KVH Industries(US:KVHI)2024-11-07 18:54Revenue Performance - Net sales decreased by $4.2 million, or 13%, for the three months ended September 30, 2024, compared to the same period in 2023, primarily due to a $4.6 million decrease in airtime service sales [118]. - Service sales decreased by $5.0 million, or 17%, to $24.4 million for the three months ended September 30, 2024, driven by a decline in VSAT-only subscribers [118]. - Net sales decreased by $14.0 million, or 14%, for the nine months ended September 30, 2024, with service sales down 15% to $74.1 million and product sales down 9% to $12.8 million [131]. Cost Management - Costs of sales decreased by $1.1 million, or 5%, to $19.7 million for the three months ended September 30, 2024, compared to $20.7 million in the same period in 2023 [121]. - Costs of service sales decreased by $1.3 million, or 8%, to $15.0 million for the three months ended September 30, 2024, primarily due to a decrease in airtime costs [122]. - Costs of sales decreased by $5.1 million, or 8%, to $58.8 million for the nine months ended September 30, 2024, with costs of sales as a percentage of net sales increasing to 68% from 63% [133]. Product and Service Sales - Product sales increased by $0.8 million, or 20%, to $4.6 million for the three months ended September 30, 2024, primarily due to a $1.2 million increase in Starlink product sales [120]. - For the three months ended September 30, 2024, costs of product sales increased by $0.2 million, or 5%, to $4.7 million from $4.5 million in the same period of 2023, with costs of product sales as a percentage of product sales decreasing to 103% from 119% [123]. Research and Development - Research and development expense for the three months ended September 30, 2024 decreased by $1.0 million, or 41%, to $1.4 million from $2.4 million for the same period in 2023, representing 5% of net sales compared to 7% in 2023 [124]. - Research and development expense for the nine months ended September 30, 2024 decreased by $0.6 million, or 8%, to $6.8 million, representing 8% of net sales compared to 7% in 2023 [137]. Operating Expenses - Sales, marketing, and support expense for the three months ended September 30, 2024 increased by $0.1 million, or 2%, to $4.9 million, with the expense as a percentage of net sales rising to 17% from 15% [126]. - Sales, marketing, and support expense remained flat at $15.7 million for the nine months ended September 30, 2024, with the expense as a percentage of net sales increasing to 18% from 16% [138]. - General and administrative expense for the three months ended September 30, 2024 decreased by $0.6 million, or 13%, to $3.8 million, maintaining 13% of net sales for both periods [127]. Cash Flow and Financing - As of September 30, 2024, the company had $49.8 million in cash, cash equivalents, and marketable securities, with $108.1 million in working capital [143]. - Net cash used in operations was $13.6 million for the nine months ended September 30, 2024, compared to $2.7 million for the same period in 2023, primarily due to increased cash outflows related to prepaid expenses and other current assets [145]. - Net cash provided by financing activities decreased to $0.1 million for the nine months ended September 30, 2024, down from $2.3 million for the same period in 2023, representing a decrease of $2.2 million [147]. - The decrease in net cash provided by financing activities was primarily due to a $2.5 million decrease in cash inflows from the exercise of stock options and employee stock purchase plan purchases [147]. - Cash outflows related to the repurchase of common stock decreased by $0.2 million, which partially offset the overall decrease in cash inflows [147]. Strategic Changes - The company expects continued decline in quarterly revenues from VSAT service sales due to competition from LEO satellite service providers [119]. - The company announced a staged wind-down of its product manufacturing operations, reducing headcount by approximately 75 employees, or 20% of its total workforce [109]. - The company prepaid $17.0 million for access to a large block of Starlink Mobile Priority data at favorable rates, enhancing flexibility in developing custom airtime plans [110]. - The company plans to continue facilitating customer transitions to third-party hardware products compatible with its mobile satellite communications services [108]. - An impairment charge of $1.1 million was recorded for the property at 75 Enterprise Center, as its carrying value exceeded fair value less costs to sell [111].