What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-11-06 compared with 2025-08-07 · 118 added, 114 removed, 113 unchanged (67% of the section changed)

11 unchanged sentences

We generate a substantial majority of our revenues from sales of satellite Internet airtime services.

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 (including Ku-band VSAT using the Intelsat (acquired by SES in July 2025) HTS network along with Starlink, OneWeb, Iridium, and other satellite services), 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 provide, for monthly fixed fees and per-usage fees, satellite connectivity encompassing broadband Internet, data and VoIP services, to customers via our KVH ONE hybrid network, which integrates global satellite service (including Ku-band VSAT using the Intelsat (acquired by SES in July 2025) HTS network along with Starlink, OneWeb, Iridium, and other satellite services), KVH-provided cellular service in more than 130 countries, and shore-based Wi-Fi access.

In March 2023, we began selling Starlink terminals and, in September 2023, we became a Starlink authorized hardware and airtime reseller offering Global Priority data plans for maritime use.

In October 2024, we expanded our portfolio to include Starlink Local Priority data plans, which will primarily be used for stationary and in-motion commercial use on land.

In December 2024, we introduced our TracNet Coastal and TracNet Coastal Pro terminals, expanding our extensive multi-channel portfolio of maritime products and services with a 5G/cellular and Wi-Fi system.

We expect to earn usage fees from our offering of OneWeb service, which we launched in January 2025.

In October 2024, we expanded our portfolio to include Starlink Local Priority data plans, which is primarily for stationary and in-motion commercial use on land.

In the third quarter of 2025, Starlink products and services were our fastest growing products and services.

We are also now earning usage fees from our offering of OneWeb maritime service, which we launched in January 2025.

Revenue from our cellular airtime service supplements our satellite-only airtime revenue.

In addition, we earn monthly usage fees from sales of third-party satellite connectivity for VoIP and supplemental services to our Inmarsat, Iridium, and Starlink customers.

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

10 unchanged sentences

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 into 2026 and that we will cease substantially all manufacturing activity by the end of 2026.

This wind-down has been extended from the end of 2025 because the reduced workforce has been prioritizing fulfilling LEO product orders and refurbishing AgilePlan terminals over manufacturing new units.

This wind-down has been extended from the end of 2025 because the reduced workforce has been prioritizing fulfilling LEO product orders and refurbishing AgilePlans terminals over manufacturing new units.

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, Rhode Island location until our anticipated relocation by early next year.

We also plan to continue to conduct maintenance, service, warehousing, shipping and receiving activities at the Middletown, Rhode Island location until our anticipated relocation in the spring of 2026.

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.

4 unchanged sentences

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

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

The agreement provides us flexibility in the development and sale of custom airtime plans using Starlink’s Global Priority service.

This block of data is expected to be fully consumed by the fourth quarter of 2025.

In recognition of the substantial growth of Starlink airtime services as a percentage of our revenue, we anticipate that we will purchase another, substantially larger block of Starlink Global Priority data in the fourth quarter of 2025.

During the third quarter of 2024, we commenced our plan to sell the warehouse building and surface parking lot located at 75 Enterprise Center in Middletown, Rhode Island (“75 Enterprise Center”).

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In December 2024, we entered into an agreement to sell 75 Enterprise Center for $8.5 million.

Consummation of the transaction is subject to customary closing conditions.

Under the purchase agreement, the buyer has six months to obtain specified zoning approvals, with up to three 30-day extensions, as well as a 60-day inspection period, subject to potential extension.

The buyer may terminate the agreement at any time before the expiration of the inspection period and may also terminate the agreement if the specified zoning approvals are denied before the expiration of the zoning approval period.

Upon consummation of the sale, we will remain in possession of the property as a tenant under a triple-net lease having an initial term of six months, which we can extend for up to an additional three months.

Rent during the initial term is approximately $25,000 per month, which would increase to approximately $44,000 per month during any extension.

We anticipate that this sale will be completed in September 2025 and we plan to lease this property until the end of March 2026.

The sale was completed in September 2025, resulting in a loss of $0.3 million, which is included in other income (expense), net in our consolidated statement of operations for the three and nine months ended September 30, 2025.

The sale generated $7.8 million of net cash.

In September 2025, we also entered into an agreement with the buyer to lease this property until the end of March 2026 for approximately $0.1 million.

Additionally, in the third quarter of 2024, we commenced our plan to sell the property, building, improvements, and land located at 50 Enterprise Center in Middletown, Rhode Island (“50 Enterprise Center”).

5 unchanged sentences

In March 2025, we entered into an agreement with another buyer to sell 50 Enterprise Center for $5.3 million.

The sale was completed in June 2025, resulting in a gain of $1.3 million, which is included in other income (expense), net in our consolidated statement of operations for the three and six months ended June 30, 2025.

The sale was completed in June 2025, resulting in a gain of $1.3 million, which is included in other income (expense), net in our consolidated statement of operations for the nine months ended September 30, 2025.

The sale generated $4.9 million of net cash.

During the three and nine months ended September 30, 2025, we recorded a $5.5 million inventory write-down related primarily due to further reduced demand for certain of our hardware products as well as a reduction in the prices we charge for certain TracNet H-series terminals.

We implemented this price reduction at the end of the third quarter of 2025 and, as a result, reduced the value of our remaining inventory of those products to net realizable value based on lower customer pricing.

If demand continues to decline, we may need to record additional inventory write-downs.

Critical Accounting Estimates

3 unchanged sentences

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 six months ended June 30, 2025, 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 nine months ended September 30, 2025, 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 Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2025 2024 2025 2024

8 unchanged sentences

General and administrative 13.0 13.1 13.4 15.2

Long-lived assets impairment charge — 3.9 — 1.3

Total costs and expenses 126.9 106.9 112.8 110.0

1 unchanged sentence

Interest income 2.4 2.2 2.3 2.8

Interest expense — — — —

Other income (expense), net 0.1 0.7 1.1 (0.4)

Income (loss) before income tax expense (benefit) 4.0 (8.2) (1.3) (9.5)

Income tax expense (benefit) 0.4 — 0.2 0.1

Net income (loss) 3.6 % (8.2) % (1.5) % (9.6) %

Three months ended June 30, 2025 and 2024

Our net sales for the three months ended June 30, 2025 and 2024 were as follows:

For the three months ended June 30, 2025 vs.

Loss before income tax expense (24.4) (4.0) (9.4) (7.6)

Income tax expense 0.1 0.2 0.2 0.1

Net loss (24.5) % (4.2) % (9.6) % (7.7) %

Three months ended September 30, 2025 and 2024

Our net sales for the three months ended September 30, 2025 and 2024 were as follows:

For the three months ended September 30, 2025 vs.

2025 2024 $ %

3 unchanged sentences

Net sales $ 28,453 $ 28,971 $ (518) (2) %

Net sales decreased by $2.1 million, or 7%, for the three months ended June 30, 2025 as compared to the three months ended June 30, 2024.

Service sales decreased by $1.6 million, or 7%, to $23.0 million for the three months ended June 30, 2025 from $24.7 million for the three months ended June 30, 2024.

The decrease in service sales was primarily due to a $1.9 million decrease in our airtime service sales, which reflected a $2.5 million reduction in sales related to the U.S.

Coast Guard contract downgrade in the third quarter of 2024, as well as a decrease in other VSAT subscribers.

These decreases in VSAT service sales were partially offset by an increase in LEO service sales.

For the three months ended June 30, 2025, LEO services sales represented over 30% of airtime services sales, as compared to less than 10% for the three months ended June 30, 2024.

The increase in LEO service sales as a percentage of total airtime sales resulted from both a substantial increase in LEO service sales and a substantial decrease in VSAT 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 $0.4 million, or 11%, to $3.6 million for the three months ended June 30, 2025 from $4.0 million for the three months ended June 30, 2024.

The decrease in product sales was primarily due to a $0.5 million decrease in Starlink product sales and a $0.2 million decrease in TracVision product sales, partially offset by a $0.3 million increase in OneWeb product sales and a $0.2 million increase in VSAT Broadband product sales.

The decrease in product sales was primarily due to discounted pricing on Starlink products.

Net sales decreased by $0.5 million, or 2%, for the three months ended September 30, 2025 as compared to the three months ended September 30, 2024.

Service sales increased by $1.0 million, or 4%, to $25.4 million for the three months ended September 30, 2025 from $24.4 million for the three months ended September 30, 2024.

The increase in service sales was primarily due to a $0.7 million increase in our airtime service sales, which reflected a substantial increase in LEO service sales driven by an increase in subscribers for both Starlink and OneWeb.

This increase in LEO service sales was largely offset by a substantial decrease in VSAT service sales, which was driven primarily by a decrease in VSAT subscribers, as well as a $2.3 million reduction in sales related to the U.S.

Coast Guard contract downgrade in the third quarter of 2024.

For the three months ended September 30, 2025, LEO services sales represented over 40% of airtime services sales, as compared to less than 15% for the three months ended September 30, 2024.

The increase in LEO service sales as a percentage of total airtime sales resulted from both the substantial increase in LEO service sales and the substantial decrease in VSAT service sales.

LEO service providers have continued to expand their product and service offerings, further heightening competition in the global leisure segment and in commercial and government markets.

Product sales decreased by $1.5 million, or 33%, to $3.1 million for the three months ended September 30, 2025 from $4.6 million for the three months ended September 30, 2024.

The decrease in product sales was primarily due to a $0.7 million decrease in Starlink product sales, a $0.6 million decrease in VSAT Broadband product sales and a $0.5 million decrease in TracVision product sales, partially offset by a $0.4 million increase in OneWeb product sales.

The decrease in Starlink product sales was primarily due to discounted pricing.

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

1 unchanged sentence

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

Costs of sales decreased by $2.3 million, or 12%, in the three months ended June 30, 2025 to $17.5 million from $19.8 million in the three months ended June 30, 2024.

The decrease in costs of sales was driven by a $1.3 million decrease in costs of service sales and a $1.0 million decrease in costs of product sales.

As a percentage of net sales, costs of sales were 66% and 69% for the three months ended June 30, 2025 and 2024, respectively.

Costs of sales increased by $6.8 million, or 35%, in the three months ended September 30, 2025 to $26.5 million from $19.7 million in the three months ended September 30, 2024.

The increase in costs of sales was driven by a $5.1 million increase in costs of product sales and a $1.7 million increase in costs of service sales.

As a percentage of net sales, costs of sales were 93% and 68% for the three months ended September 30, 2025 and 2024, 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 June 30, 2025, costs of service sales decreased by $1.3 million, or 8%, to $14.2 million from $15.5 million in the three months ended June 30, 2024, primarily due to a $1.2 million decrease in airtime costs of service sales.

As a percentage of service sales, costs of service sales were 62% and 63% for the three months ended June 30, 2025 and 2024, respectively.

During the second quarter of 2024, we purchased from Starlink access to a large block of data at favorable rates.

As a result of this purchase, during the three months ended June 30, 2025 our gross margin percentage on Starlink airtime services improved year over year.

For the three months ended September 30, 2025, costs of service sales increased by $1.7 million, or 11%, to $16.7 million from $15.0 million in the three months ended September 30, 2024, primarily due to a $1.5 million increase in airtime costs of service sales.

As a percentage of service sales, costs of service sales were 66% and 61% for the three months ended September 30, 2025 and 2024, respectively.

The increase in cost of service sales as a percentage of service sales was primarily due to increased rates of Starlink airtime data usage by customers prior to expiration of that data and the purchase during the quarter of VSAT airtime in excess of anticipated usage in order to help meet our contractual minimum purchase obligations for VSAT airtime in 2025.

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

For the three months ended June 30, 2025, costs of product sales decreased by $1.0 million, or 24%, to $3.3 million from $4.3 million in the three months ended June 30, 2024, primarily due to a $0.8 million decrease in various manufacturing and other unabsorbed expenses and a $0.6 million decrease in Starlink cost of product sales.

These decreases were partially offset by a $0.3 million increase in OneWeb cost of product sales.

As a percentage of product sales, costs of product sales were 92% and 108% for the three months ended June 30, 2025 and 2024, respectively.

Cost of product sales decreased as a percentage of product sales primarily due to the decrease in various manufacturing and other unabsorbed expense.

For the three months ended September 30, 2025, costs of product sales increased by $5.1 million, or 109%, to $9.8 million from $4.7 million in the three months ended September 30, 2024, primarily due to a $6.0 million increase in various manufacturing and other unabsorbed expenses and a $0.4 million increase in OneWeb cost of product sales.

The manufacturing and other unabsorbed costs included a $5.5 million inventory writedown related primarily to further reduced demand for certain of our hardware products as well as a reduction in the prices we charge for certain TracNet H-series terminals.

These increases were partially offset by a $0.4 million decrease in Starlink cost of product sales, a $0.4 million decrease in TracVision costs of product sales and a $0.3 million decrease in VSAT Broadband cost of product sales.

As a percentage of product sales, costs of product sales were 321% and 103% for the three months ended September 30, 2025 and 2024, respectively.

Cost of product sales increased as a percentage of product sales primarily due to the increase in various manufacturing and other unabsorbed expenses.

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 June 30, 2025 decreased by $1.4 million, or 61%, to $0.9 million from $2.3 million for the three months ended June 30, 2024.

The decrease in research and development expense resulted primarily from a $1.2 million decrease in salaries, benefits and taxes, after giving effect to $0.3 million in costs incurred during the three months ended June 30, 2024 related to the reduction in our workforce.

As a percentage of net sales, research and development expense was 3% and 8% for the three months ended June 30, 2025 and 2024, respectively.

Research and development expense for the three months ended September 30, 2025 decreased by $0.4 million, or 31%, to $1.0 million from $1.4 million for the three months ended September 30, 2024.

The decrease in research and development expense resulted primarily from a $0.3 million decrease in salaries, benefits and taxes.

As a percentage of net sales, research and development expense was 3% and 5% for the three months ended September 30, 2025 and 2024, 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 June 30, 2025 decreased by $0.3 million, or 6%, to $5.0 million from $5.3 million for the three months ended June 30, 2024.

The decrease in sales, marketing and support expense resulted primarily from a $0.3 million decrease in salaries, benefits and taxes and a $0.3 million decrease in facilities expense, partially offset by a $0.2 million increase in professional fees and a $0.2 million increase in warranty expense.

As a percentage of net sales, sales, marketing and support expense was 19% for both the three months ended June 30, 2025 and 2024.

Sales, marketing and support expense for the three months ended September 30, 2025 decreased by less than $0.1 million, or 1%, to $4.9 million for the three months ended September 30, 2024.

The decrease in sales, marketing and support expense resulted primarily from a $0.3 million decrease in facilities expense, partially offset by a $0.2 million increase in expensed materials.

As a percentage of net sales, sales, marketing and support expense was 17% for both the three months ended September 30, 2025 and 2024.

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 June 30, 2025 decreased by $0.6 million, or 13%, to $3.6 million from $4.1 million for the three months ended June 30, 2024.

The decrease in general and administrative expense resulted primarily from a $0.5 million decrease in salaries, benefits and taxes, after giving effect to $0.3 million in costs incurred during the three months ended June 30, 2024 related to the reduction in our workforce.

In addition, there was a $0.2 million decrease in depreciation expense.

These decreases in expense were partially offset by a $0.4 million increase in facilities expense.

As a percentage of net sales, general and administrative expense was 13% and 14% for the three months ended June 30, 2025 and 2024, respectively.

We currently plan to migrate our Rhode Island operations to a leased facility in the spring of 2026, at which point our general and administrative expense will include lease expense at the rate of approximately $0.6 million for the first year of the lease (excluding three months of free rent).

Interest and Other Income (Expense), Net

General and administrative expense for the three months ended September 30, 2025 decreased by $0.1 million, or 3%, to $3.7 million from $3.8 million for the three months ended September 30, 2024.

The decrease in general and administrative expense resulted primarily from a $0.4 decrease in professional fees and a $0.3 million decrease in dues and subscriptions expense.

These decreases were partially offset by a $0.5 million increase in salaries, benefits and taxes.

As a percentage of net sales, general and administrative expense was 13% for both the three months ended September 30, 2025 and 2024.

Interest and Other Income, 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 decreased by $0.3 million to $0.6 million for the three months ended June 30, 2025 from $0.9 million for the three months ended June 30, 2024, primarily as a result of lower cash balances in 2025 as a result of the $17.0 million prepayment in June 2024 for access to a large block of Starlink Mobile Priority data at favorable rates.

Interest income increased by $0.1 million to $0.7 million for the three months ended September 30, 2025 from $0.6 million for the three months ended September 30, 2024, primarily as a result of higher cash balances in 2025.

Of the current period interest income of $0.7 million, $0.6 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 income (expense), net changed by $1.2 million to other income, net of $0.8 million for the three months ended June 30, 2025 from other expense, net of $0.4 million for the three months ended June 30, 2024.

This change was driven primarily by a $1.3 million gain on the sale of 50 Enterprise Center in June 2025.

Other income, net decreased by $0.2 million to other income, net of less than $0.1 million for the three months ended September 30, 2025 from other income, net of $0.2 million for the three months ended September 30, 2024.

This decrease was driven primarily by a $0.3 million loss on the sale of 75 Enterprise Center in September 2025.

Income Tax Expense

Income tax expense for the three months ended June 30, 2025 was $0.1 million and primarily related to withholding taxes imposed in foreign jurisdictions.

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

Six months ended June 30, 2025 and 2024

Our net sales for the six months ended June 30, 2025 and 2024 were as follows:

For the six months ended June 30, 2025 vs.

Income tax expense for the three months ended September 30, 2025 was less than $0.1 million and primarily related to withholding taxes imposed in foreign jurisdictions.

Income tax expense for the three months ended September 30, 2024 was $0.1 million and related to taxes on income earned in foreign jurisdictions.

Nine months ended September 30, 2025 and 2024

Our net sales for the nine months ended September 30, 2025 and 2024 were as follows:

For the nine months ended September 30, 2025 vs.

2025 2024 $ %

3 unchanged sentences

Net sales $ 80,490 $ 86,911 $ (6,421) (7) %

Net sales decreased by $5.9 million, or 10%, for the six months ended June 30, 2025 as compared to the six months ended June 30, 2024.

Service sales decreased by $5.0 million, or 10%, to $44.7 million for the six months ended June 30, 2025 from $49.7 million for the six months ended June 30, 2024.

The decrease in service sales was primarily due to a $5.4 million decrease in our airtime service sales, of which $4.9 million related to the U.S.

Net sales decreased by $6.4 million, or 7%, for the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024.

Service sales decreased by $4.0 million, or 5%, to $70.1 million for the nine months ended September 30, 2025 from $74.1 million for the nine months ended September 30, 2024.

The decrease in service sales was primarily due to an overall $4.7 million decrease in our airtime service sales, which reflected a $7.2 million decrease in airtime service sales related to the U.S.

Coast Guard contract downgrade.

In addition, there was a decrease in other VSAT subscribers, which was partially offset by an increase in LEO service sales.

For the six months ended June 30, 2025, LEO services sales represented over 25% of airtime services sales, as compared to less than 10% for the six months ended June 30, 2024.

In addition, there was a substantial decrease in other VSAT subscribers, which was partially offset by a substantial increase in LEO service sales.

For the nine months ended September 30, 2025, LEO services sales represented over 30% of airtime services sales, as compared to less than 10% for the nine months ended September 30, 2024.

The increase in LEO service sales as a percentage of total airtime sales resulted from both a substantial increase in LEO service sales and a substantial decrease in VSAT 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 $0.9 million, or 11%, to $7.3 million for the six months ended June 30, 2025 from $8.2 million for the six months ended June 30, 2024.

The decrease in product sales was primarily due to a $0.7 million decrease in TracVision product sales, a $0.4 million decrease in Starlink product sales and a $0.3 million decrease in accessory and service parts product sales, partially offset by a $0.3 million increase in OneWeb product sales and a $0.2 million increase in VSAT broadband product sales.

The decline in product sales was primarily driven by product sales mix and discounted pricing on Starlink units.

LEO service providers have continued to expand their product and service offerings, further heightening competition in the global leisure segment and in commercial and government markets.

Product sales decreased by $2.4 million, or 19%, to $10.4 million for the nine months ended September 30, 2025 from $12.8 million for the nine months ended September 30, 2024.

The decrease in product sales was primarily due to a $1.2 million decrease in TracVision product sales, a $1.1 million decrease in Starlink product sales, a $0.4 million decrease in VSAT Broadband product sales and a $0.4 million decrease in accessory and service parts product sales, partially offset by a $0.8 million increase in OneWeb product sales.

The decline in Starlink product sales was primarily driven by discounted pricing, whereas declines in other product sales was primarily driven by product mix and discounted pricing on VSAT Broadband products.

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

Costs of Sales

Costs of sales decreased by $3.7 million, or 9%, in the six months ended June 30, 2025 to $35.5 million from $39.1 million in the six months ended June 30, 2024.

The decrease in costs of sales was driven by a $2.6 million decrease in costs of product sales and a $1.1 million decrease in costs of service sales.

As a percentage of net sales, costs of sales were 68% for both the six months ended June 30, 2025 and 2024.

For the six months ended June 30, 2025, costs of service sales decreased by $1.1 million, or 4%, to $28.4 million from $29.5 million for the six months ended June 30, 2024, primarily due to a $1.1 million decrease in airtime cost of service sales, partially offset by a $0.4 million increase in content services cost of services sales.

As a percentage of service sales, costs of service sales were 64% and 59% for the six months ended June 30, 2025 and 2024, respectively.

For the six months ended June 30, 2025, costs of product sales decreased by $2.6 million, or 27%, to $7.0 million from $9.6 million in the six months ended June 30, 2024, primarily due to a $1.9 million decrease in various manufacturing and other unabsorbed expenses, a $0.5 million decrease in TracVision cost of product sales and a $0.5 million decrease in Starlink cost of product sales, partially offset by a $0.3 million increase in OneWeb cost of product sales.

As a percentage of product sales, costs of product sales were 96% and 117% for the six months ended June 30, 2025 and 2024, respectively.

Cost of product sales decreased as a percentage of product sales primarily due to the decrease in various manufacturing and other unabsorbed expense.

Costs of sales increased by $3.2 million, or 5%, in the nine months ended September 30, 2025 to $62.0 million from $58.8 million in the nine months ended September 30, 2024.

The increase in costs of sales was driven by a $2.5 million increase in costs of product sales and a $0.6 million increase in costs of service sales.

As a percentage of net sales, costs of sales were 77% and 68% for the nine months ended September 30, 2025 and 2024, respectively.

For the nine months ended September 30, 2025, costs of service sales increased by $0.6 million, or 1%, to $45.1 million from $44.5 million for the nine months ended September 30, 2024, primarily due to a $0.5 million increase in content services cost of services sales and a $0.4 million increase in airtime cost of service sales.

As a percentage of service sales, costs of service sales were 64% and 60% for the nine months ended September 30, 2025 and 2024, respectively.

For the nine months ended September 30, 2025, costs of product sales increased by $2.5 million, or 18%, to $16.9 million from $14.3 million in the nine months ended September 30, 2024, primarily due to a $4.0 million increase in various manufacturing and other unabsorbed expenses and a $0.7 million increase in OneWeb cost of product sales, partially offset by a $0.9 million decrease in Starlink cost of product sales and a $0.9 million decrease in TracVision cost of product sales.

As a percentage of product sales, costs of product sales were 162% and 112% for the nine months ended September 30, 2025 and 2024, respectively.

Cost of product sales increase as a percentage of product sales primarily due to the increase in various manufacturing and other unabsorbed expenses.

Operating Expenses

Research and development expense for the six months ended June 30, 2025 decreased by $3.3 million, or 61%, to $2.1 million from $5.4 million for the six months ended June 30, 2024.

The decrease in research and development expense resulted primarily from a $2.8 million decrease in salaries, benefits and taxes, after giving effect to $1.1 million in costs incurred during the six months ended June 30, 2024 related to the reduction in our workforce.

As a percentage of net sales, research and development expense was 4% and 9% for the six months ended June 30, 2025 and 2024, respectively.

Sales, marketing and support expense for the six months ended June 30, 2025 decreased by $0.7 million, or 7%, to $10.0 million from $10.7 million for the six months ended June 30, 2024.

The decrease in sales, marketing and support expense resulted primarily from a $0.7 million decrease in salaries, benefits and taxes, after giving effect to $0.4 million in costs incurred during the six months ended June 30, 2024 related to the reduction in our workforce.

In addition, there was a $0.3 million decrease in facilities expense and a $0.3 million decrease in expensed materials, partially offset by a $0.3 million increase in warranty expense.

As a percentage of net sales, sales, marketing and support expense was 19% for both the six months ended June 30, 2025 and 2024.

General and administrative expense for the six months ended June 30, 2025 decreased by $2.3 million, or 25%, to $7.1 million from $9.4 million for the six months ended June 30, 2024.

The decrease in general and administrative expense resulted primarily from a $2.1 million decrease in salaries, benefits and taxes, after giving effect to $0.9 million in costs incurred during the six months ended June 30, 2024 related to the reduction in our workforce, and a $0.5 million decrease in depreciation expense, partially offset by a $0.6 million increase in facilities expense.

As a percentage of net sales, general and administrative expense was 14% and 16% for the six months ended June 30, 2025 and 2024, respectively.

Research and development expense for the nine months ended September 30, 2025 decreased by $3.7 million, or 55%, to $3.1 million from $6.8 million for the nine months ended September 30, 2024.

The decrease in research and development expense resulted primarily from a $3.1 million decrease in salaries, benefits and taxes, after giving effect to $0.9 million in costs incurred during the nine months ended September 30, 2024 related to the reduction in our workforce, and a $0.3 million decrease in facilities expense allocated to our research and development operations.

As a percentage of net sales, research and development expense was 4% and 8% for the nine months ended September 30, 2025 and 2024, respectively.

Sales, marketing and support expense for the nine months ended September 30, 2025 decreased by $0.8 million, or 5%, to $14.9 million from $15.7 million for the nine months ended September 30, 2024.

The decrease in sales, marketing and support expense resulted primarily from a $0.6 million decrease in salaries, benefits and taxes, after giving effect to $0.3 million in costs incurred during the nine months ended September 30, 2024 related to the reduction in our workforce.

In addition, there was a $0.6 million decrease in facilities expense allocated to our sales, marketing and support operations, partially offset by a $0.3 million increase in warranty expense and a $0.3 million increase in professional fees.

As a percentage of net sales, sales, marketing and support expense was 19% and 18% for the nine months ended September 30, 2025 and 2024, respectively.

General and administrative expense for the nine months ended September 30, 2025 decreased by $2.4 million, or 18%, to $10.8 million from $13.2 million for the nine months ended September 30, 2024.

The decrease in general and administrative expense resulted primarily from a $1.6 million decrease in salaries, benefits and taxes, after giving effect to $0.7 million in costs incurred during the nine months ended September 30, 2024 related to the reduction in our workforce, a $0.6 million decrease in depreciation expense, a $0.4 million decrease in professional fees and a $0.3 million decrease in dues and subscriptions expense, partially offset by a $0.7 million increase in facilities expense allocated to our general and administrative operations.

As a percentage of net sales, general and administrative expense was 13% and 15% for the nine months ended September 30, 2025 and 2024, respectively.

Interest and Other Income (Expense), Net

Interest income decreased by $0.6 million to $1.1 million for the six months ended June 30, 2025 from $1.8 million for the six months ended June 30, 2024, primarily as a result of lower cash balances in 2025 as a result of the $17.0 million prepayment in June 2024 for access to a large block of Starlink Mobile Priority data at favorable rates.

Interest income decreased by $0.6 million to $1.8 million for the nine months ended September 30, 2025 from $2.4 million for the nine months ended September 30, 2024, primarily as a result of lower cash balances in 2025 as a result of the $17.0 million prepayment in June 2024 for access to a large block of Starlink Mobile Priority data at favorable rates.

Of the current period interest income of $1.8 million, $1.5 million is attributable to interest earned on cash and cash equivalents, and $0.3 million was attributable to interest from lease receivables.

Other income (expense), net changed by $1.4 million to other income, net of $0.8 million for the six months ended June 30, 2025 from other expense, net of $0.6 million for the six months ended June 30, 2024.

This change was driven primarily by a $1.3 million gain on the sale of 50 Enterprise Center in June 2025.

Other income (expense), net changed by $1.2 million to other income, net of $0.8 million for the nine months ended September 30, 2025 from other expense, net of $0.3 million for the nine months ended September 30, 2024.

This change was driven primarily by a $1.3 million gain on the sale of 50 Enterprise Center in June 2025, partially offset by a $0.3 million loss on the sale of 75 Enterprise Center in September 2025.

Income Tax Expense

Income tax expense for the six months ended June 30, 2025 was $0.1 million and primarily related to state taxes and withholding taxes imposed in foreign jurisdictions.

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

Income tax expense for the nine months ended September 30, 2025 was $0.1 million and primarily related to state taxes and withholding taxes imposed in foreign jurisdictions.

Income tax expense for the nine months ended September 30, 2024 was $0.1 million and related to taxes on income earned in foreign jurisdictions.

Liquidity and Capital Resources

Our primary liquidity needs have been to fund general business requirements, including working capital requirements and capital expenditures.

In recent years, we have funded our operations primarily from the sale of two businesses in 2022, the sale of a business in 2019, the sale of 50 Enterprise Center, a PPP loan, cash flows from operations, bank financings and proceeds received from exercises of stock options and the issuance of stock.

In recent years, we have funded our operations primarily from the sale of two businesses in 2022, the sale of 50 Enterprise Center, the sale of 75 Enterprise Center, cash flows from operations and proceeds received from exercises of stock options and the issuance of stock.

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 June 30, 2025, we had $55.9 million in cash and cash equivalents, of which $3.0 million in cash and cash equivalents was held in local currencies by our foreign subsidiaries.

We held no marketable securities as of June 30, 2025 as all excess cash has been invested in an interest-bearing account with Bank of America, N.A.

As of September 30, 2025, we had $72.8 million in cash and cash equivalents, of which $3.4 million was held in local currencies by our foreign subsidiaries.

We held no marketable securities as of September 30, 2025 as all excess cash has been invested in an interest-bearing account with Bank of America, N.A.

since the fourth quarter of 2024.

As of June 30, 2025, we had $109.9 million in working capital.

As of September 30, 2025, we had $104.5 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.

In recognition of the substantial growth of Starlink airtime services as a percentage of our revenue since the second quarter of 2024, we anticipate that, in the fourth quarter of 2025, we will purchase a substantial block of Starlink Global Priority data and will make an upfront payment of a material portion of the purchase price, with periodic payments continuing over the course of the contract period.

Our funding plans for our working capital needs and other commitments may be adversely impacted if our underlying assumptions regarding our anticipated revenues and expenses are not realized.

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

Net cash generated in operations was $3.8 million for the six months ended June 30, 2025 compared to net cash used in operations of $15.5 million for the six months ended June 30, 2024.

The $19.3 million change in net cash provided by operations was primarily the result of an $17.3 million decrease in cash outflows related to prepaid expenses and current assets, which included the $17.0 million purchase of the Starlink data pool, a $6.4 million decrease in cash outflows relating to inventories, a $4.8 million decrease in net loss, a $2.4 million decrease in cash outflows relating to accrued compensation, product warranty and other expenses, and a $0.5 million increase in cash inflows relating to deferred revenue, partially offset by a $5.9 million increase in cash outflows related to accounts payable, a change of $3.8 million related to non-cash items, a $2.0 million decrease in cash inflows relating to accounts receivable, and a $0.3 million increase in cash outflows relating to other non-current assets.

Net cash provided by investing activities was $2.6 million for the six months ended June 30, 2025 compared to net cash provided by investing activities of $14.4 million for the six months ended June 30, 2024.

The $11.8 million decrease in net cash provided by investing activities was primarily the result of a $19.6 million decrease in proceeds from net sales of marketable securities, which was driven by the liquidation of our marketable securities held by Wells Fargo in 2024, partially offset by proceeds of $4.9 million for the sale of 50 Enterprise Center, a $1.6 million decrease in capital expenditures and $1.2 million of proceeds from the sale of fixed assets.

Net cash used in financing activities was $1.2 million for the six months ended June 30, 2025 compared to net cash provided by financing activities of $0.1 million for the six months ended June 30, 2024.

The $1.3 million increase in net cash used in financing activities is primarily attributable to a $1.3 million increase in cash outflows related to the purchase of treasury stock and $0.1 million decrease in cash inflows relating to proceeds from the exercise of stock options and purchases under our employee stock purchase plan.

Net cash generated in operations was $13.7 million for the nine months ended September 30, 2025 compared to net cash used in operations of $13.6 million for the nine months ended September 30, 2024.

The $27.3 million change in net cash provided by operations was primarily the result of a $23.0 million decrease in cash outflows related to prepaid expenses and current assets, which included the $17.0 million purchase of the Starlink data pool in 2024, a $15.7 million decrease in cash outflows relating to inventories, a $5.7 million decrease in cash outflows relating to accrued compensation, product warranty and other expenses, and a $0.5 million increase in cash inflows relating to deferred revenue, partially offset by a $7.0 million reduction in non-cash items, a $5.7 million increase in cash outflows related to accounts payable, a $3.6 million decrease in cash inflows relating to accounts receivable, a $1.0 million increase in net loss, and a $0.4 million decrease in cash inflows relating to other non-current assets.

Net cash provided by investing activities was $9.8 million for the nine months ended September 30, 2025 compared to net cash provided by investing activities of $16.5 million for the nine months ended September 30, 2024.

The $6.7 million decrease in net cash provided by investing activities was primarily the result of a $23.1 million decrease in proceeds from net sales of marketable securities, which was driven by the liquidation of our marketable securities held by Wells Fargo in 2024, partially offset by proceeds of $7.8 million for the sale of 75 Enterprise Center, proceeds of $4.9 million for the sale of 50 Enterprise Center, a $2.0 million increase of proceeds from the sale of fixed assets and a $1.6 million decrease in capital expenditures.

Net cash used in financing activities was $1.3 million for the nine months ended September 30, 2025 compared to net cash provided by financing activities of $0.1 million for the nine months ended September 30, 2024.

The $1.4 million increase in net cash used in financing activities is primarily attributable to a $1.4 million increase in cash outflows related to the purchase of treasury stock.

Other Matters

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Under the program, we, 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.

We 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 we might otherwise be precluded from making purchases under insider trading laws or our company policy.

We may elect to make purchases under Rule 10b-18 under the Securities Exchange Act of 1934, as amended, or the Exchange Act, which imposes certain volume limitations, and/or under Rule 10b5-1 under that act, which would permit repurchases to occur during periods when we might otherwise be precluded from making purchases under insider trading laws or our 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 us 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 June 30, 2025, we repurchased 211 shares of common stock in open market transactions at a cost of approximately $1.1 million.

During the six months ended June 30, 2025, we repurchased 242 shares of common stock in open market transactions at a cost of approximately $1.3 million.

During the three months ended September 30, 2025, we repurchased 22 shares of common stock in open market transactions at a cost of approximately $0.1 million.

During the nine months ended September 30, 2025, we repurchased 264 shares of common stock in open market transactions at a cost of approximately $1.4 million.

Except as noted above, there were no other repurchase programs outstanding.

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