KVH INDUSTRIES INC \DE\ 10-Q

ITEM 1. Financial Statements KVH INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share amounts) March 31, 2025 December 31, 2024 ASSETS (unaudited) Current assets: Cash and cash equivalents $ 48,600 $ 50,572 Accounts receivable, net of allowance for credit losses of $ 1,018 and $ 1,006 as of March 31, 2025 and December 31, 2024, respectively 23,197 21,624 Inventories 21,982 22,953 Prepaid expenses and other current assets 16,390 16,016 Current assets held for sale 11,410 11,410 Total current assets 121,579 122,575 Property and equipment, net 24,818 27,014 Intangible assets, net 733 828 Right of use assets 1,130 1,361 Other non-current assets 3,037 3,146 Deferred income tax asset 137 157 Total assets $ 151,434 $ 155,081 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 3,355 $ 4,316 Accrued airtime 560 745 Accrued compensation and employee-related expenses 2,828 4,728 Accrued loss on future firm purchase commitments 483 919 Accrued other 2,066 2,134 Accrued product warranty costs 707 607 Deferred revenue 1,806 1,039 Current operating lease liability 507 660 Liability for uncertain tax positions 745 724 Total current liabilities 13,057 15,872 Long-term operating lease liability 525 569 Deferred income tax liability 41 15 Total liabilities $ 13,623 $ 16,456 Commitments and contingencies (Notes 2, 11, and 16) Stockholders’ equity: Preferred stock, $ 0.01 par value. Authorized 1,000,000 shares; none issued — — Common stock, $ 0.01 par value. Authorized 30,000,000 shares; 21,220,157 and 21,240,525 shares issued at March 31, 2025 and December 31, 2024, respectively; and 19,733,230 and 19,784,416 shares outstanding at March 31, 2025 and December 31, 2024, respectively 212 212 Additional paid-in capital 167,624 167,287 Accumulated deficit ( 14,462 ) ( 12,752 ) Accumulated other comprehensive loss ( 3,310 ) ( 4,032 ) 150,064 150,715 Less: treasury stock at cost, common stock, 1,486,927 and 1,456,109 shares as of March 31, 2025 and December 31, 2024, respectively. ( 12,253 ) ( 12,090 ) Total stockholders’ equity 137,811 138,625 Total liabilities and stockholders’ equity $ 151,434 $ 155,081 See accompanying Notes to Unaudited Consolidated Financial Statements. 3 KVH INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except earnings per share amounts, unaudited) Three Months Ended March 31, 2025 2024 Sales: Service $ 21,642 $ 25,038 Product 3,772 4,229 Net sales 25,414 29,267 Costs and expenses: Costs of service sales 14,235 14,044 Costs of product sales 3,740 5,308 Research and development 1,187 3,038 Sales, marketing and support 4,960 5,384 General and administrative 3,535 5,291 Total costs and expenses 27,657 33,065 Loss from operations ( 2,243 ) ( 3,798 ) Interest income 567 911 Other expense, net ( 9 ) ( 198 ) Loss before income tax expense ( 1,685 ) ( 3,085 ) Income tax expense 25 78 Net loss $ ( 1,710 ) $ ( 3,163 ) Net loss per common share Basic $ ( 0.09 ) $ ( 0.16 ) Diluted $ ( 0.09 ) $ ( 0.16 ) Weighted average number of common shares outstanding: Basic 19,492 19,286 Diluted 19,492 19,286 See accompanying Notes to Unaudited Consolidated Financial Statements. 4 KVH INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (in thousands, unaudited) Three Months Ended March 31, 2025 2024 Net loss $ ( 1,710 ) $ ( 3,163 ) Other comprehensive loss, net of tax: Foreign currency translation adjustment 722 229 Other comprehensive income, net of tax (1) 722 229 Total comprehensive loss $ ( 988 ) $ ( 2,934 ) (1) Tax impact was nominal for all periods. See accompanying Notes to Unaudited Consolidated Financial Statements. 5 KVH INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (in thousands, unaudited) Common Stock Additional Paid-in Capital Retained Deficit Accumulated Other Comprehensive Loss Treasury Stock Total Stockholders’ Equity Shares Amount Shares Amount Balance at December 31, 2024 21,241 $ 212 $ 167,287 $ ( 12,752 ) $ ( 4,032 ) ( 1,456 ) $ ( 12,090 ) $ 138,625 Net loss — — — ( 1,710 ) — — — ( 1,710 ) Other comprehensive income — — — — 722 — — 722 Stock-based compensation — — 337 — — — — 337 Acquisition of treasury stock — — — — — ( 31 ) ( 163 ) ( 163 ) Exercise of stock options and issuance of restricted stock awards, net of forfeitures ( 21 ) — — — — — — — Balance at March 31, 2025 21,220 $ 212 $ 167,624 $ ( 14,462 ) $ ( 3,310 ) ( 1,487 ) $ ( 12,253 ) $ 137,811 Common Stock Additional Paid-in Capital Retained Deficit Accumulated Other Comprehensive Loss Treasury Stock Total Stockholders’ Equity Shares Amount Shares Amount Balance at December 31, 2023 21,067 $ 211 $ 165,140 $ ( 1,704 ) $ ( 4,185 ) ( 1,456 ) $ ( 12,090 ) $ 147,372 Net loss — — — ( 3,163 ) — — — ( 3,163 ) Other comprehensive income — — — — 229 — — 229 Stock-based compensation — — 522 — — — — 522 Issuance of common stock under employee stock purchase plan 24 — 95 — — — — 95 Exercise of stock options and issuance of restricted stock awards, net of forfeitures 114 1 11 — — — — 12 Balance at March 31, 2024 21,205 $ 212 $ 165,768 $ ( 4,867 ) $ ( 3,956 ) ( 1,456 ) $ ( 12,090 ) $ 145,067 See accompanying Notes to Unaudited Consolidated Financial Statements. 6 KVH INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands, unaudited) Three Months Ended March 31, 2025 2024 Cash flows from operating activities: Net loss $ ( 1,710 ) $ ( 3,163 ) Adjustments to reconcile net loss to net cash used in operating activities: Provision for credit losses 97 54 Depreciation and amortization 2,888 3,247 Deferred income taxes 46 36 (Gain) loss on disposals of fixed assets ( 27 ) 683 Compensation expense related to stock-based awards and employee stock purchase plan 337 522 Unrealized currency translation loss 726 241 Changes in operating assets and liabilities: Accounts receivable ( 1,650 ) ( 355 ) Inventories 971 ( 44 ) Prepaid expenses and other current assets ( 351 ) 100 Other non-current assets 144 328 Accounts payable ( 964 ) 2,184 Deferred revenue 734 400 Accrued compensation, product warranty and other ( 2,518 ) ( 5,025 ) Net cash used in operating activities $ ( 1,277 ) $ ( 792 ) Cash flows from investing activities: Capital expenditures ( 1,149 ) ( 2,399 ) Cash paid for acquisition of intangible asset ( 43 ) ( 10 ) Proceeds from sale of fixed assets 635 — Purchases of marketable securities — ( 720 ) Maturities and sales of marketable securities — 4,000 Net cash (used in) provided by investing activities $ ( 557 ) $ 871 Cash flows from financing activities: Proceeds from stock options exercised and employee stock purchase plan 1 96 Purchase of treasury stock ( 163 ) — Net cash (used in) provided by financing activities $ ( 162 ) $ 96 Effect of exchange rate changes on cash and cash equivalents 24 ( 28 ) Net (decrease) increase in cash and cash equivalents ( 1,972 ) 147 Cash and cash equivalents at beginning of period 50,572 11,294 Cash and cash equivalents at end of period $ 48,600 $ 11,441 Supplemental disclosure of non-cash investing and financing activities: Amounts in accrued other and accounts payable related to property and equipment additions $ 186 $ 5 See accompanying Notes to Unaudited Consolidated Financial Statements. 7 KVH INDUSTRIES, INC. AND SUBSIDIARIES Notes to Consolidated Interim Financial Statements (Unaudited, all amounts in thousands except per share amounts) (1) Description of Business KVH Industries, Inc. (together with its subsidiaries, the Company or KVH) designs, develops, manufactures and markets mobile connectivity services and products for the marine and land markets. KVH’s service sales primarily represent revenue earned from satellite Internet airtime services. KVH provides, for monthly fixed and per-usage fees, satellite connectivity encompassing broadband Internet and Voice over Internet Protocol (VoIP) services, to its TracNet® H-series and TracPhone® V-HTS series customers via KVH’s global high-throughput satellite (HTS) network. Revenue from our cellular airtime service supplements KVH’s satellite-only airtime revenue following the July 2022 launch of the KVH ONE® hybrid network and TracNet H-series terminals. This service and product combination integrates global satellite service with KVH-provided cellular service in more than 150 countries, along with shore-based Wi-Fi access. In March 2023, KVH began selling terminals for the Starlink Low Earth Orbit (LEO) service and in September 2023 became a Starlink authorized hardware and airtime reseller. The May 2023 introduction of the KVH ONE OpenNet Program expanded access to KVH’s global HTS network and airtime services to non-KVH terminals for the first time. KVH further expanded its LEO service and hardware portfolio in January 2025 with the launch of OneWeb service for maritime applications. AgilePlans, KVH’s connectivity as a service offering, is a monthly subscription model that provides global connectivity to commercial maritime customers. The subscription can include KVH VSAT terminals and data service, Starlink and OneWeb terminals and data service, KVH’s CommBox™ Edge Communications Gateway and associated service licensing, VoIP, daily news, subsidized shipping and installation, and global support for a monthly fee with no minimum contract commitment. KVH offers AgilePlans subscribers a variety of airtime data plans with varying data speeds and fixed data usage levels with per megabyte overage charges. These airtime plans are similar to those that the Company offers to customers who elect to purchase or lease a TracNet H-series, TracPhone V-HTS series, Starlink, or OneWeb terminal. The Company recognizes the monthly AgilePlans subscription fee as service revenue over the service delivery period. The Company retains ownership of the hardware it provides to AgilePlans customers, who must return the hardware to KVH if they decide to terminate the service. Because KVH does not sell the hardware under AgilePlans, the Company does not recognize any product revenue when the hardware is deployed to an AgilePlans customer. KVH records the cost of the hardware used by AgilePlans customers as revenue-generating assets and depreciates the cost over an estimated useful life of two to five years . Since the Company retains ownership of the hardware, it does not accrue any warranty costs for AgilePlans hardware; however, any maintenance or refurbishment costs on the hardware are expensed in the period these costs are incurred. Service sales also include the distribution of commercially licensed entertainment, including movies, television programming, news, and music, to commercial customers in the maritime market through the KVH Media Group, along with supplemental value-added cybersecurity, email, and crew Internet services. In addition, KVH earns monthly usage fees from third-party satellite connectivity services, including VoIP, data and Internet services, provided to its Viasat/Inmarsat and Iridium customers who choose to activate their subscriptions with KVH. Service sales also include sales from product repairs and extended warranty sales. KVH’s 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. In addition, the Company’s in-motion television terminals permit customers to receive live digital television via regional satellite services in marine vessels, recreational vehicles, buses and automobiles. KVH sells its products through an extensive international network of dealers and distributors. KVH also sells and leases products to service providers and end users. KVH’s marine leisure business is highly seasonal. Seasonality can also impact the Company’s commercial marine business, although typically to a lesser degree. Temporary suspensions of the Company’s airtime services typically increase in the fourth and first quarters of each year as boats are placed out of service during the winter months. Historically, the Company has generated the majority of its marine leisure product revenues during the first and second quarters of each year, and these revenues typically decline in the third and fourth quarters of each year, compared to the first two quarters. In February 2024, the Company announced a staged wind-down of its product manufacturing operations at its Middletown, Rhode Island location. The Company expects that it will continue its product manufacturing activities in order to generate a targeted amount of inventory of maritime satellite connectivity and satellite television terminals to meet anticipated 8 demand and that it will cease substantially all manufacturing activity by the end of 2025. The Company expects to continue to facilitate customer transition to third-party hardware products compatible with its mobile satellite communications services. Please see Note 17 for additional details surrounding the wind-down of the Company's manufacturing activities. (2) Summary of Significant Accounting Policies Basis of Presentation The accompanying consolidated interim financial statements of KVH Industries, Inc. and its wholly owned subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States of America. The Company has evaluated all subsequent events through the date of this filing. All significant intercompany accounts and transactions have been eliminated in consolidation. The consolidated interim financial statements have not been audited by the Company’s independent registered public accounting firm and include all adjustments (consisting of only normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation of the financial condition, results of operations, and cash flows for the periods presented. These consolidated interim financial statements do not include all disclosures associated with annual financial statements and accordingly should be read in conjunction with the Company’s consolidated financial statements and related notes included in the Company’s annual report on Form 10-K for the year ended December 31, 2024 filed on March 10, 2025 with the Securities and Exchange Commission. The results for the three months ended March 31, 2025 are not necessarily indicative of operating results for the remainder of the year. Significant Estimates and Assumptions and Other Significant Non-Recurring Transactions The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of sales and expenses during the reporting periods. The estimates and assumptions used by management affect the Company’s revenue recognition, valuation of accounts receivable, valuation of inventory, valuation of prepaid assets, expected future cash flows (including growth rates, discount rates, terminal values and other assumptions and estimates used to evaluate the recoverability of long-lived assets), estimated fair values of long-lived assets (including amortization methods and amortization periods), certain accrued expenses and other related charges, stock-based compensation, contingent liabilities, forfeitures and key valuation assumptions for its share-based awards, estimated fulfillment costs for warranty obligations, tax reserves and recoverability of the Company’s net deferred tax assets and related valuation allowance, and the valuation of right-of-use assets and lease liabilities. Although the Company regularly assesses these estimates, actual results could differ materially from these estimates. Changes in estimates are recorded in the period in which they become known. The Company bases its estimates on historical experience and various other assumptions that it believes to be reasonable under the circumstances. Asset Held for Sale The Company classifies an asset as held for sale when management, having the authority to approve the action, commits to a plan to sell the asset, the sale is probable within one year and the asset is available for immediate sale in its present condition. The Company also considers whether an active program to locate a buyer has been initiated, whether the asset is marketed actively for sale at a price that is reasonable in relation to its current fair value and whether actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. The Company initially measures an asset that is classified as held for sale at the lower of its carrying amount or fair value less costs to sell. Any loss resulting from this measurement is recognized in the period in which the held for sale criteria are met. Conversely, gains are not recognized until the date of sale. The Company assesses the fair value of an asset less costs to sell for each reporting period that it remains classified as held for sale and reports any subsequent changes as an adjustment to the carrying amount of the asset, as long as the new carrying amount does not exceed the carrying amount of the asset at the time it was initially classified as held for sale. Assets are not depreciated or amortized while they are classified as held for sale. 9 Foreign Currency Translation The financial statements of the Company’s foreign subsidiaries located in Denmark, Singapore, Brazil and Cyprus are maintained using the United States dollar as the functional currency. Exchange rates in effect on the date of the transaction are used to record monetary assets and liabilities. Revenue and other expense elements are recorded at rates that approximate the rates in effect on the transaction dates. Foreign currency exchange gains and losses are recognized within “other expense, net” in the accompanying consolidated statements of operations. The Company recorded net foreign currency exchange losses, which are comprised of both realized and unrealized foreign currency exchange gains and losses, in its accompanying consolidated statements of operations of $( 31 ) and $( 21 ) for the three months ended March 31, 2025 and 2024, respectively. The financial statements of the Company’s foreign subsidiaries located in the United Kingdom, Norway, India and Japan use the foreign subsidiaries’ respective local currencies as the functional currency. The Company translates the assets and liabilities of these foreign subsidiaries at the exchange rates in effect at the end of each reporting period. Net sales, costs and expenses are translated using average exchange rates in effect during the period. Gains and losses from foreign currency translation are credited or charged to accumulated other comprehensive loss included in stockholders' equity in the accompanying consolidated balance sheets. (3) Recently Issued Accounting Standards and Accounting Standards Not yet Adopted In December 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amendments in this ASU apply to all entities that are subject to Topic 740, Income Taxes. The amendments require public business entities to disclose specific categories in their tax rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. These amendments also require all entities to disclose income taxes paid, net of refunds received, disaggregated by federal, state, and foreign taxes and by individual jurisdictions in which income taxes paid, net of refunds received, are equal to or greater than five percent of total income taxes paid. For public business entities, the amendments in this ASU are effective for annual periods beginning after December 15, 2024. The amendments in this ASU should be applied on a prospective basis. The adoption of ASU No. 2023-09 is not expected to have a material impact on the Company’s financial statements, including disclosures. In November 2024, the FASB issued ASU No. 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. The standard requires public business entities to provide further disaggregated information of relevant expense captions within its consolidated statements of operations. The standard is effective for annual periods beginning after December 15, 2026 and interim periods within annual periods beginning after December 15, 2027. The standard may be applied prospectively or retrospectively. The adoption will result in disclosure changes only. There are no other recent accounting pronouncements that have been issued by the FASB that are not yet effective and that the Company expects would have a material impact on the Company’s financial statements, including disclosures. (4) Marketable Securities In the fourth quarter of 2024, the balance of our marketable securities held by Wells Fargo was liquidated and transferred to an interest-bearing account held by Bank of America, N.A. Interest income from marketable securities was $ 0 and $ 720 during the three months ended March 31, 2025 and 2024, respectively. We held no marketable securities as of March 31, 2025 and December 31, 2024. 10 (5) Stockholder's Equity (a) Stock Equity and Incentive Plan The Company recognizes stock-based compensation in accordance with the provisions of ASC Topic 718, Compensation-Stock Compensation . Stock-based compensation expense was $ 335 and $ 517 , excluding $ 2 and $ 5 of compensation shares related to the employee stock purchase plan (ESPP), for the three months ended March 31, 2025 and 2024, respectively. As of March 31, 2025, there was $ 2,005 of total unrecognized compensation expense related to stock options, which is expected to be recognized over a weighted-average period of 3.20 years. As of March 31, 2025, there was $ 1,227 of total unrecognized compensation expense related to restricted stock awards, which is expected to be recognized over a weighted-average period of 1.83 years. Stock Options During the three months ended March 31, 2025, the Company issued less than 1 shares of common stock upon the exercise of stock options. Additionally, during the three months ended March 31, 2025, 525 stock options were granted and 63 stock options expired, were canceled or were forfeited. During the three months ended March 31, 2024, no shares of common stock were issued upon the exercise of stock options. Additionally, during the three months ended March 31, 2024, 266 stock options were granted and 14 stock options expired, were canceled or were forfeited. The Company has historically estimated the fair value of each option grant on the date of grant using the Black-Scholes option-pricing model. The weighted average assumptions utilized to determine the fair value of options granted during the three months ended March 31, 2025 and 2024 are as follows: Three Months Ended March 31, 2025 2024 Risk-free interest rate 3.95 % 4.36 % Expected volatility 40.73 % 48.63 % Expected life (in years) 3.77 4.32 Dividend yield 0 % 0 % As of March 31, 2025, there were 1,415 options outstanding with a weighted average exercise price of $ 7.33 per share and 531 options exercisable with a weighted average exercise price of $ 9.02 per share. As of March 31, 2024, there were 1,482 options outstanding with a weighted average exercise price of $ 8.75 per share and 641 options exercisable with a weighted average exercise price of $ 9.86 per share. Restricted Stock During the three months ended March 31, 2025, no shares of restricted stock were granted and 21 shares of restricted stock were forfeited. Additionally, during the three months ended March 31, 2025, 83 shares of restricted stock vested. During the three months ended March 31, 2024, 122 shares of restricted stock were granted with a weighted average grant date fair value of $ 5.03 per share and 8 shares of restricted stock were forfeited. Additionally, during the three months ended March 31, 2024, 66 shares of restricted stock vested. As of March 31, 2025 and 2024, the Company had no unvested outstanding options and no outstanding shares of restricted stock that were subject to performance-based or market-based vesting conditions. (b) Employee Stock Purchase Plan The Company's ESPP affords eligible employees the right to purchase common stock, via payroll deductions, through various offering periods at a purchase price equal to 85 % of the fair market value of the common stock on the first or last day of the offering period, whichever is lower. During the three months ended March 31, 2025 and 2024, 0 and 24 shares were issued under the ESPP plan, respectively. The Company recorded compensation charges related to the ESPP of $ 2 and $ 5 for the three months ended March 31, 2025 and 2024, respectively. 11 (c) Stock-Based Compensation Expense The following table presents stock-based compensation expense, including expense for the ESPP, in the Company's consolidated statements of operations for the three months ended March 31, 2025 and 2024, respectively: Three Months Ended March 31, 2025 2024 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 $ 337 $ 522 (d) Accumulated Other Comprehensive Loss (AOCL) Comprehensive income (loss) includes net income (loss), unrealized gains and losses from foreign currency translation, and unrealized gains and losses on available for sale marketable securities. The components of the Company’s comprehensive income (loss) and the effect on earnings for the periods presented are detailed in the accompanying consolidated statements of comprehensive income (loss). The balances for the three months ended March 31, 2025 and 2024 are as follows: Foreign Currency Translation Total Accumulated Other Comprehensive Loss Balance, December 31, 2024 $ ( 4,032 ) $ ( 4,032 ) Other comprehensive income 722 722 Net other comprehensive income 722 722 Balance, March 31, 2025 $ ( 3,310 ) $ ( 3,310 ) Foreign Currency Translation Total Accumulated Other Comprehensive Loss Balance, December 31, 2023 $ ( 4,185 ) $ ( 4,185 ) Other comprehensive income 229 229 Net other comprehensive income 229 229 Balance, March 31, 2024 $ ( 3,956 ) $ ( 3,956 ) (6) Net Loss per Common Share Basic net loss per share is calculated based on the weighted average number of common shares outstanding during the period. Diluted net income per share incorporates the dilutive effect of common stock equivalent options, warrants and other convertible securities, if any, as determined with the treasury stock accounting method. For the three months ended March 31, 2025 and 2024 since there was a net loss, the company excluded 1,141 and 1,584 shares, respectively, in outstanding stock options and non-vested restricted shares from its diluted loss per share calculation, as inclusion of these convertible securities would have reduced the net loss per share. 12 A reconciliation of the basic and diluted weighted average common shares outstanding is as follows: Three Months Ended March 31, 2025 2024 Weighted average common shares outstanding—basic 19,492 19,286 Dilutive common shares issuable in connection with stock plans — — Weighted average common shares outstanding—diluted 19,492 19,286 (7) Inventories Inventories are stated at the lower of cost or net realizable value using the first-in first-out costing method. Inventories as of March 31, 2025 and December 31, 2024 include the costs of material, labor, and factory overhead. Components of inventories consist of the following: March 31, 2025 December 31, 2024 Raw materials $ 14,954 $ 15,379 Work in process 2,066 2,469 Finished goods 4,962 5,105 $ 21,982 $ 22,953 (8) Prepaid Expenses and Other Current Assets March 31, 2025 December 31, 2024 Prepaid Starlink pooled data $ 11,897 $ 14,137 Other prepaid expenses and other current assets 4,493 1,879 $ 16,390 $ 16,016 During the second quarter of 2024, KVH expanded its relationship with Starlink through a bulk data distribution agreement. Under the agreement, KVH prepaid for access to a large block of Starlink Global Priority data at favorable rates. The new agreement offers KVH increased flexibility in the development and sales of custom, cost-effective airtime plans using Starlink’s Global Priority service. KVH began drawing from this prepaid pooled data in the third quarter of 2024. 13 (9) Property and Equipment Property and equipment, net, as of March 31, 2025 and December 31, 2024 consist of the following: March 31, 2025 December 31, 2024 Leasehold improvements 338 336 Machinery and equipment 6,021 6,021 Revenue-generating assets 60,370 61,380 Office and computer equipment 10,950 10,561 Motor vehicles 31 31 77,710 78,329 Less accumulated depreciation ( 52,892 ) ( 51,315 ) $ 24,818 $ 27,014 Depreciation expense was $ 2,784 and $ 3,147 for the three months ended March 31, 2025 and 2024, respectively. Certain revenue-generating hardware assets are utilized by the Company in the delivery of the Company's airtime services, media and other content. As of March 31, 2025 and December 31, 2024, the long-lived tangible assets related to the Company’s international subsidiaries were less than 10% of the Company’s long-lived tangible assets. In the third quarter of 2024, the Company commenced its plan to sell the warehouse building and surface parking lot located at 75 Enterprise Center in Middletown, Rhode Island (“75 Enterprise Center”). As of September 30, 2024, 75 Enterprise Center had a carrying value of approximately $ 7.8 million. The Company determined that all of the criteria to classify 75 Enterprise Center as held for sale had been met as of September 30, 2024. The estimated fair value was determined based upon the anticipated sales price of these assets based on current market conditions and assumptions made by management, less selling costs. The Company recorded an impairment charge of $ 1.1 million during the year ended December 31, 2024, as the carrying value of 75 Enterprise Center at the time the asset for sale criteria were met exceeded the fair value less costs to sell. Additionally, in the third quarter of 2024, the Company commenced its plan to sell the property, building, improvements, and land located at 50 Enterprise Center in Middletown, Rhode Island (“50 Enterprise Center”). As of September 30, 2024, 50 Enterprise Center had a carrying value of approximately $ 3.6 million. The Company determined that all of the criteria to classify 50 Enterprise Center as held for sale had been met as of September 30, 2024. The estimated fair value of 50 Enterprise Center exceeds its carrying value. In December 2024, the Company entered into an agreement to sell 50 Enterprise Center, subject to the buyer's right to terminate the agreement during an inspection period. In January 2025, before the end of the inspection period, the Company received notice of termination from the buyer. In March 2025, the Company entered into an agreement with another buyer to sell 50 Enterprise Center for $ 5.3 million. Consummation of the transaction is subject to customary closing conditions. Under the purchase agreement, the buyer has a 60-day inspection period and may terminate the agreement at any time before the end of the inspection period. 14 (10) Product Warranty The Company’s products carry standard limited warranties that range from one to two years and vary by product. The warranty period begins on the date of retail purchase or lease by the original purchaser. The Company also offers extended warranties on its products for up to five years, The Company accrues estimated product warranty costs at the time of sale and any additional amounts are recorded when such costs are probable and can be reasonably estimated. Factors that affect the Company’s warranty liability include the number of units sold or leased, historical and anticipated rates of warranty repairs and the cost per repair. Warranty and related costs are reflected within sales, marketing and support in the accompanying consolidated statements of operations. As of March 31, 2025 and December 31, 2024, the Company had accrued product warranty costs of $ 707 and $ 607 , respectively. The following table summarizes product warranty activity during 2025 and 2024: Three Months Ended March 31, 2025 2024 Beginning balance $ 607 $ 828 Charges to expense 232 264 Costs incurred ( 132 ) ( 366 ) Ending balance $ 707 $ 726 (11) Legal Matters In the ordinary course of business, the Company is a party to inquiries, legal proceedings and claims including, from time to time, disagreements with vendors and customers. The Company is not a party to any lawsuit or proceeding that, in management's opinion, is likely to materially harm the Company's business, results of operations, financial condition, or cash flows. (12) Fair Value Measurements ASC Topic 820, Fair Value Measurements and Disclosures (ASC 820), provides a framework for measuring fair value and requires expanded disclosures regarding fair value measurements. ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value: Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. Level 2: Quoted prices for similar assets or liabilities in active markets; or observable prices that are based on observable market data, based on directly or indirectly market-corroborated inputs. Level 3: Unobservable inputs that are supported by little or no market activity and are developed based on the best information available given the circumstances. No financial assets or liabilities were measured at fair value based upon the ASC 820 fair value hierarchy as of March 31, 2025 or December 31, 2024. The carrying amount of certain financial instruments approximates fair value due to their short-term, highly liquid nature. These instruments include cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses. The carrying amount of the Company's operating and financing lease liabilities approximates fair value based on currently available quoted rates of similarly structured borrowings. 15 Assets Measured and Recorded at Fair Value on a Nonrecurring Basis The Company's non-financial assets, such as intangible assets, and other long-lived assets resulting from business combinations, are measured at fair value using income approach valuation methodologies at the date of acquisition and subsequently re-measured if indications of impairment exist. There was no impairment of the Company's non-financial assets noted during the three months ended March 31, 2025 or 2024. The Company does not have any liabilities that are recorded at fair value on a non-recurring basis. (13) Intangible Assets Intangible assets with finite lives and other long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of intangible assets with finite lives and other long-lived assets is measured by a comparison of the carrying amount of an asset or asset group to future undiscounted cash flows expected to be generated by the asset or asset group. Asset groups are determined at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. If these comparisons indicate that an asset is not recoverable, the Company will recognize an impairment loss for the amount by which the carrying value of the asset or asset group exceeds its related estimated fair value. The Company has determined that the assets within each of the Company's reporting units (Mobile Broadband (MBB) and KVH Media Group (Media)) are highly interrelated and interdependent on each other to generate revenues, and thus independent cash flows are not identifiable at a level lower than that of these reporting units. Accordingly, the Company's asset groups were determined to be its reporting units (MBB and Media). The changes in the carrying amount of intangible assets during the three months ended March 31, 2025 are as follows: Amounts Balance at December 31, 2024 $ 828 Amortization expense ( 104 ) Intangible assets acquired in asset acquisition 9 Balance at March 31, 2025 $ 733 Intangible assets arose from the purchase of distribution rights from Kognitive Networks Inc. in October 2023 and the purchase of KVH Industries Norway AS in September 2010. The assets that are related to the distribution rights from Kognitive Networks are being amortized on a straight-line basis over the estimated useful life of 3 years. The assets related to the purchase of KVH Industries Norway AS for acquired intellectual property are fully amortized. In January 2017, the Company completed the acquisition of certain subscriber relationships from a third party. This acquisition did not meet the definition of a business under ASC 2017-01, Business Combinations (Topic 805)-Clarifying the Definition of a Business . The Company ascribed $ 100 of the initial purchase price to the acquired subscriber relationships definite-lived intangible assets with an initial estimated useful life of 10 years. Under the asset purchase agreement, the purchase price includes a component of contingent consideration under which the Company is required to pay a percentage of recurring revenues received from the acquired subscriber relationships through 2026 up to a maximum annual payment of $ 114 . The amounts payable under the contingent consideration arrangement, if any, will be included in the measurement of the cost of the acquired subscriber relationships. 16 Acquired intangible assets are subject to amortization. The following table summarizes acquired intangible assets at March 31, 2025 and December 31, 2024, respectively: Gross Carrying Amount Accumulated Amortization Net Carrying Value March 31, 2025 Subscriber relationships $ 60 $ 18 $ 42 Distribution rights 1,250 559 691 Intellectual property 2,284 2,284 — $ 3,594 $ 2,861 $ 733 December 31, 2024 Subscriber relationships $ 51 $ 13 $ 38 Distribution rights 1,250 460 790 Intellectual property 2,284 2,284 — $ 3,585 $ 2,757 $ 828 Amortization expense related to intangible assets was $ 104 and $ 100 for the three months ended March 31, 2025 and 2024, respectively. Amortization expense was categorized as general and administrative expense. As of March 31, 2025, the total weighted average remaining useful lives of the definite-lived intangible assets was 1.8 years. Estimated future amortization expense for intangible assets recorded by the Company at March 31, 2025 is as follows: Years ending December 31, Amortization Expense 2025 $ 314 2026 419 Total amortization expense $ 733 (14) Revenue from Contracts with Customers In accordance with ASC 606, revenue is recognized when a customer obtains control of promised products and services. The amount of revenue recognized reflects the consideration which the Company expects to be entitled to receive in exchange for these products and services. Disaggregation of Revenue The following table summarizes net sales from contracts with customers for the three months ended March 31, 2025 and 2024: Three Months Ended March 31, 2025 2024 Service - over time $ 21,642 $ 25,038 Product - point in time 3,772 4,229 Total net sales $ 25,414 $ 29,267 For product sales, the delivery of the Company’s performance obligations is generally transferred to the customer, and associated revenue is recognized, at a point in time. For service sales, the delivery of the Company’s performance obligations is transferred to the customer, and associated revenue is recognized, over time. Revenues for these service agreements are recognized over time using an output method based upon the passage of time, as this provides a faithful depiction of the pattern of transfer of control. The Company's performance is impacted by the levels of activity in the marine and land mobile markets, among other factors. Performance in any particular period could be impacted by the timing of sales to certain large customers. 17 The Company offers a comprehensive family of mobile satellite antenna services and products that provide access to the Internet, television, and VoIP services while on the move. Service sales of airtime service accounted for approximately 79 % and 81 % of the Company's consolidated net sales for the three months ended March 31, 2025 and 2024, respectively. The balance of service sales are comprised of distribution of commercially licensed entertainment and news, product repairs, and extended warranty sales. Product sales accounted for 15 % and 14 % of the Company's consolidated net sales for the three months ended March 31, 2025 and 2024, respectively. No other single product class accounts for 10% or more of the Company's consolidated net sales. The Company operates in a number of major geographic areas, including internationally. Revenues from international locations primarily include Singapore, Canada, South American countries, European Union countries and other European countries, and countries in Africa, the Middle East and Asia/Pacific, including India. Revenues are based upon customer location, and revenues from international locations represented 80 % and 72 % of consolidated net sales for the three months ended March 31, 2025 and 2024, respectively. Sales to Singapore customers represented 23 % and 22 % of the Company's consolidated net sales for the three months ended March 31, 2025 and 2024, respectively. No other individual foreign country represented 10% or more of the Company's consolidated net sales for the three months ended March 31, 2025 or 2024. Business and Credit Concentrations Concentrations of risk with respect to trade accounts receivable are generally limited due to the large number of customers and their dispersion across several geographic areas. Although the Company does not foresee that credit risk associated with these receivables will deviate from historical experience, repayment is dependent upon the financial stability of those individual customers. The Company establishes allowances for credit losses and evaluates, on a monthly basis, the adequacy of those reserves based upon expected losses, historical experience and its expectation for future collectability concerns. One customer accounted for 13 % and 11 % of consolidated net sales for the three months ended March 31, 2025 and 2024, respectively. No other customers accounted for 10% or more of consolidated net sales for the three months ended March 31, 2025 and 2024. One customer accounted for approximately 21 % and 19 % of accounts receivable at March 31, 2025 and December 31, 2024, respectively. One customer accounted for 39 % and 45 % of long-term accounts receivable included in other non-current assets on the consolidated balance sheets related to sales-type leases at March 31, 2025 and December 31, 2024, respectively. Certain components from third parties used in the Company’s products are procured from single sources of supply. The failure of a supplier, including a subcontractor, to deliver on schedule could delay or interrupt the Company’s delivery of products and thereby materially adversely affect the Company’s revenues and operating results. (15) Income Taxes The Company’s effective tax rate for the three months ended March 31, 2025 was ( 1.5 )%, compared with ( 2.5 )%, for the corresponding period in the prior year. The effective income tax rate is based on estimated income for the year, the estimated composition of the income in different jurisdictions and discrete adjustments, if any, in the applicable periods, including retroactive changes in tax legislation, settlements of tax audits or assessments, and the resolution or identification of tax position uncertainties. For the three months ended March 31, 2025 and 2024, the effective tax rates differed from the statutory tax rate primarily due to the Company maintaining a valuation allowance reserve on its U.S. deferred tax assets, discrete tax adjustments and the composition of income from foreign jurisdictions taxed at lower rates. As of March 31, 2025 and December 31, 2024, the Company had reserves for uncertain tax positions of $ 745 and $ 724 , respectively. There were no material changes during the three months ended March 31, 2025 to the Company’s reserve for uncertain tax positions. The Company estimates that it is reasonably possible that the balance of unrecognized tax benefits as of March 31, 2025 may decrease $ 15 in the next twelve months as a result of a lapse of statutes of limitations and settlements with taxing authorities. 18 The Company’s tax jurisdictions include the United States, the United Kingdom, Denmark, Cyprus, Norway, Brazil, Singapore, Japan and India. In general, the statute of limitations with respect to the Company's United States federal income taxes has expired for years prior to 2020, and the relevant state and foreign statutes vary. However, preceding years remain open to examination by United States federal and state and foreign taxing authorities to the extent of future utilization of net operating losses and research and development tax credits generated in each preceding year. (16) Leases Lessee The Company has operating leases for office facilities, equipment, and satellite service capacity and related equipment. Lease expense was $ 271 and $ 353 for the three months ended March 31, 2025 and 2024, respectively. Short-term operating lease costs were $ 22 and $ 19 for the three months ended March 31, 2025 and 2024, respectively. Maturities of lease liabilities as of March 31, 2025 under operating leases having an initial or remaining non-cancelable term of one year or more are as follows: 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 Less current installments of obligation under current-operating lease liabilities $ 507 Obligations under long-term operating lease liabilities, excluding current installments $ 525 Weighted-average remaining lease term - operating leases (years) 2.43 Weighted-average discount rate - operating leases 5.50 % Lessor The Company enters into leases with certain customers primarily for the TracPhone and TracNet VSAT systems. These leases are classified as sales-type leases because title to the equipment transfers to the customer at the end of the lease term. The Company records the leases at a price typically equivalent to normal selling price and in excess of the cost or carrying amount. Upon delivery, the Company records the net present value of all payments under these leases as product revenue, and the related costs of the product are charged to cost of sales. Interest income is recognized throughout the lease term (typically three to five years ) using an implicit interest rate. The sales-type leases do not have unguaranteed residual assets. Upon adoption of ASC 842, the Company elected to apply the practical expedient provided to lessors to combine the lease and non-lease component of a contract where the revenue recognition pattern is the same and where the lease component, when accounted for separately, would be considered an operating lease. The practical expedient also allows a lessor to account for the combined lease and non-lease components under ASC 606, Revenue from Contracts with Customers, when the non-lease component is the predominant element of the combined component. The current portion of the net investment in these leases was $ 3,067 as of March 31, 2025 and the non-current portion of the net investment in these leases was $ 3,036 as of March 31, 2025. The current portion of the net investment in the leases is included in accounts receivable, net of allowance for doubtful accounts on the accompanying consolidated balance sheets, and the non-current portion of the net investment in these leases is included in other non-current assets on the accompanying consolidated balance sheets. Interest income from sales-type leases was $ 102 and $ 129 during the three months ended March 31, 2025 and 2024, respectively. 19 The future undiscounted cash flows from these leases as of March 31, 2025 are: Remainder of 2025 $ 2,776 2026 2,102 2027 1,243 2028 414 2029 94 2030 2 Total undiscounted cash flows $ 6,631 Present value of lease payments $ 6,103 Difference between undiscounted cash flows and discounted cash flows $ 528 In 2021, the Company began entering into three-year leases for its TracPhone VSAT systems, in which ownership of the hardware does not transfer to the lessee by the end of the lease term. As a result, and in light of other factors indicated in ASC 842, these leases are classified as operating leases. As of March 31, 2025, the gross costs and accumulated depreciation associated with these operating leases are included in revenue generating assets and amounted to $ 1,767 and $ 1,352 , respectively. They are depreciated on a straight-line basis over a five-year estimated useful life. Depreciation expense for these operating leases was $ 89 for the three months ended March 31, 2025. Lease revenue recognized was $ 19 for the three months ended March 31, 2025, respectively, in service sales in the consolidated statements of operations. As of March 31, 2025, minimum future lease payments to be recognized on the operating leases are as follows: Remainder of 2025 $ 6 Total $ 6 (17) Restructuring On February 9, 2024, the Board of Directors of the Company voted to implement a staged wind-down of the Company’s manufacturing activities at its facility in Middletown, Rhode Island. The Board made this determination following a strategic review of the Company’s manufacturing operations, driven by reduced demand for the Company’s hardware products in the face of intensifying competition during the third and fourth quarters of 2023. The Board concluded that the Company should discontinue its capital-intensive manufacturing activities and concentrate its efforts on growing sales of its multi-orbit, multi-channel, integrated communications solutions, which in recent years have constituted the largest portion of the Company’s overall revenues. The Company expects that it will continue its product manufacturing activities for a period of time in order to generate a targeted amount of inventory of maritime satellite connectivity and satellite television terminals to meet anticipated demand and that it will cease substantially all manufacturing activity at the Middletown, Rhode Island facility by the end of 2025. The Company expects to continue to facilitate customer transition to third-party hardware products compatible with the Company’s mobile satellite communications services. The Company also plans to continue to conduct maintenance, refurbishment service, warehousing, shipping and receiving activities at the Middletown, Rhode Island location until the Company's anticipated relocation by early next year. As part of this restructuring, the Company reduced its headcount by approximately 75 employees, or approximately 20 % of its total workforce as of the time the Company announced the restructuring. In 2024, the Company incurred aggregate severance charges of approximately $ 3.9 million, consisting of approximately $ 3.6 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. For the aggregate severance charges of approximately $ 3.9 million, the Company recorded in its consolidated statement of operations $ 0.9 million in cost of product sales, $ 1.4 million in research and development, $ 0.7 million in sales, marketing and support, and $ 0.8 million in general and administrative. 20 (18) Segment Information The Company manages its operations as a single operating segment for the purpose of assessing performance and making operating decisions, resulting in a single reportable segment. The Company has determined that its Chief Operating Decision Maker (CODM) is its Chief Executive Officer. The CODM reviews the Company’s financial information on a consolidated basis for the purpose of allocating resources and assessing financial performance. The key measure of segment profit or loss that the CODM uses to allocate resources and assess performance is the Company’s consolidated net income (loss). This is reviewed against budgeted expectations to assess segment performance and allocate resources. The Company’s segment net income for the three months ended March 31, 2025 and 2024 consisted of the following: 21 Three Months Ended March 31, 2025 2024 Sales: Service $ 21,642 $ 25,038 Product 3,772 4,229 Net Sales 25,414 29,267 Cost of service sales VSAT airtime 11,196 13,207 LEO airtime 2,545 507 Other (1) 494 330 14,235 14,044 Cost of product sales VSAT 595 620 LEO 1,455 1,272 TracVision & land mobile 620 1,067 Other (2) 1,070 2,349 3,740 5,308 Research and development Personnel costs 951 2,606 Professional fees 38 88 Other (3) 198 344 1,187 3,038 Sales, marketing and support Personnel costs 3,231 3,583 Professional fees 220 167 Other (4) 1,509 1,634 4,960 5,384 General and administrative Personnel costs 1,878 3,460 Professional fees 636 590 Other (5) 1,021 1,241 3,535 5,291 Other segment items (6) ( 533 ) ( 635 ) Net loss $ ( 1,710 ) $ ( 3,163 ) (1) Includes costs related to Inmarsat, service activations, content service, CommBox Edge and other miscellaneous (2) Includes costs related to CommBox Edge, TracNet Coastal, obsolete inventory write-off and other miscellaneous (3) Includes facilities and other less significant expenses (4) Includes marketing expenses, external commissions, travel and entertainment, facilities expense, warranty expense and other less significant expenses (5) Includes the financing fees, facilities expense, computer expenses, depreciation and amortization and other less significant expenses (6) Other segment items includes interest income; other expense, net; and income tax expense line items on the face of the income statement 22 Regarding the Company's long-lived assets of $ 25,948 , $ 4,719 of these assets are located inside of the United States, while the remaining $ 21,229 are located outside of the United States. Regarding the assets located outside of the United States, $ 7,128 are located in Singapore. The geographic location of the Company's AgilePlans revenue-generating assets has been determined based upon the customer shipping address. (19) Share Buyback Program On December 9, 2024, the Board of Directors of the Company authorized a share repurchase program pursuant to which the Company may purchase outstanding shares of the Company’s common stock for an aggregate purchase price of up to $ 10 million. Under the program, the Company, at management’s discretion, may repurchase shares from time to time through various means, including on the open market, in privately negotiated transactions or block transactions, or through an accelerated repurchase agreement. The Company may elect to make purchases under Rule 10b-18 under the Securities Exchange Act of 1934, as amended, which imposes certain volume limitations, and/or under Rule 10b5-1 under that act, which would permit repurchases to occur during periods when the Company might otherwise be precluded from making purchases under insider trading laws or Company policy. The volume and timing of any such repurchases will depend on a variety of factors, including the availability of shares, price, market conditions, alternative uses of capital, liquidity, general business conditions, satisfaction of debt covenants, and applicable regulatory requirements. The program does not obligate the Company to repurchase any minimum number or dollar amount of shares, and the program may be modified, suspended or terminated at any time without prior notice. During the three months ended March 31, 2025, the Company repurchased 31 shares of common stock in open market transactions at a cost of approximately $ 163 . Except as noted above, there were no other repurchase programs outstanding.