What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-05-06 compared with 2025-11-06 · 71 added, 144 removed, 87 unchanged (71% of the section changed)

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In some cases, forward-looking statements can be identified by terminology such as “may,” “will,” “should,” “would,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue,” or the negative of these terms or other comparable terminology.

Any expectations based on these forward-looking statements are subject to risks and uncertainties and other important factors, including those discussed in the section entitled “Risk Factors” in Item 1A of Part II of this quarterly report on Form 10-Q.

These and many other factors could affect our future financial and operating results and could cause actual results to differ materially from expectations based on forward-looking statements made in this document or elsewhere by us or on our behalf.

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The following discussion and analysis should be read in conjunction with our consolidated interim financial statements and related notes appearing elsewhere in this report.

We are a leading global provider of innovative and technology-driven connectivity solutions to primarily maritime commercial, leisure, and military/government customers.

We are a leading global provider of innovative and technology-driven connectivity solutions to primarily maritime commercial and leisure customers.

We provide global high-speed internet and Voice over Internet Protocol (VoIP) services via satellite to mobile users at sea and on land.

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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 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.

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 Starlink, Ku-band VSAT using the SES HTS network, Eutelsat OneWeb, Viasat/Inmarsat, 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 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.

In October 2024, we expanded our portfolio to include Starlink Local Priority data plans, which is suitable for fixed and mobile uses on land and inland waterways, including lakes and rivers.

In 2025, Starlink products and services were our fastest growing products and services.

We are also now earning usage fees from our offering of Eutelsat 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.

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

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 standalone 5G/cellular and Wi-Fi system.

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

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

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

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

In addition, our in-motion television terminals permit customers to receive live digital television via regional satellite services in marine vessels, recreational vehicles, buses and automobiles.

Historically, our Ku-band VSAT communications service was the primary driver of revenue growth.

However, in recent years these services have represented a declining percentage of our revenues in the face of increased demand for and competition from emerging LEO services.

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

In addition, our in-motion television terminals permit customers to receive live digital television via regional satellite services on maritime vessels and on recreational vehicles, buses and automobiles.

We sell our products through an extensive international network of dealers and distributors.

We also sell and lease products to service providers and end users.

In February 2024, we announced a staged wind-down of our product manufacturing operations at our Middletown, Rhode Island location.

In February 2024, we announced a staged wind-down of our product manufacturing operations.

The wind-down was driven by reduced demand for our hardware products in the face of intensifying competition in the third and fourth quarters of 2023.

We concluded that we should discontinue our capital-intensive manufacturing activities and concentrate our efforts on growing sales of our multi-orbit, multi-channel, integrated communications solutions.

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 AgilePlans terminals over manufacturing new units.

We expect that we will continue our product manufacturing activities in order to generate a targeted amount of inventory of maritime satellite connectivity and satellite television terminals to meet anticipated demand and that we will cease substantially all manufacturing activity by the end of 2026.

This wind-down has been extended because our 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 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.

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

During 2024, we incurred $3.9 million of severance charges for this and other restructurings.

The $3.9 million of severance charges incurred during the year consisted 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.

We also plan to continue to conduct maintenance, service, warehousing, shipping and receiving activities at our Bristol, Rhode Island location.

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

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

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.

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

We began drawing from this prepaid pooled data in the third quarter of 2024 and this data was fully consumed by the end of 2025.

In the fourth quarter of 2025, we entered into an agreement to purchase a substantially larger block of Starlink Global Priority data.

We made a prepayment of $5.0 million related to this agreement in the fourth quarter of 2025, and additional payments of $10.0 million in January 2026 and $6.0 million in February 2026.

We must pay the remaining balance of $24.0 million in periodic quarterly payments through the first quarter of 2027.

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”).

As of September 30, 2024, 75 Enterprise Center had a carrying value of approximately $7.8 million.

We 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.

We recorded an impairment charge of $1.1 million in 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.

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

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.

The sale was completed in September 2025.

We also entered into an agreement with the buyer to lease this property for the period October 2025 through the end of March 2026, which was subsequently extended through April 30, 2026.

Total lease expense under this agreement was $0.2 million.

The Company has fully migrated its Rhode Island operations to the leased facility located in Bristol, Rhode Island.

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”).

As of September 30, 2024, 50 Enterprise Center had a carrying value of approximately $3.6 million.

We 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 at that date exceeded its carrying value.

In December 2024, we 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, we received notice of termination from the buyer.

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 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.

The sale was completed in June 2025.

Critical Accounting Estimates

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

We believe that our accounting estimates for intangible assets and other long-lived assets are the only estimates critical to an understanding and evaluation of our financial results for the nine months ended September 30, 2025, as discussed below.

We believe that our accounting estimates for goodwill, intangible assets and other long-lived assets are the only estimates critical to an understanding and evaluation of our financial results for the three months ended March 31, 2026, 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 Nine Months Ended

September 30, September 30,

2025 2024 2025 2024

Three Months Ended

Service 87.1 % 85.2 %

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General and administrative 12.0 13.9

Long-lived assets impairment charge — 3.9 — 1.3

Total costs and expenses 100.3 108.8

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Interest income 1.8 2.2

Interest expense — — — —

Other income (expense), net 0.7 —

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

Income (loss) before income tax expense 2.2 (6.6)

Income tax expense 0.4 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.

Net income (loss) 1.8 % (6.7) %

Three months ended March 31, 2026 and 2025

Our net sales for the three months ended March 31, 2026 and 2025 were as follows:

For the three months ended March 31, 2026 vs.

2026 2025 $ %

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Net sales $ 32,318 $ 25,414 $ 6,904 27 %

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.

Net sales increased by $6.9 million, or 27%, for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025.

Service sales increased by $6.5 million, or 30%, to $28.2 million for the three months ended March 31, 2026 from $21.6 million for the three months ended March 31, 2025.

The increase in service sales was primarily due to a $6.2 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.

This increase in LEO service sales was partially offset by a substantial decrease in VSAT service sales, which was driven primarily by a decrease in VSAT subscribers.

For the three months ended March 31, 2026, LEO services sales represented over 45% of airtime services sales, as compared to less than 30% for the three months ended March 31, 2025.

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.

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

Product sales increased by $0.4 million, or 10%, to $4.2 million for the three months ended March 31, 2026 from $3.8 million for the three months ended March 31, 2025.

The increase in product sales was primarily due to a $0.7 million increase in OneWeb product sales and a $0.3 million increase in Starlink product sales, partially offset by a $0.5 million decrease in TracVision product sales and a $0.3 million decrease in VSAT Broadband product sales.

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

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

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.

Costs of sales increased by $4.8 million, or 27%, in the three months ended March 31, 2026 to $22.8 million from $18.0 million in the three months ended March 31, 2025.

The increase in costs of sales was driven by a $0.7 million increase in costs of product sales and a $4.1 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.

As a percentage of net sales, costs of sales were 70% and 71% for the three months ended March 31, 2026 and 2025, 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 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.

For the three months ended March 31, 2026, costs of service sales increased by $4.1 million, or 29%, to $18.4 million from $14.2 million in the three months ended March 31, 2025, primarily due to a $3.8 million increase in airtime costs of service sales.

As a percentage of service sales, costs of service sales were 65% and 66% for the three months ended March 31, 2026 and 2025, respectively.

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

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.

For the three months ended March 31, 2026, costs of product sales increased by $0.7 million, or 18%, to $4.4 million from $3.7 million in the three months ended March 31, 2025, primarily due to a $0.5 million increase in various manufacturing and other unabsorbed expenses and a $0.6 million increase in OneWeb cost of product sales, partially offset by a $0.3 million decrease in TracVision cost of product sales and a $0.2 million decrease in VSAT Broadband cost of product sales.

As a percentage of product sales, costs of product sales were 106% and 99% for the three months ended March 31, 2026 and 2025, respectively.

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

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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 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.

Research and development expense for the three months ended March 31, 2026 decreased by $0.5 million, or 39%, to $0.7 million from $1.2 million for the three months ended March 31, 2025.

The decrease in research and development expense resulted primarily from a $0.4 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.

As a percentage of net sales, research and development expense was 2% and 5% for the three months ended March 31, 2026 and 2025, 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 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.

Sales, marketing and support expense for the three months ended March 31, 2026 were $5.1 million, an increase of $0.1 million, or 2%, from $5.0 million for the three months ended March 31, 2025.

The increase in sales, marketing and support expense resulted primarily from a $0.4 million increase in salaries, benefits and taxes, partially offset by a $0.2 million decrease in facilities expense and a $0.1 million decrease in warranty expense.

As a percentage of net sales, sales, marketing and support expense was 16% and 20% for the three months ended March 31, 2026 and 2025, respectively.

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

General and administrative expense for the three months ended 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.

General and administrative expense for the three months ended March 31, 2026 increased by $0.3 million, or 10%, to $3.9 million from $3.5 million for the three months ended March 31, 2025.

The increase in general and administrative expense resulted primarily from a $0.2 million increase in salaries, benefits and taxes and a $0.2 million increase in computer software and maintenance expenses, partially offset by a $0.1 million decrease in dues and subscriptions expense.

As a percentage of net sales, general and administrative expense was 12% and 14% for the three months ended March 31, 2026 and 2025, respectively.

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 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.

Interest income remained flat at $0.6 million for the three months ended March 31, 2026 from $0.6 million for the three months ended March 31, 2025.

Of the current period interest income of $0.6 million, $0.5 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, 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 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 $ %

(dollars in thousands)

Service $ 70,079 $ 74,122 $ (4,043) (5) %

Product 10,411 12,789 (2,378) (19) %

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

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 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.

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 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 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 $1.8 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 $1.2 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.

Other income, net increased by $0.2 million to other income, net of $0.2 million for the three months ended March 31, 2026 from other expense, net of less than $0.1 million for the three months ended March 31, 2025.

This decrease was driven primarily by a $0.1 million gain on foreign exchange as well as a $0.1 million gain on the sales of fixed assets.

Income Tax Expense

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.

Income tax expense for the three months ended March 31, 2026 was $0.1 million and primarily related to withholding taxes imposed in foreign jurisdictions.

Income tax expense for the three months ended March 31, 2025 was less than $0.1 million and related to state taxes and taxes on income earned in foreign jurisdictions.

Liquidity and Capital Resources

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

As of 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 September 30, 2025, we had $104.5 million in working capital.

As of March 31, 2026, we had $59.2 million in cash and cash equivalents, of which $3.0 million in cash equivalents was held in local currencies by our foreign subsidiaries.

As of March 31, 2026, we had $101.7 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.

In recognition of the substantial growth of Starlink airtime services as a percentage of our revenue since the second quarter of 2024 and in an effort to increase margins, we entered an agreement in the fourth quarter of 2025 to purchase a substantial block of Starlink Global Priority data for $45.0 million.

We made an upfront payment of $5.0 million upon entry into the agreement, a payment of $10.0 million in January 2026 and a payment of $6.0 million in February 2026.

Periodic quarterly payments of the balance owed will continue over the course of the contract period, which runs through the first quarter of 2027.

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 $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.

Net cash used in operations was $8.3 million for the three months ended March 31, 2026 compared to net cash used in operations of $1.3 million for the three months ended March 31, 2025.

The $7.0 million increase in net cash used in operations was primarily the result of a $11.6 million increase in cash outflows related to prepaid expenses and other current assets, which reflected the $16.0 million purchase of Starlink pooled data in 2026, a $2.2 million decrease in cash inflows relating to accounts receivable, a $1.4 million reduction in non-cash items, and a $0.2 million increase in cash outflows relating to accrued compensation, product warranty and other expenses, partially offset by a $5.4 million decrease in cash outflows related to accounts payable, a $2.3 million decrease in net loss, and a $0.7 million decrease in cash outflows relating to inventories.

Net cash used in investing activities was $2.4 million for the three months ended March 31, 2026 compared to net cash used in investing activities of $0.6 million for the three months ended March 31, 2025.

The $1.8 million increase in net cash used in investing activities was primarily the result of a $1.4 million increase in capital expenditures, partially offset by a $0.4 million decrease of proceeds from the sale of fixed assets.

Net cash used in financing activities was $0.1 million for the three months ended March 31, 2026 compared to net cash used in financing activities of $0.2 million for the three months ended March 31, 2025.

The $0.1 million decrease in net cash used in financing activities is the result of a $0.1 million increase in cash inflows related to the proceeds from stock options exercised.

Other Matters

On December 9, 2024, our Board of Directors authorized a share repurchase program pursuant in which we may purchase outstanding shares of our common stock for an aggregate purchase price of up to $10 million.

On March 6, 2026, our Board of Directors authorized an increase in the size of the repurchase program from $10 million to $15 million.

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.

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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 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.

During the three months ended March 31, 2026, we repurchased 34 thousand shares of common stock in open market transactions at a cost of approximately $0.2 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