation | $(52,892) | $(51,315) | $(1,577) | (3.1)% | | **Property and equipment, net** | **$24,818** | **$27,014** | **$(2,196)** | **(8.1)%** | - Depreciation expense was **$2.784 million** for Q1 **2025**, down from **$3.147 million** for Q1 **2024**[59](index=59&type=chunk) - The Company plans to sell 75 Enterprise Center and 50 Enterprise Center in Middletown, Rhode Island; an agreement to sell 50 Enterprise Center for **$5.3 million** was entered into in March **2025**[61](index=61&type=chunk)[62](index=62&type=chunk) [(10) Product Warranty](index=15&type=section&id=(10)%20Product%20Warranty) The Company's product warranty liability increased slightly for the three months ended March 31, 2025, reflecting new charges to expense partially offset by costs incurred for repairs Product Warranty Activity (in thousands) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | |:---|:---|:---|\n| Beginning balance | $607 | $828 | | Charges to expense | $232 | $264 | | Costs incurred | $(132) | $(366) | | **Ending balance** | **$707** | **$726** | - Accrued product warranty costs increased by **$100 thousand** (**16.5%**) from **$607 thousand** at December 31, **2024**, to **$707 thousand** at March 31, **2025**[10](index=10&type=chunk)[64](index=64&type=chunk) [(11) Legal Matters](index=15&type=section&id=(11)%20Legal%20Matters) The Company is involved in routine inquiries, legal proceedings, and claims in the ordinary course of business but does not anticipate any of these matters will materially harm its business, results of operations, financial condition, or cash flows - The Company is not a party to any lawsuit or proceeding that is likely to materially harm its business, results of operations, financial condition, or cash flows[66](index=66&type=chunk) [(12) Fair Value Measurements](index=15&type=section&id=(12)%20Fair%20Value%20Measurements) This note clarifies that no financial assets or liabilities were measured at fair value using the ASC 820 hierarchy as of March 31, 2025, or December 31, 2024, as the carrying amounts of most financial instruments approximate fair value due to their short-term nature, and no impairment of non-financial assets was noted - No financial assets or liabilities were measured at fair value based on the ASC 820 fair value hierarchy as of March 31, **2025**, or December 31, **2024**[68](index=68&type=chunk) - The carrying amounts of certain financial instruments (cash, receivables, payables, accrued expenses, lease liabilities) approximate fair value due to their short-term, highly liquid nature or quoted rates[69](index=69&type=chunk) - No impairment of non-financial assets was noted during the three months ended March 31, **2025**, or **2024**[71](index=71&type=chunk) [(13) Intangible Assets](index=16&type=section&id=(13)%20Intangible%20Assets) The net carrying amount of intangible assets decreased due to amortization, with the remaining assets primarily consisting of distribution rights and subscriber relationships, which are amortized over finite lives Acquired Intangible Assets (in thousands) | Asset Type | Gross Carrying Amount (Mar 31, 2025) | Accumulated Amortization (Mar 31, 2025) | Net Carrying Value (Mar 31, 2025) | |:---|:---|:---|:---|\n| Subscriber relationships | $60 | $18 | $42 | | Distribution rights | $1,250 | $559 | $691 | | Intellectual property | $2,284 | $2,284 | $— | | **Total** | **$3,594** | **$2,861** | **$733** | - Net carrying amount of intangible assets decreased by **$95 thousand** (**11.5%**) from **$828 thousand** at December 31, **2024**, to **$733 thousand** at March 31, **2025**[10](index=10&type=chunk)[73](index=73&type=chunk) - Amortization expense was **$104 thousand** for Q1 **2025**, and the total weighted average remaining useful life of definite-lived intangible assets was **1.8 years**[76](index=76&type=chunk)[77](index=77&type=chunk) [(14) Revenue from Contracts with Customers](index=17&type=section&id=(14)%20Revenue%20from%20Contracts%20with%20Customers) Net sales decreased for the three months ended March 31, 2025, with service sales continuing to be the predominant revenue source, and international sales, particularly to Singapore, representing a significant portion of consolidated net sales Net Sales from Contracts with Customers (in thousands) | Category | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Change ($) | Change (%) | |:---|:---|:---|:---|:---|\n| Service - over time | $21,642 | $25,038 | $(3,396) | (13.6)% | | Product - point in time | $3,772 | $4,229 | $(457) | (10.8)% | | **Total net sales** | **$25,414** | **$29,267** | **$(3,853)** | **(13.2)%** | - Service sales accounted for approximately **85.2%** of consolidated net sales in Q1 **2025** (**85.6%** in Q1 **2024**)[81](index=81&type=chunk) - International revenues represented **80%** of consolidated net sales in Q1 **2025** (**72%** in Q1 **2024**), with Singapore customers accounting for **23%** (**22%** in Q1 **2024**)[83](index=83&type=chunk) [(15) Income Taxes](index=18&type=section&id=(15)%20Income%20Taxes) The Company's effective tax rate for the three months ended March 31, 2025, was negative, primarily due to a valuation allowance on U.S. deferred tax assets and the composition of income from foreign jurisdictions taxed at lower rates, while the reserve for uncertain tax positions remained stable - The effective tax rate was **(1.5)%** for Q1 **2025**, compared to **(2.5)%** for Q1 **2024**[87](index=87&type=chunk) - The effective tax rate differed from the statutory rate primarily due to a valuation allowance on U.S. deferred tax assets and income composition from foreign jurisdictions taxed at lower rates[88](index=88&type=chunk) - Reserves for uncertain tax positions were **$745 thousand** at March 31, **2025**, with a reasonably possible decrease of **$15 thousand** in the next twelve months[89](index=89&type=chunk) [(16) Leases](index=19&type=section&id=(16)%20Leases) This note details the Company's operating leases as a lessee for facilities and equipment, and its sales-type and operating leases as a lessor for VSAT systems, outlining lease expenses, liabilities, and future cash flows - Lease expense as a lessee was **$271 thousand** for Q1 **2025**, down from **$353 thousand** for Q1 **2024**[91](index=91&type=chunk) Lessee Operating Lease Liabilities (in thousands) as of March 31, 2025 | Period | Minimum Lease Payments | |:---|:---|\n| Remainder of 2025 | $460 | | 2026 | $292 | | 2027 | $204 | | 2028 and thereafter | $154 | | **Total minimum lease payments** | **$1,110** | | Less amount representing interest | $(78) | | **Present value of net minimum operating lease payments** | **$1,032** | - Interest income from sales-type leases as a lessor was **$102 thousand** for Q1 **2025**, down from **$129 thousand** for Q1 **2024**[94](index=94&type=chunk) [(17) Restructuring](index=20&type=section&id=(17)%20Restructuring) The Company initiated a staged wind-down of its manufacturing activities in February 2024, driven by reduced demand and competition, aiming to cease substantially all manufacturing by the end of 2025 and focus on integrated communications solutions, which involved a headcount reduction of approximately 75 employees and incurred $3.9 million in severance charges in 2024 - The Board of Directors voted on February 9, **2024**, to implement a staged wind-down of manufacturing activities at its Middletown, Rhode Island facility[99](index=99&type=chunk) - The wind-down was driven by reduced demand for hardware products and intensifying competition, with the goal to cease substantially all manufacturing by the end of **2025**[99](index=99&type=chunk)[100](index=100&type=chunk) - Approximately **75 employees** (**20%** of the total workforce) were reduced, incurring aggregate severance charges of **$3.9 million** in **2024**[101](index=101&type=chunk) [(18) Segment Information](index=21&type=section&id=(18)%20Segment%20Information) KVH Industries manages its operations as a single operating segment, with the CEO serving as the Chief Operating Decision Maker (CODM) who reviews consolidated net income (loss) to assess performance and allocate resources, and the majority of the Company's long-lived assets are located outside the United States, with a significant portion in Singapore - The Company manages its operations as a single operating segment, with the CEO as the Chief Operating Decision Maker (CODM)[102](index=102&type=chunk) Geographic Location of Long-Lived Assets (in thousands) as of March 31, 2025 | Location | Amount | |:---|:---|\n| Inside United States | $4,719 | | Outside United States | $21,229 | | *Of which, Singapore* | *$7,128* | | **Total** | **$25,948** | [(19) Share Buyback Program](index=23&type=section&id=(19)%20Share%20Buyback%20Program) The Board of Directors authorized a share repurchase program of up to $10 million on December 9, 2024, allowing for repurchases through various means, and during the three months ended March 31, 2025, the Company repurchased 30,818 shares for approximately $163 thousand - The Board of Directors authorized a share repurchase program for up to **$10 million** on December 9, **2024**[106](index=106&type=chunk) - During the three months ended March 31, **2025**, the Company repurchased **30,818 shares** of common stock at a cost of approximately **$163 thousand**[108](index=108&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=23&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management's discussion and analysis provides an overview of KVH Industries' business, recent strategic initiatives including the manufacturing wind-down and expansion into LEO services, and a detailed review of financial performance for the three months ended March 31, 2025, compared to the prior year, highlighting changes in sales, costs, operating expenses, and liquidity [Introduction](index=23&type=section&id=Introduction) This introduction highlights the forward-looking nature of the report and advises reading it in conjunction with the consolidated interim financial statements and annual report - The report contains forward-looking statements regarding future financial results, operating results, business strategies, and product development, which are subject to risks and uncertainties[109](index=109&type=chunk) - The discussion and analysis should be read in conjunction with the consolidated interim financial statements and the annual report on Form 10-K[109](index=109&type=chunk) [Overview](index=23&type=section&id=Overview) This overview describes KVH's core business in mobile connectivity solutions, its strategic shift to integrated communications, and the ongoing manufacturing wind-down and property sales - KVH is a leading global provider of innovative and technology-driven connectivity solutions, primarily for maritime commercial, leisure, and military/government customers[110](index=110&type=chunk) - The Company generates a substantial majority of revenues from satellite Internet airtime services, including its KVH ONE hybrid network and reseller services for Starlink and OneWeb[111](index=111&type=chunk)[112](index=112&type=chunk) - A staged wind-down of product manufacturing operations was announced in February **2024**, driven by reduced demand and competition, with a focus on integrated communications solutions and an expected cessation of manufacturing by the end of **2025**[115](index=115&type=chunk) - The restructuring included a headcount reduction of approximately **75 employees** and incurred **$3.9 million** in severance charges during **2024**[116](index=116&type=chunk) - The Company is actively selling properties in Middletown, Rhode Island, including 75 Enterprise Center and 50 Enterprise Center, with agreements in place for both[118](index=118&type=chunk)[120](index=120&type=chunk) [Critical Accounting Estimates](index=25&type=section&id=Critical%20Accounting%20Estimates) This section identifies critical accounting estimates, particularly for intangible and other long-lived assets, due to their inherent estimation uncertainty and potential financial impact - The Company identifies accounting estimates for intangible assets and other long-lived assets as critical due to significant estimation uncertainty and their potential impact on financial results[123](index=123&type=chunk) [Results of Operations](index=26&type=section&id=Results%20of%20Operations) This section analyzes the Company's financial performance for the three months ended March 31, 2025, detailing changes in net sales, costs of sales, and operating expenses Financial Data as a Percentage of Net Sales | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | |:---|:---|:---|\n| Net sales | 100.0% | 100.0% | | Costs of service sales | 56.0% | 48.0% | | Costs of product sales | 14.7% | 18.1% | | Research and development | 4.7% | 10.4% | | Sales, marketing and support | 19.5% | 18.4% | | General and administrative | 13.9% | 18.1% | | Total costs and expenses | 108.8% | 113.0% | | Loss from operations | (8.8)% | (13.0)% | | Net loss | (6.7)% | (10.9)% | [Net Sales](index=27&type=section&id=Net%20Sales) Net sales declined by 13% year-over-year, primarily due to a decrease in airtime service sales, particularly from a U.S. Coast Guard contract downgrade and reduced VSAT-only subscribers, alongside a decrease in TracVision and accessory product sales, partially offset by growth in LEO and Starlink product sales Net Sales Performance (in thousands) | Category | Q1 2025 | Q1 2024 | Change ($) | Change (%) | |:---|:---|:---|:---|:---|\n| Service | $21,642 | $25,038 | $(3,396) | (14)% | | Product | $3,772 | $4,229 | $(457) | (11)% | | **Total Net Sales** | **$25,414** | **$29,267** | **$(3,853)** | **(13)%** | - Service sales decreased primarily due to a **$3.5 million** decrease in airtime service sales, including a **$2.5 million** impact from a U.S. Coast Guard contract downgrade and a decline in VSAT-only subscribers[127](index=127&type=chunk) - Product sales decreased mainly due to a **$0.5 million** decrease in TracVision sales and a **$0.2 million** decrease in accessory and land mobile connectivity product sales, partially offset by increases in Starlink and CommBox Edge product sales[128](index=128&type=chunk) [Costs of Sales](index=27&type=section&id=Costs%20of%20Sales) Total costs of sales decreased by 7% year-over-year, primarily driven by a significant reduction in product sales costs due to lower manufacturing and unabsorbed expenses, despite a slight increase in service sales costs - Total costs of sales decreased by **$1.4 million** (**7%**) to **$18.0 million** in Q1 **2025** from **$19.4 million** in Q1 **2024**[129](index=129&type=chunk) - Costs of service sales increased by **$0.2 million** (**1%**) to **$14.2 million**, primarily due to a **$0.2 million** increase in content services cost, leading to an increase from **56%** to **66%** as a percentage of service sales[130](index=130&type=chunk) - Costs of product sales decreased by **$1.6 million** (**30%**) to **$3.7 million**, mainly due to a **$1.2 million** decrease in manufacturing and unabsorbed expenses, improving from **126%** to **99%** as a percentage of product sales[131](index=131&type=chunk) [Operating Expenses](index=28&type=section&id=Operating%20Expenses) Operating expenses significantly decreased across all categories for Q1 2025 compared to Q1 2024, primarily driven by reductions in salaries, benefits, and taxes following the workforce reduction, as well as lower depreciation expense - Research and development expense decreased by **$1.9 million** (**61%**) to **$1.2 million**, primarily due to a **$1.7 million** decrease in salaries, benefits, and taxes following workforce reduction[132](index=132&type=chunk) - Sales, marketing, and support expense decreased by **$0.4 million** (**8%**) to **$5.0 million**, mainly due to a **$0.4 million** decrease in salaries, benefits, and taxes[133](index=133&type=chunk) - General and administrative expense decreased by **$1.8 million** (**33%**) to **$3.5 million**, driven by a **$1.6 million** decrease in salaries, benefits, and taxes and a **$0.3 million** decrease in depreciation expense[134](index=134&type=chunk) [Interest and Other Expense, Net](index=28&type=section&id=Interest%20and%20Other%20Expense%2C%20Net) Interest income decreased due to the liquidation of marketable securities, while other expense, net, significantly improved, primarily driven by a reduction in loss on disposal of fixed assets - Interest income decreased by **$0.3 million** to **$0.6 million** in Q1 **2025**, with **$0.5 million** from cash/cash equivalents and **$0.1 million** from lease receivables[135](index=135&type=chunk) - Other expense, net, decreased by **$0.2 million** to less than **$0.1 million** in Q1 **2025**, driven by a **$0.2 million** decrease in the loss on disposal of fixed assets[135](index=135&type=chunk) [Income Tax Expense](index=28&type=section&id=Income%20Tax%20Expense) Income tax expense remained low for Q1 2025, primarily related to state taxes and foreign jurisdictions, consistent with the prior year - Income tax expense for Q1 **2025** was less than **$0.1 million**, related to state taxes and taxes on income earned in foreign jurisdictions[136](index=136&type=chunk) - Income tax expense for Q1 **2024** was **$0.1 million**, related to taxes on income earned in foreign jurisdictions[136](index=136&type=chunk) [Liquidity and Capital Resources](index=28&type=section&id=Liquidity%20and%20Capital%20Resources) This section assesses the Company's financial liquidity and capital resources, analyzing cash and working capital positions and cash flow changes from operating, investing, and financing activities - Cash and cash equivalents were **$48.6 million** as of March 31, **2025**, with **$3.5 million** held by foreign subsidiaries[138](index=138&type=chunk) - Working capital was **$108.5 million** as of March 31, **2025**[138](index=138&type=chunk) - Net cash used in operating activities increased by **$0.5 million** to **$(1.3) million** in Q1 **2025**, primarily due to increased cash outflows related to accounts payable and accounts receivable[140](index=140&type=chunk) - Net cash used in investing activities was **$(0.6) million** in Q1 **2025**, a **$1.4 million** change from **$0.9 million** provided in Q1 **2024**, mainly due to decreased proceeds from marketable securities sales[141](index=141&type=chunk) - Net cash used in financing activities was **$(0.2) million** in Q1 **2025**, a **$0.3 million** change from **$0.1 million** provided in Q1 **2024**, primarily due to increased cash outflows for treasury stock repurchases[142](index=142&type=chunk) [Other Matters](index=29&type=section&id=Other%20Matters) This section discusses other significant financial matters, including the Board's authorization of a share repurchase program and the shares repurchased during the quarter - The Board of Directors authorized a share repurchase program for up to **$10 million** on December 9, **2024**[143](index=143&type=chunk) - During the three months ended March 31, **2025**, the Company repurchased **30,818 shares** of common stock at a cost of **$0.2 million**[145](index=145&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=30&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) This section confirms that KVH Industries' management, including the CEO and CFO, evaluated the effectiveness of disclosure controls and procedures and internal control over financial reporting as of March 31, 2025, concluding they were effective and that no material changes occurred during the quarter - Management, including the Chief Executive Officer and Chief Financial Officer, concluded that disclosure controls and procedures were effective as of March 31, **2025**[147](index=147&type=chunk) - No material changes in internal control over financial reporting were identified during the first quarter of **2025**[148](index=148&type=chunk) [PART II. OTHER INFORMATION](index=31&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section provides additional information not covered in the financial statements, including details on equity security sales and a list of filed exhibits [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=31&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) This section details the Company's share repurchase program, authorized for up to $10 million, and reports the actual repurchases made during the three months ended March 31, 2025 - The Board of Directors authorized a share repurchase program for up to **$10 million** on December 9, **2024**[151](index=151&type=chunk) Share Repurchase Activity (Q1 2025) | Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program | |:---|:---|:---|:---|:---|\n| January 1 - January 31 | — | — | — | $10,000,000 | | February 1 - February 29 | — | — | — | $10,000,000 | | March 1 - March 31 | 30,818 | $5.25 | 30,818 | $9,837,220 | | **Total** | **30,818** | **$5.25** | **30,818** | **—** | [ITEM 6. EXHIBITS](index=32&type=section&id=ITEM%206.%20EXHIBITS) This section lists all exhibits filed with the Form 10-Q, including corporate governance documents, certifications, and financial information formatted in Inline XBRL - Exhibits include Amended and Restated Certificate of Incorporation, Bylaws, Specimen common stock certificate, Rule 13a-14(a)/15d-14(a) certifications, Section 1350 certifications, and Inline XBRL financial information[156](index=156&type=chunk) [SIGNATURE](index=33&type=section&id=SIGNATURE) This section contains the required signatures for the filing, certifying the accuracy and completeness of the report

Financial Data and Key Metrics Changes - Revenue for the first quarter declined year over year to $25.4 million, primarily due to lower revenue from VSAT airtime service, including the loss of U.S. Coast Guard revenue [6][12] - Airtime gross margin improved to 31.5% in Q1 from 28.2% in the previous quarter, with adjusted EBITDA for the quarter at $1 million [14][17] - Ending cash balance decreased by approximately $2 million to $48.6 million, driven by movements in working capital [17] Business Line Data and Key Metrics Changes - Subscriber base increased by 5% to over 7,400 subscribing vessels, recovering from the decline experienced in 2023 [8][15] - Quarterly shipments of connectivity terminals exceeded 1,300 units, marking the fifth consecutive record quarter, with significant increases in Starlink terminals [7][10] - Product gross profit was breakeven compared to a positive $300,000 in the prior quarter, with expectations for product margins to remain about breakeven [16] Market Data and Key Metrics Changes - Starlink revenue continued to increase as a percentage of total revenue, with strong demand in both commercial and leisure markets [6][9] - Approximately 30% of Starlink activations in Q1 were hybrid configurations, showcasing the company's ability to deliver multi-orbit managed solutions [9] Company Strategy and Development Direction - The company is transitioning from a GEO-focused business model to a primarily LEO-based mobile connectivity market, with ongoing double-digit annual growth in subscribers [18] - The addition of OneWeb to the product and service portfolio is expected to enhance offerings and market reach [12][13] - The company is closely managing GEO bandwidth commitments, anticipating continued pressure on GEO margins while benefiting from strong LEO margins [18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's strategic initiatives, highlighting record-breaking subscriber growth and increased product shipments [13][14] - The company is monitoring tariffs but does not expect them to have a material impact on costs due to prior component purchases [12][13] - Management acknowledged challenges ahead but remains optimistic about the path forward, particularly with the growth of the LEO business [14] Other Important Information - The company is in the process of selling its headquarters and factory facilities, expecting to close the sale of the headquarters before the end of the quarter [12] - Share buybacks were initiated under a program approved by the Board of Directors, with over 30,000 shares purchased at a cost of approximately $163,000 [12][13] Q&A Session Summary Question: Breakdown of LEO margins - The majority of the margin is derived from actual airtime, with strong underlying LEO bandwidth margins [20][21] Question: Optimization of plans for customers - Current plans are well optimized, but changes in pricing and terminal access charges are anticipated [22][23] Question: Concerns about market saturation - The market is significantly larger than before, and saturation is not expected in the foreseeable future [25][26] Question: Expansion beyond maritime applications - The existing sales team is handling land-based applications, with no immediate hiring plans but efforts to identify new service providers [27][28] Question: Coast Guard contract revenue roll-off - Negative variance from the Coast Guard contract is expected through the third quarter, with a smaller impact in the fourth quarter [30][32] Question: Future buyback efforts - The company is continuing to buy back shares, with expectations for a larger number to be disclosed in the next quarter [33]

Financial Data and Key Metrics Changes - Revenue for the first quarter declined year over year to $25.4 million, primarily due to lower revenue from VSAT airtime service, including the loss of U.S. Coast Guard revenue [6][12] - Airtime gross margin increased to 31.5% from 28.2% in the prior quarter, with adjusted EBITDA for the quarter at $1 million [14][17] - Ending cash balance was $48.6 million, down approximately $2 million from the beginning of the quarter [17] Business Line Data and Key Metrics Changes - Subscriber base increased by 5%, reaching over 7,400 subscribing vessels, recovering from the decline experienced in 2023 [8][15] - Quarterly shipments of connectivity terminals exceeded 1,300 units, marking the fifth consecutive record quarter, with significant increases in Starlink terminals [7][10] - Product gross profit was breakeven compared to a positive $300,000 in the prior quarter, with expectations for product margins to remain about breakeven [16] Market Data and Key Metrics Changes - Starlink revenue continued to increase as a percentage of total revenue, driven by strong demand in commercial and leisure markets [6][8] - The company is seeing significant interest in OneWeb terminals, especially outside the U.S. [11][12] Company Strategy and Development Direction - The company is transitioning from a GEO-focused business model to a primarily LEO-based mobile connectivity market, with ongoing double-digit annual growth in subscribers [18] - The launch of the Commvox Edge Secure Suite aims to enhance cybersecurity for vessel communications [10][11] - The company is managing GEO bandwidth commitments carefully, anticipating continued pressure on GEO margins while focusing on strong LEO margins [18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's strategic initiatives, highlighting record-breaking subscriber growth and increased product shipments [13][14] - The company is optimistic about generating positive cash flow moving forward, despite challenges in the GEO segment [18] Other Important Information - The company expects to close the sale of its headquarters before the end of the quarter and anticipates the factory sale to close in Q3 [12] - Share buybacks were initiated, with over 30,000 shares purchased at a cost of approximately $163,000 [13] Q&A Session Summary Question: LEO margins breakdown - The majority of the margin comes from actual airtime, with strong underlying LEO bandwidth margins [20][21] Question: Optimization of plans for customers - Current plans are well optimized, but changes in pricing and terminal access charges are expected later this year [22][23] Question: Potential saturation in the maritime market - The market is much larger than before, and saturation is not anticipated in the foreseeable future [25][26] Question: Expansion beyond maritime applications - The existing sales team is handling land-based applications, with no new hires but efforts to identify service providers for land opportunities [27][28] Question: Coast Guard contract revenue roll-off - Negative variance from the Coast Guard contract is expected through the third quarter, with minimal revenue in the fourth quarter [29][32] Question: Future buyback efforts - The company is continuing to buy back shares, with larger numbers expected to be disclosed in the next quarter [33]

Revenue Performance - Total revenues decreased by 13% in Q1 2025 to $25.4 million from $29.3 million in Q1 2024, primarily due to the transition to LEO satellite services and the downgrade of the U.S. Coast Guard contract[7] - Airtime revenue decreased by $3.5 million, or 15%, to $20.0 million in Q1 2025 compared to Q1 2024, with the U.S. Coast Guard contract downgrade accounting for a $2.5 million reduction[7] - Service revenues for Q1 2025 were $21.6 million, a decrease of $3.4 million compared to Q1 2024, primarily due to the decline in airtime service sales[9] - Product revenues for Q1 2025 were $3.8 million, a decrease of 11% compared to Q1 2024, with notable declines in TracVision and accessory sales[10] Profitability and Loss - Net loss in Q1 2025 was $1.7 million, or $0.09 per share, an improvement from a net loss of $3.2 million, or $0.16 per share, in Q1 2024[7] - GAAP net loss improved from $(3,163) thousand in Q1 2024 to $(1,710) thousand in Q1 2025, representing a reduction of about 46%[29] - Non-GAAP adjusted EBITDA was $1.0 million in Q1 2025, down from $2.0 million in Q1 2024[7] - Non-GAAP adjusted EBITDA decreased from $1,971 thousand in Q1 2024 to $1,007 thousand in Q1 2025, a decline of approximately 48.9%[29] Operational Metrics - Subscribing vessels increased by 5% sequentially, with service now delivered to over 7,400 active vessels, marking an all-time high[6] - Quarterly connectivity terminal shipments exceeded 1,300 units, representing the fifth consecutive quarter of record terminal shipments[6] Expenses and Cost Management - Operating expenses decreased by $4.0 million to $9.7 million in Q1 2025 compared to $13.7 million in Q1 2024, driven by a reduction in salaries and benefits[11] - Employee termination and other variable costs significantly decreased from $2,177 thousand in Q1 2024 to $3 thousand in Q1 2025, a reduction of approximately 99.9%[29] Balance Sheet and Financial Position - Total assets decreased from $155,081 million in December 2024 to $151,434 million in March 2025, a decline of approximately 2.1%[27] - Total current liabilities decreased from $15,872 million in December 2024 to $13,057 million in March 2025, a reduction of about 17.7%[27] - Stockholders' equity slightly decreased from $138,625 million in December 2024 to $137,811 million in March 2025, a decline of approximately 0.6%[27] - Accounts receivable increased from $21,624 million in December 2024 to $23,197 million in March 2025, an increase of about 7.3%[27] - Inventories decreased from $22,953 million in December 2024 to $21,982 million in March 2025, a decline of approximately 4.2%[27] - Deferred revenue increased from $1,039 million in December 2024 to $1,806 million in March 2025, an increase of approximately 73.6%[27] Financial Performance Indicators - Interest income improved from $(911) thousand in Q1 2024 to $(567) thousand in Q1 2025, indicating a positive change in financial performance[29] - KVH launched its OneWeb service, providing a second LEO option to customers worldwide, alongside increased shipments of the CommBox Edge Communications Gateway[6]

Core Viewpoint - KVH Industries, Inc. has launched the CommBox™ Edge Secure Suite, a cybersecurity service designed to detect, prevent, and report threats to maritime communications and operations, enhancing the security of vessels and fleets [1][2][3]. Product Features - The Secure Suite actively identifies and blocks harmful traffic in real time, reducing risks to vessel communications and network security [1]. - It is compatible with CommBox Edge 6, Edge 2 belowdeck appliances, and the CommBox Edge virtual machine option, making it a versatile upgrade [1]. - The service includes an Intrusion Prevention System (IPS), active quarantine capabilities, and a cloud-based Threat Dashboard for comprehensive cybersecurity [3][4]. Deployment and Integration - CommBox Edge Secure Suite is designed for rapid, easy, and affordable deployment, maximizing IT resources while optimizing communications [2]. - It supports various wide area network (WAN) options, including VSAT, low earth orbit (LEO) services, and 5G cellular, accommodating up to thirty onboard local area networks [4]. Advanced Technology - The Secure Suite utilizes advanced cybersecurity technology from Cisco Talos and Cisco Snort to monitor and respond to cyber threats in real time [7]. - It captures detailed threat logs for analysis and actionable insights, ensuring compliance with industry standards and enhancing network performance [7]. Company Overview - KVH Industries, Inc. is a global leader in maritime and mobile connectivity, providing solutions for commercial maritime, leisure marine, military/government, and land mobile applications [8]. - The company was founded in 1982 and is headquartered in Middletown, RI, with operations worldwide [8].