What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-08-01 compared with 2024-05-06 · 111 added, 56 removed, 80 unchanged (68% of the section changed)

12 unchanged sentences

We provide, for monthly fixed fees and per-usage fees, satellite connectivity encompassing broadband Internet, data and VoIP services, to customers via our global HTS network.

In mid-2022, we launched our KVH ONE hybrid network, which integrates global satellite service with KVH-provided cellular service in more than 150 countries, along with shore-based Wi-Fi access.

Revenue from our cellular airtime service has increasingly supplemented, and we expect will continue to supplement, our satellite-only airtime revenue.

In mid-2022, we launched our KVH ONE hybrid network, which integrates global satellite service, including Ku-band VSAT using the Intelsat HTS network along with Starlink, Iridium, and other satellite services, with KVH-provided cellular service in more than 150 countries and shore-based Wi-Fi access.

Revenue from our cellular airtime service has supplemented, and we expect will continue to supplement, our satellite-only airtime revenue.

In addition, we earn monthly usage fees from sales of third-party satellite connectivity for VoIP, data and Internet services to our Inmarsat, Iridium, and Starlink customers who choose to activate their subscriptions with us.

We expect to earn usage fees from OneWeb service upon the launch of that service in the second quarter of 2024.

In March 2023, we began selling Starlink terminals and in September 2023 became a Starlink authorized hardware and airtime reseller.

We expect to earn usage fees from OneWeb service upon the launch of that service, which we currently anticipate will occur late in the third quarter of 2024.

We also generate service revenue from product repairs and extended warranty sales.

Our service sales also include the distribution of entertainment, including news, sports, music, and movies, to commercial customers in the maritime and hotel markets through KVH Media Group, along with supplemental value-added services.

Historically, we have also offered satellite communications products, but these products have represented a declining percentage of our revenues in recent years.

Historically, our Ku-band VSAT communications service has been the primary driver of growth.

However, these services represent a declining percentage of our revenues in the face of competition from emerging LEO services.

Our satellite-only and hybrid products enable marine customers to receive data, VoIP, and value-added services via satellite, cellular, and shore-based Wi-Fi networks onboard commercial, leisure, and military/government vessels.

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We expect that we will continue our product manufacturing activities in order to generate a targeted amount of inventory of maritime satellite connectivity and satellite television terminals to meet anticipated demand and that we will cease substantially all manufacturing activity by the end of 2025.

We expect to continue to facilitate customer transition to third-party hardware products compatible with our mobile satellite communications services.

We expect to continue to facilitate customer transition to

third-party hardware products compatible with our mobile satellite communications services.

We also plan to continue to conduct maintenance, service, warehousing, shipping and receiving activities at the Middletown location.

As part of this restructuring, we will reduce our headcount by approximately 75 employees, or approximately 20% of our total workforce as of the time we announced the restructuring.

Approximately one-half of the employee terminations have been completed, and the remaining terminations are expected to be completed by the end of the second quarter of 2024.

Approximately $2.2 million of severance charges were incurred in the three months ended March 31, 2024.

We expect to incur aggregate severance charges for this restructuring of approximately $3.3 million, consisting of approximately $3.0 million of cash charges and approximately $0.3 million of non-cash charges arising from pre-existing contractual obligations to accelerate vesting of certain outstanding equity compensation awards.

As part of this restructuring, we reduced our headcount by approximately 75 employees, or approximately 20% of our total workforce as of the time we announced the restructuring.

As of June 30, 2024, all employee terminations were completed.

During the three and six months ended June 30, 2024, we incurred $1.2 million and $3.4 million, respectively, of severance charges for this restructuring.

The $3.4 million of severance charges incurred during the six months ended June 30, 2024 consisted of approximately $3.0 million of cash charges and approximately $0.3 million of non-cash charges arising from pre-existing contractual obligations to accelerate vesting of certain outstanding equity compensation awards.

During the second quarter of 2024, we expanded our relationship with Starlink through a bulk data distribution agreement.

Under the agreement, we prepaid $17.0 million for access to a large block of Starlink Mobile Priority data at favorable rates.

The new agreement offers us increased flexibility in the development and sale of custom airtime plans using Starlink’s Mobile Priority service.

Our marine leisure business has been highly seasonal, and seasonality can also impact our commercial marine business.

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Critical accounting estimates are those estimates made that involve a significant level of estimation uncertainty and have had or are reasonably likely to have an impact on our statement of operations.

We believe that our accounting estimates for intangible assets and other long-lived assets are the only estimates critical to an understanding and evaluation of our financial results for the three months ended March 31, 2024, as discussed below.

We believe that our accounting estimates for intangible assets and other long-lived assets are the only estimates critical to an understanding and evaluation of our financial results for the six months ended June 30, 2024, as discussed below.

Results of Operations

The following table provides, for the periods indicated, certain financial data relating to our operations expressed as a percentage of net sales:

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

2024 2023 2024 2023

Service 86.1 % 85.6 % 85.8 % 84.9 %

8 unchanged sentences

Total costs and expenses 110.0 99.6 111.6 100.1

Loss from operations (13.0) (0.5)

(Loss) income from operations (10.0) 0.4 (11.6) (0.1)

Interest income 3.1 2.6 3.1 2.5

Other expense, net (1.3) (0.7) (1.0) (0.7)

(Loss) income before income tax expense (10.6) 1.1

Income tax expense 0.3 0.1

(Loss) income before income tax (benefit) expense (8.2) 2.3 (9.5) 1.7

Income tax (benefit) expense — 0.1 0.1 0.1

Net (loss) income (8.2) % 2.2 % (9.6) % 1.6 %

Three months ended March 31, 2024 and 2023

Our net sales for the three months ended March 31, 2024 and 2023 were as follows:

For the three months ended March 31, 2024 vs.

Three months ended June 30, 2024 and 2023

Our net sales for the three months ended June 30, 2024 and 2023 were as follows:

For the three months ended June 30, 2024 vs.

2024 2023 $ %

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Net sales $ 28,673 $ 33,586 $ (4,913) (15) %

Net sales decreased by $4.9 million, or 14%, for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023.

Service sales decreased by $3.7 million, or 13%, to $25.0 million for the three months ended March 31, 2024 from $28.7 million for the three months ended March 31, 2023.

Net sales decreased by $4.9 million, or 15%, for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023.

Service sales decreased by $4.1 million, or 14%, to $24.7 million for the three months ended June 30, 2024 from $28.7 million for the three months ended June 30, 2023.

The decrease was primarily due to a $5.6 million decrease in our VSAT service sales driven primarily by a decrease in subscribers, partially offset by a $1.7 million increase in Starlink service sales.

Alternative solutions offered by recent low-earth-orbit (LEO) entrants have heightened competition in the global leisure segment and in commercial and government markets.

We expect that the trend of intensifying competition from LEO satellite service providers will continue and that our quarterly revenues from VSAT service sales will continue to decline on a year-over-year basis at least through the end of 2024.

Alternative solutions offered by recent low-earth-orbit (LEO) entrants have heightened competition in the global leisure segment as well as in commercial and government markets.

Subscribers to Starlink terminals have approximately doubled from March 31, 2024 to June 30, 2024.

We expect that VSAT service sales will continue to decline while Starlink services sales will continue to grow.

It is possible that the rate of reduction will accelerate.

A key driver of the anticipated reduction in revenue is an acceleration of the previously disclosed transition by one of our largest customers, the U.S.

We anticipate that a key driver of the expected reduction in revenue will be an acceleration of the previously disclosed transition by one of our largest customers, the U.S.

Coast Guard, of its primary satellite service relationship to Starlink.

As a result of the accelerated transition, the anticipated decline in revenue from this customer will occur earlier, reducing the aggregate amount of revenue we expect to receive from this customer in 2024.

Product sales decreased by $1.2 million, or 22%, to $4.2 million for the three months ended March 31, 2024 from $5.4 million for the three months ended March 31, 2023.

The decrease in product sales was primarily due to a $1.3 million decrease in VSAT Broadband product sales and a $0.8 million decrease in TracVision product sales, partially offset by a $1.4 million increase in Starlink product sales.

The decline in product sales was primarily due to a decrease in unit sales volume, particularly in our global leisure segment.

Competition from low-cost alternatives to VSAT, which include streaming capabilities, has had a significant impact on sales of both TracVision and VSAT Broadband products in the leisure segment.

We anticipate that this decline will begin in the third or fourth quarter of 2024.

Product sales decreased by $0.8 million, or 17%, to $4.0 million for the three months ended June 30, 2024 from $4.8 million for the three months ended June 30, 2023.

The decrease in product sales was primarily due to a $1.1 million decrease in VSAT Broadband product sales, a $0.6 million decrease in TracVision product sales and a $0.3 million decrease in accessory product sales, partially offset by a $1.2 million increase in Starlink product sales.

The decline in product sales was primarily due to a decrease in unit sales volume.

Competition from low-cost alternatives to VSAT, which include streaming capabilities, has had a significant impact on sales of both TracVision and VSAT Broadband products.

Costs of Sales

Costs of sales consists of costs of service sales and costs of product sales.

Costs of sales decreased by $2.0 million, or 10%, in the three months ended March 31, 2024 to $19.4 million from $21.4 million in the three months ended March 31, 2023.

The decrease in costs of sales was driven by a $2.0 million decrease in costs of service sales and a less than $0.1 million decrease in costs of product sales.

As a percentage of net sales, costs of sales were 66% and 63% for the three months ended March 31, 2024 and 2023, respectively.

Costs of sales decreased by $2.0 million, or 9%, in the three months ended June 30, 2024 to $19.8 million from $21.8 million in the three months ended June 30, 2023.

The decrease in costs of sales was driven by a $1.9 million decrease in costs of product sales and a $0.1 million decrease in costs of service sales.

As a percentage of net sales, costs of sales were 69% and 65% for the three months ended June 30, 2024 and 2023, respectively.

Our costs of service sales consist primarily of satellite service capacity, depreciation, service network overhead expense associated with our VSAT Broadband network infrastructure, direct network service labor, product installation costs, media materials and distribution costs, and service repair materials.

For the three months ended March 31, 2024, costs of service sales decreased by $2.0 million, or 13%, to $14.0 million from $16.1 million for the three months ended March 31, 2023, primarily due to a $2.5 million decrease in VSAT Broadband airtime costs of service sales, partially offset by a $0.5 million increase in Starlink airtime costs of service sales.

As a percentage of service sales, costs of service sales were 56% for both the three months ended March 31, 2024 and 2023.

We expect that margins on our new reseller arrangements will be lower than current margins on our VSAT Broadband airtime services.

For the three months ended June 30, 2024, costs of service sales remained flat period-over-period at $15.5 million for both the three months ended June 30, 2024 and 2023, primarily due to a $1.6 million decrease in VSAT Broadband airtime costs of service sales, partially offset by a $1.3 million increase in Starlink airtime costs of service sales.

As a percentage of service sales, costs of service sales were 63% and 54% for the three months ended June 30, 2024 and 2023, respectively.

During the second quarter of 2024, we expanded our relationship with Starlink through a bulk data distribution agreement whereby we purchased access to a large block of data at favorable rates.

Although we expect that future margins on sales of Starlink airtime services will be slightly lower than current margins on sales of our VSAT Broadband airtime services, we expect that the opportunities provided under the agreement will result in improved profitability compared to the previous arrangement with Starlink.

Our costs of product sales consist primarily of materials, manufacturing overhead, and direct labor used to produce our products.

For the three months ended March 31, 2024, costs of product sales remained flat period-over-period at $5.3 million for both the three months ended March 31, 2024 and 2023, primarily due to a $1.3 million increase in Starlink cost of product sales, partially offset by a $0.7 million decrease in VSAT Broadband cost of product sales and a $0.6 million decrease in TracVision cost of product sales.

As a percentage of product sales, costs of product sales were 126% and 98% for the three months ended March 31, 2024 and 2023, respectively.

Cost of product sales increased as a percentage of product sales primarily due to unabsorbed expenses driven by the under-utilization of the factory and severance costs for manufacturing employees in the first quarter of 2024.

For the three months ended June 30, 2024, costs of product sales decreased by $1.9 million, or 31%, to $4.3 million from $6.2 million in the three months ended June 30, 2023, primarily due to a $1.7 million decrease in various manufacturing and other unabsorbed expenses, which primarily consists of labor, purchase price variance, excess and obsolescence write down, absorption and severance costs, a $0.8 million decrease in VSAT Broadband cost of product sales and a $0.5 million decrease in TracVision cost of product sales, partially offset by a $1.1 million increase in Starlink product sales.

As a percentage of product sales, costs of product sales were 108% and 128% for the three months ended June 30, 2024 and 2023, respectively.

Cost of product sales decreased as a percentage of product sales primarily due to improved purchase price variance and improved absorption driven by the reduction in headcount of manufacturing employees, as well as ramped up production required to achieved targeted inventory levels before completion of the staged wind-down.

Operating Expenses

Research and development expense consists of direct labor, materials, external consultants, and related overhead costs that support our internally funded product development and product sustaining engineering activities.

Research and development expense for the three months ended March 31, 2024 increased by $0.5 million, or 18%, to $3.0 million from $2.6 million for the three months ended March 31, 2023.

The increase in research and development expense resulted primarily from a $0.5 million increase in salaries, benefits and taxes, which was driven by $0.8 million in costs related to the reduction in our workforce beginning in February 2024.

As a percentage of net sales, research and development expense was 10% and 8% for the three months ended March 31, 2024 and 2023, respectively.

Research and development expense for the three months ended June 30, 2024 decreased by $0.1 million, or 4%, to $2.3 million from $2.4 million for the three months ended June 30, 2023.

During the three months ended June 30, 2024, we incurred $0.3 million in costs related to the reduction in our workforce beginning in February 2024, which was more than offset by various cost savings, including a $0.2 million decrease in other salaries, benefits and taxes.

As a percentage of net sales, research and development expense was 8% and 7% for the three months ended June 30, 2024 and 2023, respectively.

Sales, marketing, and support expense consists primarily of salaries and related expenses for sales and marketing personnel, commissions for both in-house and third-party representatives, costs related to the co-development of certain content, other sales and marketing support costs such as advertising, literature and promotional materials, product service personnel and support costs, warranty-related costs and bad debt expense.

Sales, marketing and support expense also includes the operating expenses of our sales office subsidiaries in Denmark, Singapore, Brazil, and Japan.

Sales, marketing and support expense for the three months ended March 31, 2024 decreased by $0.3 million, or 6%, to $5.4 million from $5.7 million for the three months ended March 31, 2023.

The decrease in sales, marketing and support expense resulted primarily from a $0.3 million decrease in salaries, benefits and taxes, excluding costs related to the previously mentioned deduction in workforce, and a $0.2 million decrease in bad debt expense.

These decreases were partially offset by $0.3 million in costs related to the reduction in our workforce beginning in February 2024.

As a percentage of net sales, sales, marketing and support expense was 18% and 17% for the three months ended March 31, 2024 and 2023, respectively.

Sales, marketing and support expense for the three months ended June 30, 2024 increased by $0.2 million, or 4%, to $5.3 million from $5.1 million for the three months ended June 30, 2023.

The increase primarily resulted from a $0.4 million increase in bad debt expense and a $0.3 million increase in salaries, benefits and taxes, partially offset by a $0.2 million decrease in facilities expenses.

As a percentage of net sales, sales, marketing and support expense was 19% and 15% for the three months ended June 30, 2024 and 2023, respectively.

General and administrative expense consists of costs attributable to management, finance and accounting, information technology, human resources, certain outside professional services, and other administrative costs.

General and administrative expense for the three months ended March 31, 2024 increased by $0.6 million, or 14%, to $5.3 million from $4.7 million for the three months ended March 31, 2023.

General and administrative expense for the three months ended June 30, 2024 remained flat period-over-period at $4.1 million for both the three months ended June 30, 2024 and 2023.

During the three months ended June 30, 2024, we incurred $0.3 million in costs related to the reduction in our workforce beginning in February 2024, which was offset by a $0.4 million decrease in other salaries, benefits and taxes.

As a percentage of net sales, general and administrative expense was 14% and 12% for the three months ended June 30, 2024 and 2023, respectively.

Interest and Other Expense, Net

Interest income represents interest earned on our cash and cash equivalents, as well as from investments and our sale-type lease receivables.

Interest income remained flat period-over-period at $0.9 million for both the three months ended June 30, 2024 and 2023.

Of the current period interest income of $0.9 million, $0.8 million is attributable to interest earned on cash and cash equivalents, while the remaining $0.1 million was attributable to interest from lease receivables.

Other expense, net increased by $0.1 million to $0.4 million for the three months ended June 30, 2024 from other expense, net of $0.2 million for the three months ended June 30, 2023.

Income Tax (Benefit) Expense

Income tax (benefit) expense for each of the three months ended June 30, 2024 and 2023 was less than $0.1 million and related to taxes on income earned in foreign jurisdictions.

Six months ended June 30, 2024 and 2023

Our net sales for the six months ended June 30, 2024 and 2023 were as follows:

For the six months ended June 30, 2024 vs.

2024 2023 $ %

(dollars in thousands)

Service $ 49,712 $ 57,486 $ (7,774) (14) %

Product 8,228 10,243 (2,015) (20) %

Net sales $ 57,940 $ 67,729 $ (9,789) (14) %

Net sales decreased by $9.8 million, or 14%, for the six months ended June 30, 2024 as compared to the six months ended June 30, 2023.

Service sales decreased by $7.8 million, or 14%, to $49.7 million for the six months ended June 30, 2024 from $57.5 million for the six months ended June 30, 2023.

The decrease was primarily due to a $9.7 million decrease in our VSAT service sales driven primarily by a decrease in subscribers, partially offset by a $2.3 million increase in Starlink service sales.

Alternative solutions offered by recent LEO entrants have heightened competition in the global leisure segment and in commercial and government markets.

Product sales decreased by $2.0 million, or 20%, to $8.2 million for the six months ended June 30, 2024 from $10.2 million for the six months ended June 30, 2023.

The decrease in product sales was primarily due to a $2.4 million decrease in VSAT Broadband product sales, a $1.4 million decrease in TracVision product sales and a $0.5 million decrease in accessory product sales, partially offset by a $2.6 million increase in Starlink product sales.

The decline in product sales was primarily due to a decrease in unit sales volume.

Competition from low-cost alternatives to VSAT, which include streaming capabilities, has had a significant impact on sales of both TracVision and VSAT Broadband products.

Costs of Sales

Costs of sales decreased by $4.0 million, or 9%, in the six months ended June 30, 2024 to $39.1 million from $43.1 million in the six months ended June 30, 2023.

The decrease in costs of sales was driven by a $2.1 million decrease in costs of service sales and a $1.9 million decrease in costs of product sales.

As a percentage of net sales, costs of sales were 68% and 64% for the six months ended June 30, 2024 and 2023, respectively.

For the six months ended June 30, 2024, costs of service sales decreased by $2.1 million, or 7%, to $29.5 million from $31.6 million for the six months ended June 30, 2023, primarily due to a $4.1 million decrease in VSAT Broadband airtime costs of service sales, partially offset by a $1.8 million increase in Starlink airtime costs of service sales.

As a percentage of service sales, costs of service sales were 59% and 55% for the six months ended June 30, 2024 and 2023, respectively.

For the six months ended June 30, 2024, costs of product sales decreased by $1.9 million, or 17%, to $9.6 million from $11.5 million in the six months ended June 30, 2023, primarily due to a $1.4 million decrease in various manufacturing and other unabsorbed expenses, which primarily consists of labor, purchase price variance, excess and obsolescence write down, absorption and severance costs, a $1.4 million decrease in VSAT Broadband cost of product sales, a $1.1 million decrease in TracVision cost of product sales and a $0.3 million decrease in accessory cost of product sales, partially offset by a $2.4 million increase in Starlink cost of product sales.

As a percentage of product sales, costs of product sales were 117% and 113% for the six months ended June 30, 2024 and 2023, respectively.

Cost of product sales increased as a percentage of product sales primarily due to lower product sales volume, as well as the under-utilization of the factory and severance costs for manufacturing employees, partially offset by the improved purchase price variance.

Operating Expenses

Research and development expense for the six months ended June 30, 2024 increased by $0.4 million, or 8%, to $5.4 million from $5.0 million for the six months ended June 30, 2023.

The increase in research and development expense resulted primarily from a $0.7 million increase in salaries, benefits and taxes, which was driven by $1.1 million in costs related to the reduction in our workforce beginning in February 2024.

As a percentage of net sales, research and development expense was 9% and 7% for the six months ended June 30, 2024 and 2023, respectively.

Sales, marketing and support expense for the six months ended June 30, 2024 decreased by $0.1 million, or 1%, to $10.7 million from $10.8 million for the six months ended June 30, 2023.

The decrease in sales, marketing and support expense resulted primarily from a $0.2 million decrease in facilities expenses, a $0.2 million decrease in external commissions and a $0.2 million decrease in marketing expenses.

These decreases were partially offset by $0.4 million in costs related to the reduction in our workforce beginning in February 2024.

As a percentage of net sales, sales, marketing and support expense was 19% and 16% for the six months ended June 30, 2024 and 2023, respectively.

General and administrative expense for the six months ended June 30, 2024 increased by $0.7 million, or 7%, to $9.4 million from $8.8 million for the six months ended June 30, 2023.

The increase in general and administrative expense resulted primarily from a $1.1 million increase in salaries, benefits and taxes, which was driven by $0.9 million in costs related to the reduction in our workforce beginning in February 2024, and a $0.7 million reduction in reimbursements made by EMCORE for expenses incurred under the transition services agreement relating to the sale of the inertial navigation business in August 2022.

Partially offsetting these items was a $1.0 million decrease in professional fees, related to a decrease in legal fees, as well as additional accounting and consulting costs incurred during the three months ended March 31, 2023 to prepare our 2022 annual filings.

As a percentage of net sales, general and administrative expense was 18% and 14% for the three months ended March 31, 2024 and 2023, respectively.

Partially offsetting these items was a $1.0 million decrease in professional fees, related to a decrease in legal fees, as well as additional accounting and consulting costs incurred during the six months ended June 30, 2023 to prepare our 2022 annual filings.

Lastly, there was a $0.3 million decrease in software license and maintenance fees.

As a percentage of net sales, general and administrative expense was 16% and 13% for the six months ended June 30, 2024 and 2023, respectively.

Interest and Other Expense, Net

Interest income increased by $0.1 million to $0.9 million for the three months ended March 31, 2024 from $0.8 million for the three months ended March 31, 2023.

Of the current period interest income of $0.9 million, $0.8 million is attributable to interest earned on cash and cash equivalents, and the remaining $0.1 million was attributable to interest from lease receivables.

Other expense, net remained flat at $0.2 million for both the three months ended March 31, 2024 and 2023.

Interest income increased by $0.1 million to $1.8 million for the six months ended June 30, 2024 from $1.7 million for the six months ended June 30, 2023.

Of the current period interest income of $1.8 million, $1.5 million is attributable to interest earned on cash and cash equivalents, and $0.2 million was attributable to interest from lease receivables.

Other expense, net increased by $0.1 million to $0.6 million for the six months ended June 30, 2024 from other expense, net $0.5 million for the six months ended June 30, 2023.

Income Tax Expense

Income tax expense for the three months ended March 31, 2024 and 2023 was $0.1 million and less than $0.1 million, respectively, and related to taxes on income earned in foreign jurisdictions.

Income tax expense for each of the six months ended June 30, 2024 and 2023 was $0.1 million and related to taxes on income earned in foreign jurisdictions.

Liquidity and Capital Resources

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On August 9, 2022, we sold our inertial navigation business to EMCORE Corporation for net proceeds of $54.9 million, less specified deductions.

As of March 31, 2024, we had $66.6 million in cash, cash equivalents, and marketable securities, of which $3.7 million in cash and cash equivalents was held in local currencies by our foreign subsidiaries.

Our foreign subsidiaries held no marketable securities as of March 31, 2024.

As of March 31, 2024, we had $93.0 million in working capital.

As of June 30, 2024, we had $49.3 million in cash, cash equivalents, and marketable securities, of which $3.3 million in cash and cash equivalents was held in local currencies by our foreign subsidiaries.

Our foreign subsidiaries held no marketable securities as of June 30, 2024.

As of June 30, 2024, we had $93.4 million in working capital.

Based upon our current working capital position, current operating plans and expected business conditions, we expect to have sufficient funds, through at least twelve months from the date that this report is filed with the SEC, to fund our short-term and long-term working capital requirements, including capital expenditures and contractual obligations.

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In addition, if we raise funds by issuing equity securities, our stockholders may experience dilution.

Net cash used in operations was $0.8 million for the three months ended March 31, 2024 compared to net cash used in operations of $6.8 million for the three months ended March 31, 2023.

The $6.0 million decrease in net cash used in operations was primarily the result of a $17.3 million decrease in cash outflows related to accounts payable, a $1.1 million decrease in cash outflows relating to inventories, a change of $0.6 million related to non-cash items and a $0.2 million decrease in cash outflows relating to prepaid expenses and other current assets, partially offset by an $8.5 million increase in cash outflows relating to accrued compensation, product warranty and other expenses, a $3.5 million increase in net loss, and a $1.1 million decrease in cash inflows relating to accounts receivable.

Net cash provided by investing activities was $0.9 million for the three months ended March 31, 2024 compared to net cash used in investing activities of $2.7 million for the three months ended March 31, 2023.

Net cash used in operations was $15.5 million for the six months ended June 30, 2024 compared to net cash used in operations of $3.2 million for the six months ended June 30, 2023.

The $12.3 million increase in net cash used in operations was primarily the result of a $15.6 million increase in cash outflows relating to prepaid expenses and other current assets, a $6.7 million increase in net loss, a $2.3 million decrease in cash inflows relating to accounts receivable, a $2.2 million increase in cash outflows relating to inventories, and a $0.4 million decrease in cash inflows relating to deferred revenue, partially offset by a $13.1 million decrease in cash outflows related to accounts payable and a $1.7 million increase in non-cash items.

Net cash provided by investing activities was $14.4 million for the six months ended June 30, 2024 compared to net cash used in investing activities of $6.0 million for the six months ended June 30, 2023.

The $20.5 million change in net cash provided by investing activities was primarily the result of a $20.8 million decrease in net investment in marketable securities, partially offset by a $0.4 million increase in capital expenditures.

Net cash provided by financing activities was $0.1 million for the three months ended March 31, 2024 compared to net cash provided by financing activities of $0.8 million for the three months ended March 31, 2023.

Net cash provided by financing activities was $0.1 million for the six months ended June 30, 2024 compared to net cash provided by financing activities of $2.1 million for the six months ended June 30, 2023.

The $2.0 million decrease in net cash provided by financing activities is primarily attributable to a $2.3 million decrease in cash inflows relating to proceeds from the exercise of stock options and purchases under our employee stock purchase plan, partially offset by a $0.2 million decrease in cash outflows related to the repurchase of common stock to satisfy specific tax withholding obligations arising from accelerated vesting of executive stock grants in 2023.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis