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What changed in KVH INDUSTRIES INC \DE\'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of KVH INDUSTRIES INC \DE\'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+296 added−294 removedSource: 10-K (2025-03-10) vs 10-K (2024-03-15)

Top changes in KVH INDUSTRIES INC \DE\'s 2024 10-K

296 paragraphs added · 294 removed · 224 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

76 edited+19 added−21 removed53 unchanged
Biggest changeBecause we sell and support our products globally, we have a globally distributed workforce to manufacture products in the U.S. and support our customers in the U.S. and internationally: 13 Table of Contents KVH Team Member Headcount Country Number at December 31, 2023 Number After February 2024 Reduction in Force United States 182 112 Philippines 61 61 United Kingdom 49 49 Denmark 12 10 Singapore 12 12 India 10 9 Norway 5 3 Greece 3 3 Brazil 2 2 Hong Kong 2 2 Cyprus 1 1 Germany 1 1 Italy 1 1 Japan 1 1 Netherlands 1 1 Poland 1 1 South Africa 1 1 Total 345 270 Approximately 61 team members, or 18%, are directly involved in supporting our technology in positions such as engineers, technicians, or software developers.
Biggest changeBecause we sell and support our products globally, we have a globally distributed workforce to manufacture products in the U.S. and support our customers in the U.S. and internationally: 12 Table of Contents KVH Team Member Headcount Country Number at December 31, 2024 United States 102 Philippines 57 United Kingdom 50 Denmark 10 Singapore 12 India 10 Norway 3 Greece 3 Brazil 2 Hong Kong 2 Other 9 Total 260 Approximately 40 team members, or 15%, are directly involved in supporting our technology in positions such as engineers, technicians, or software developers.
Our parabolic mobile satellite antenna products use sophisticated robotics, stabilization, and control software, sensing technologies, transceiver integration, and advanced antenna designs to automatically search for, identify, and point directly at the optimal television and communications satellite while the vessel or vehicle is in motion.
Our parabolic mobile satellite antenna products use sophisticated robotics, stabilization, and control software, sensing technologies, transceiver integration, and advanced antenna designs to automatically search for, identify, and point directly at the optimal communications and television satellite while the vessel or vehicle is in motion.
We sell news, sports, and entertainment media content directly through our KVH Media Group, headquartered in Leeds, England. Our European headquarters, which is located in Denmark, coordinates our sales, marketing, and support efforts for our products in Europe, the Middle East, and Africa.
We sell entertainment media, news, and sports content directly through our KVH Media Group, headquartered in Leeds, England. Our European headquarters, which is located in Denmark, coordinates our sales, marketing, and support efforts for our products in Europe, the Middle East, and Africa.
Many of our primary competitors are large, well-established companies, many have substantially greater financial, managerial, technical, marketing, operational, and other resources than we do, and others have entered the markets with significantly disruptive new technology and services. In the marine market for high-speed Internet, voice, fax, and data services, we compete primarily with Inmarsat, Marlink, Speedcast, Viasat and Network Innovations.
Many of our primary competitors are large, well-established companies, many have substantially greater financial, managerial, technical, marketing, operational, and other resources than we do, and others have entered the markets with significantly disruptive new technology and services. In the marine market for high-speed Internet, voice, fax, and data services, we compete primarily with Viasat/Inmarsat, Marlink, Speedcast, Viasat and Network Innovations.
Specifically: • We provide employee wages that we believe are competitive and consistent with employee positions, skill levels, experience, knowledge, and geographic location. 14 Table of Contents • We review compensation and benefits surveys to obtain relevant industry data in order to benchmark our practices against those of industry peers. • We seek to align the interests of our executives with those of our shareholders by paying a significant portion of our executives’ total compensation in the form of equity awards, which increase in value as the price of our common stock increases. • Annual salary increases and incentive compensation include adjustments based on merit, which is communicated to employees through our annual review process and upon internal transfers and/or promotions. • All U.S. employees are eligible for health insurance, paid and unpaid leaves, a retirement plan and life and disability/accident coverage, subject to applicable regulations.
Specifically: • We provide employee wages that we believe are competitive and consistent with employee positions, skill levels, experience, knowledge, and geographic location. • We review compensation and benefits surveys to obtain relevant industry data in order to benchmark our practices against those of industry peers. • We seek to align the interests of our executives with those of our shareholders by paying a significant portion of our executives’ total compensation in the form of equity awards, which increase in value as the price of our common stock increases. • Annual salary increases and incentive compensation include adjustments based on merit, which is communicated to employees through our annual review process and upon internal transfers and/or promotions. 13 Table of Contents • All U.S. employees are eligible for health insurance, paid and unpaid leaves, a retirement plan and life and disability/accident coverage, subject to applicable regulations.
Optional routing enables onboard data to switch between our KVH ONE hybrid network services and Iridium Certus. In addition to our TracNet hybrid and TracPhone VSAT-only products and associated airtime services service, we also offer the Inmarsat-compatible TracPhone FleetOne product that provides in-motion access to global satellite communications.
Optional routing enables onboard data to switch between our KVH ONE hybrid network services and Iridium Certus. In addition to our TracNet hybrid and TracPhone VSAT-only products and associated airtime services service, we also offer the Viasat/Inmarsat-compatible TracPhone FleetOne product that provides in-motion access to global satellite communications.
We believe this approach enables better business decisions, enhanced product development, and superior customer service. Our diversity and inclusion principles are also reflected in our employee training, in particular with respect to our policies against harassment in the workplace.
We believe this approach enables better business decisions, enhanced product development, and superior customer service. Our diversity and inclusion principles are also reflected in our employee training, in particular with respect to our policies against discrimination and harassment in the workplace.
We are also subject to the laws and regulations of the U.S. and foreign jurisdictions in which we offer and sell our satellite communication products and services, including those of the European Union, Brazil, Norway, Singapore, Japan and India.
We are also subject to the laws and regulations of the U.S. and foreign jurisdictions in which we offer and sell our satellite and wireless communication products and services, including those of the European Union, Brazil, Norway, Singapore, Japan and India.
In October 2023, we signed an exclusive multi-year agreement with Kognitive Networks through which we are integrating Kognitive’s diverse suite of enterprise-grade network and bandwidth management tools, white-labeled as CommBox Edge, into our maritime mobile communication service offerings. CommBox Edge is an integral element of our multi-orbit, multi-channel marine communication solutions, enabling more diverse hybrid configurations.
In October 2023, we signed an exclusive multi-year agreement with Kognitive Networks through which we are integrating Kognitive’s diverse suite of enterprise-grade network and bandwidth management tools, private-labeled as CommBox Edge, into our maritime mobile communication service offerings. CommBox Edge is an integral element of our multi-orbit, multi-channel marine communication solutions, enabling more diverse hybrid configurations.
In addition, product development is inherently uncertain in a rapidly evolving technological environment in which there may be numerous patent applications pending, many of which are confidential when filed, with regard to similar technologies. 10 Table of Contents Manufacturing Manufacturing operations for our products consist of light manufacture, final assembly and testing.
In addition, product development is inherently uncertain in a rapidly evolving technological environment in which there may be numerous patent applications pending, many of which are confidential when filed, with regard to similar technologies. 9 Table of Contents Manufacturing Manufacturing operations for our products consist of light manufacture, final assembly and testing.
We integrate the full rack of discrete below-deck equipment typically used on traditional VSAT systems into a single, streamlined unit that is significantly easier to deploy than competing VSAT solutions. We offer three TracNet H-series terminals: the 37 cm TracNet H30, the 60 cm TracNet H60, and the 1 meter TracNet H90.
We integrate the full rack of discrete below-decks equipment typically used on traditional VSAT systems into a single, streamlined unit that is significantly easier to deploy than competing VSAT solutions. We offer three TracNet H-series terminals: the 37 cm TracNet H30, the 60 cm TracNet H60, and the 1 meter TracNet H90.
Our Asia-Pacific headquarters are managed through our office in Singapore. 9 Table of Contents Intellectual Property We currently hold intellectual property rights relating to various aspects of our hardware products, software and services. We believe that our ability to compete effectively depends in part on our ability to protect these intellectual property rights and our proprietary information.
Our Asia-Pacific headquarters are managed through our office in Singapore. 8 Table of Contents Intellectual Property We currently hold intellectual property rights relating to various aspects of our hardware products, software and services. We believe that our ability to compete effectively depends in part on our ability to protect these intellectual property rights and our proprietary information.
Each TracNet H-series terminal includes a belowdeck hub that includes a Wi-Fi router along with support for intelligent automatic channel switching among as many as five discreet Wide Area Networks (WANs), including the integrated VSAT, 5G/cellular, and shore-based Wi-Fi services. Automatic switching is managed based on an array of performance and service cost parameters.
Each TracNet H-series terminal includes a belowdeck hub that includes a Wi-Fi router along with support for intelligent automatic channel switching among as many as five discreet Wide Area Networks (WANs), including the integrated VSAT, 6 Table of Contents 5G/cellular, and shore-based Wi-Fi services. Automatic switching is managed based on an array of performance and service cost parameters.
We also register our trademarks in the United States and other key international markets where we do business. Our patents will expire at various dates between October 2024 and May 2037. We enter into confidentiality agreements with our consultants, key employees, and sales representatives and maintain controls over access to and distribution of our technology, software, and other proprietary information.
We also register our trademarks in the United States and other key international markets where we do business. Our patents will expire at various dates between May 2031 and May 2037. We enter into confidentiality agreements with our consultants, key employees, and sales representatives and maintain controls over access to and distribution of our technology, software, and other proprietary information.
Available tools and reports include, among other features, terminal status, real-time data reporting and the ability to manage data access by application category, configure the KVH 4 Table of Contents terminal, optimize performance with Tracking Avoidance Zones, set data usage alerts and get real-time vessel tracking reports with up to one year of historical data.
Available tools and reports include, among other features, terminal status, real-time data reporting and the ability to manage data access by application category, configure the KVH terminal, optimize performance with Tracking Avoidance Zones, set data usage alerts and get real-time vessel tracking reports with up to one year of historical data.
VSAT data speeds offered by the TracNet systems vary by antenna 6 Table of Contents diameter: TracNet H30 offers maximum speeds of 6/2 Mbps (down/up), TracNet H60 offers maximum speeds of 10/3 Mbps (down/up), and the TracNet H90 offers maximum speeds of 20/3 Mbps (down/up).
VSAT data speeds offered by the TracNet systems vary by antenna diameter: TracNet H30 offers maximum speeds of 6/2 Mbps (down/up), TracNet H60 offers maximum speeds of 10/3 Mbps (down/up), and the TracNet H90 offers maximum speeds of 20/3 Mbps (down/up).
We currently plan to source Eutelsat OneWeb-compatible flat-panel terminals from a third party, and we expect to commence shipments of terminals and service activations in the second quarter of 2024.
We currently plan to source Eutelsat OneWeb-compatible flat-panel terminals from a third party, and we expect to commence shipments of terminals and service activations in the second quarter of 2025.
More recently, SpaceX's Starlink has emerged as a significant competitor with flat- 11 Table of Contents panel, electronically steered array (ESA) terminals and its new LEO network. Other LEO services, such as Eutelsat OneWeb, are also entering the market. In addition, we face some competition from providers of low-speed data services, which include Inmarsat and Iridium Satellite LLC.
More recently, SpaceX’s Starlink has emerged as a significant competitor with flat-panel, electronically steered array (ESA) terminals and its new LEO network. Other LEO services, such as Eutelsat OneWeb, are also entering the market. In addition, we face some competition from providers of low-speed data services, which include Viasat/Inmarsat and Iridium Satellite LLC.
Temporary suspensions of our airtime services typically increase in the fourth and first quarters of each year as boats are placed out of service during the winter months. Competition We encounter intense competition in the markets we serve, and we expect the intensity of competition to continue to increase in the future.
Temporary suspensions of our airtime services typically increase in the fourth and first quarters of each year as boats are placed out of service during the winter months. Competition 10 Table of Contents We encounter intense competition in the markets we serve, and we expect the intensity of competition to continue to increase in the future.
We also manufacture in-motion, stabilized antennas that provide receive-only satellite television services. Product sales accounted for 13% and 19% of our consolidated net sales for 2023 and 2022, respectively. In the global maritime market, we believe that there is significant demand for mobile access to the Internet, operational data, voice services, entertainment content, and satellite television.
We also manufacture in-motion, stabilized antennas that provide receive-only satellite television services. Product sales accounted for 15% and 13% of our consolidated net sales for 2024 and 2023, respectively. In the global maritime market, we believe that there is significant demand for mobile access to the Internet, operational data, voice services, entertainment content, and satellite television.
Our family of marine TracVision products includes the 32 cm diameter TracVision TV1, 37 cm diameter TracVision TV3, 45 cm diameter TracVision TV5, 60 cm diameter TracVision TV6, 81 cm TracVision TV8, and 1 meter TracVision TV10.
Our family of marine TracVision products includes the 37 cm diameter TracVision TV3, 45 cm diameter TracVision TV5, 60 cm diameter TracVision TV6, 81 cm TracVision TV8, and 1 meter TracVision TV10.
In the U.S., many of these matters are regulated by the Federal Communications Commission. 12 Table of Contents As a result of our international operations, we are subject to a number of additional legal requirements, including the U.S. Foreign Corrupt Practices Act, the U.K.
In the U.S., many of these matters are regulated by the Federal Communications Commission. As a result of our international operations, we are subject to a number of additional legal requirements, including the U.S. Foreign Corrupt Practices Act, the U.K.
KVH Team Member Recruitment We work diligently to attract the best available talent from a diverse range of sources to meet the current and future demands of our business. We have established relationships with major universities, professional associations, and industry groups to proactively attract talent. In 2023, we hired 11 professional level team members.
KVH Team Member Recruitment We work diligently to attract the best available talent from a diverse range of sources to meet the current and future demands of our business. We have established relationships with major universities, professional associations, and industry groups to proactively attract talent. In 2024, we hired 15 professional level team members.
For more information, see “Risk Factors – Risks related to government regulation.” KVH Team Demographics KVH team members are essential to the success of KVH. We had 345 team members as of December 31, 2023, including full-time employees, part-time employees, and long-term contractors. The figures in this section provide information as of December 31, 2023.
For more information, see “Risk Factors – Risks related to government regulation.” KVH Team Demographics KVH team members are essential to the success of KVH. We had 260 team members as of December 31, 2024, including full-time employees, part-time employees, and long-term contractors. The figures in this section provide information as of December 31, 2024.
When appropriate, we seek to file patent applications to protect innovations arising from our research, development and design activities. As of December 31, 2023, our patent portfolio included approximately 9 U.S. and foreign issued patents, including utility patents, design patents and others and one pending U.S. patent application.
When appropriate, we seek to file patent applications to protect innovations arising from our research, development and design activities. As of December 31, 2024, our patent portfolio included approximately seven U.S. and foreign issued patents, including utility patents, design patents and others and one pending U.S. patent application.
Together with our airtime services, these products provide an end-to-end solution for offshore mobile connectivity to commercial, leisure, and government customers seeking an integrated hardware and service solution for mobile communications and seamless region-to-region roaming. We manufacture the TracNet and TracPhone terminals and provide 24/7/365 after-sale support.
We also continue to service and support our legacy TracPhone VSAT-only terminals. Together with our airtime services, these products provide an end-to-end solution for offshore mobile connectivity to commercial, leisure, and government customers seeking an integrated hardware and service solution for mobile communications and seamless region-to-region roaming. We manufacture the TracNet and TracPhone terminals and provide 24/7/365 after-sale support.
Our brands include: • AgilePlans® – Connectivity as a Service Program • CommBox™ – data management software for maritime communications • CommBox™ Edge – advanced maritime network optimization and management solution • KVH Elite TM – unlimited HD-quality streaming service for leisure yachts • KVH Link – crew wellbeing content subscription service with delivery by IP-MobileCast • KVH ONE® – global hybrid communication network supporting Internet, VoIP, content delivery, and more • KVH OneCare™ – global services and support for TracNet and TracPhone systems • MOVIElink TM – movie distribution through a variety of means • MUSIClink™ – music and karaoke delivered through a variety of means • NEWSlink™ – maritime news delivery service through a variety of means • OpenNet – delivering KVH VSAT data services to non-KVH Ku-band VSAT terminals • SPORTSlink TM – sporting content delivered through a variety of means • TracNet™ – integrated hybrid two-way communication terminals with VSAT, 5G/LTE, and shore-based Wi-Fi • TracPhone® – two-way VSAT-only satellite communications systems • TracVision® – satellite television systems for vessels and vehicles • TVlink TM – television programming delivered through a variety of means We sell our products directly and through an international network of independent retailers, chain stores, distributors, and service providers as well as to manufacturers of vessels, maritime equipment, and vehicles.
Our brands include: • AgilePlans® – Connectivity as a Service Program • CommBox™ – data management software for maritime communications • CommBox™ Edge – advanced maritime network optimization and management solution • KVH Elite™ – unlimited HD-quality streaming service for leisure yachts • KVH Link – crew wellbeing content subscription service employing over-the-air and secure drive delivery mechanisms • KVH ONE® – global hybrid communication network supporting Internet, VoIP, content delivery, and more • KVH OneCare® – global services and support for TracNet and TracPhone systems • MOVIElink™ – movie distribution through a variety of means • MUSIClink™ – music and karaoke delivered through a variety of means • NEWSlink™ – maritime news delivery service through a variety of means • OpenNet – delivering KVH VSAT data services to non-KVH Ku-band VSAT terminals • TracNet™ – integrated hybrid two-way communication terminals with VSAT, 5G/LTE, and shore-based Wi-Fi • TracPhone® – two-way VSAT-only satellite communications systems • TracVision® – satellite television systems for vessels and vehicles • TVlink™ – television programming delivered through a variety of means We sell our products directly and through an international network of independent retailers, chain stores, distributors, and service providers as well as to manufacturers of vessels, maritime equipment, and vehicles.
Benefits for international employees vary by country. Health and Safety We are committed to protecting the health and safety of our employees and others who enter our facilities. In 2023, KVH’s Occupational Safety and Health Administration (OSHA) total recordable incident rate was 2.2%, which is favorable compared to the 2023 OSHA national average of 2.9%.
Benefits for international employees vary by country. Health and Safety We are committed to protecting the health and safety of our employees and others who enter our facilities. In 2024, KVH’s Occupational Safety and Health Administration (OSHA) total recordable incident rate was 1.1%, which is favorable compared to the 2024 OSHA national average of 2.4%.
The TracPhone V30 is also well-suited to commercial vessels that don’t voyage globally, including fishing boats, tugboats, and offshore service vessels. We continue to offer refurbished 60 cm TracPhone V7-HTS terminals as part of our AgilePlans Connectivity as a Service program. LTE Broadband.
The TracPhone V30 is also well-suited to commercial vessels that don’t voyage globally, including fishing boats, tugboats, and offshore service vessels. We continue to offer refurbished 60 cm TracPhone V7-HTS terminals as part of our AgilePlans Connectivity as a Service program. 5G/Cellular Solutions.
Our customer portal, myKVH, is a secure site that offers KVH customers easy access to technical support, product warranty and user documentation, billing, and our system and network tools.
Our customer portal, myKVH, is a secure site that offers KVH customers easy access to technical support, product warranty and 4 Table of Contents user documentation, billing, and our system and network tools.
M any of the countries where our customers use our products and services have licensing and regulatory requirements for the importation and use of satellite communications and reception equipment, including the use of such equipment in territorial waters, the transmission of satellite signals on certain radio frequencies, the transmission of VoIP services using such equipment, and, in some cases, the reception of certain video programming services.
M any of the countries where our customers use our products and services have licensing and regulatory requirements for the importation and use of satellite and wireless communications and reception equipment, including the certification or type approval of such equipment, the use of such equipment in territorial waters, the transmission of satellite and wireless signals on certain radio frequencies, the carriage of VoIP services using such equipment, and, in some cases, the reception of certain video programming services.
Network and bandwidth configuration are controlled via compact onboard services and both cloud-based and mobile applications. Content Services We offer a variety of value-added services to our maritime customers as well as news content to our hotel customers. The vast majority of these value-added services are subscription-based.
Network and bandwidth configuration are controlled via onboard services and both cloud-based and mobile applications. Content Services We offer a variety of value-added services to our maritime customers. The vast majority of these value-added services are subscription-based.
Overall, our global HTS network currently uses a combination of 178 Ku-band transponders (5 of which we directly contract for) on 22 satellites to provide Ku-band coverage throughout the northern and southern hemispheres. Of the 22 satellites, 6 are considered high-throughput satellites that provide coverage via overlapping high-powered spot beams. Of the 178 Ku-band transponders, 158 are on high-throughput satellites.
Overall, our global HTS network currently uses a combination of 182 Ku-band transponders (5 of which we directly contract for) on 31 satellites to provide Ku-band coverage throughout the northern and southern hemispheres. Of the 31 satellites, 5 are considered high-throughput satellites that provide coverage via overlapping high-powered spot beams. Of the 182 Ku-band transponders, 138 are on high-throughput satellites.
The network infrastructure that we have developed to support our airtime services also supports the delivery of other value-added services, such as our KVH Link content service, with country-specific news, entertainment, music, and other crew welfare content delivered using our IP-MobileCast multicast delivery service.
The network infrastructure that we have developed to support our airtime services also supports the delivery of other value-added services, such as our KVH Link content service, with country-specific news, entertainment, music, and other crew welfare content delivered using our linkHUB OTA (over the air) delivery service.
OneWeb’s network compromises more than 630 satellites in low earth orbit that can deliver enterprise-grade broadband connectivity services. EutelSat OneWeb is rapidly expanding its network and ground 7 Table of Contents infrastructure to meet the needs of maritime’s global requirements.
OneWeb’s network compromises more than 630 satellites in low earth orbit that can deliver enterprise-grade broadband connectivity services. Eutelsat OneWeb is expanding its network and ground infrastructure to meet maritime's global requirements.
In the marine market for voice, fax, data, and Internet communications equipment, we compete primarily with Intellian and Cobham SATCOM with regard to parabolic antennas. The emergence of ESA terminals from companies like Starlink has significantly increased competitive pressure on traditional parabolic antennas.
In the marine market for voice, fax, data, and Internet communications equipment, we compete primarily with Intellian and Cobham satcom with regard to parabolic antennas. The emergence of ESA terminals from companies like Starlink has significantly increased competitive pressure on traditional parabolic antennas. In the markets for media content, we compete primarily with Swank Motion Pictures, Baze Technology, and PressReader.
On the services side of our business, sales of our global high-throughput satellite (HTS) airtime service accounted for 81% and 75% of our consolidated net sales for 2023 and 2022, respectively. Sales of content services accounted for 3% and 4% of our consolidated net sales for 2023 and 2022, respectively.
On the services side of our business, sales of our global high-throughput satellite (HTS) airtime service accounted for 71% and 81% of our consolidated net sales for 2024 and 2023, respectively. Sales of content services accounted for 3% of our consolidated net sales for both 2024 and 2023.
We currently offer three terminals compatible with Iridium Certus service – the Thales VesseLINK 200 (data speeds as fast as 176/176 Kbps down/up), the VesseLINK 700 (data speeds as fast as 704/352 Kbps down/up), and the Cobham Sailor 4300 (data speeds as fast as 704/176 Kbps down/up), which is only available to AgilePlans subscribers.
We currently offer three terminals compatible with Iridium Certus service – the Thales VesseLINK 200 (data speeds as fast as 176/176 Kbps down/up), the Thales VesseLINK 700 (data speeds as fast as 704/352 Kbps down/up), and the Cobham Sailor 4300 (data speeds as fast as 704/176 Kbps down/up).
The continuity of our employee base is important to the success of our business, as our employees have deep knowledge of our products and are critical to the services that we provide to our customers. Inclusion and Diversity KVH strives to recruit and retain a diverse and inclusive workforce.
The continuity of our employee base is important to the success of our business, as our employees have deep knowledge of our products and are critical to the services that we provide to our customers. Inclusion and Diversity KVH strives to recruit and retain a diverse and inclusive workforce in a manner consistent with federal and state anti-discrimination laws.
Introduction We are a leading provider of innovative and technology-driven connectivity solutions to primarily maritime customers globally. We provide global high-speed Internet and Voice over Internet Protocol (VoIP) services via satellite to mobile users at sea and on land.
Introduction We are a leading global provider of innovative and technology-driven connectivity solutions to primarily maritime commercial, leisure, and military/government customers. We provide global high-speed Internet and Voice over Internet Protocol (VoIP) services via satellite and integrated 5G/LTE cellular communications to mobile users at sea and on land.
We are also a leading provider of commercially licensed entertainment, including news, sports, music, and movies, to commercial customers in the maritime and hotel markets, along with supplemental value-added cybersecurity, email, and crew internet services.
We are also a leading provider of commercially licensed entertainment, including movies, television programming, news, and music, to commercial customers in the maritime market, along with supplemental value-added network and bandwidth management cybersecurity, email, and crew Internet services.
We currently manufacture our products in Middletown, Rhode Island, and we generate revenues in the United States and various international locations, including primarily Singapore, Canada, South American countries, European Union countries and other European countries, and countries in Africa, the Middle East and Asia/Pacific, including India. As described below, we are winding down our product manufacturing operations in 2024.
We currently manufacture our products in Middletown, Rhode Island, and we generate revenues in the United States and various international locations, including primarily Singapore, Canada, South American countries, European Union countries and other European countries, and countries in Africa, the Middle East and Asia/Pacific, including India.
Our leisure marine business is highly seasonal, and seasonality can also impact our commercial marine business. Historically, we have generated the majority of our marine leisure product revenues during the first and second quarters of each year, and these revenues typically decline in the third and fourth quarters of each year.
Historically, we have generated the majority of our marine leisure product revenues during the first and second quarters of each year, and these revenues typically decline in the third and fourth quarters of each year.
Traditional satellite TV products and services in the marine market also face pressure from the rising use of streaming services, which are more practical in marine applications following the launch of high-speed, lower-cost LEO services.
In the marine market for satellite TV equipment, we compete primarily with Intellian, Cobham satcom and Raymarine (Intellian-made). Traditional satellite TV products and services in the marine market also face pressure from the rising use of streaming services, which are more practical in marine applications following the launch of high-speed, lower-cost LEO services.
In addition, we offer a 37 cm parabolic VSAT-only TracPhone V30 antenna and support our legacy family of other VSAT-only terminals marketed under the TracPhone brand and using our global HTS network.
In addition, we offer a 37 cm parabolic VSAT-only TracPhone V30 antenna and support our legacy family of other VSAT-only terminals marketed under the TracPhone brand and using our global HTS network. We are also an authorized reseller of airtime and terminals supporting the Starlink and OneWeb LEO services.
Our TracVision R1 delivers standard-definition DIRECTV and high-definition DISH network service through a parabolic 32 cm diameter antenna. Our TracVision A9 uses hybrid phased-array antenna technology to provide in-motion reception of satellite TV programming in the continental United States using either the standard-definition DIRECTV or high-definition DISH Network services.
Land Mobile Product Our TracVision A9 uses hybrid phased-array antenna technology to provide in-motion reception of satellite TV programming in the continental United States using either the standard-definition DIRECTV or high-definition DISH Network services.
AgilePlans customers may also choose to add a Starlink terminal and data plan to a new or existing AgilePlans subscription. We offer AgilePlans customers a variety of airtime data plans with varying data allotments and fixed data usage levels with our exclusive dual-channel configuration, with dual channel airtime plans delivering both a high-speed channel and an unlimited use data channel.
We offer AgilePlans customers a variety of airtime data plans with varying data allotments and fixed data usage levels with our exclusive dual-channel configuration, with dual channel airtime plans delivering both a high-speed channel and an unlimited use data channel.
KVH Team Member Headcount Category Number at December 31, 2023 Number After February 2024 Reduction in Force Full-Time Employees 325 252 Part-Time Employees 13 11 Long-term Contractors 7 7 Total 345 270 Our team members are directly responsible for the creation, development, manufacture, marketing, sale, repair and support of our products and services.
KVH Team Member Headcount Category Number at December 31, 2024 Full-time employees 247 Part-time employees 6 Long-term contractors/consultants 7 Total 260 Our team members are directly responsible for the creation, development, manufacture, marketing, sale, repair and support of our products and services.
Among these value-added services are an enterprise-grade Managed Firewall powered by industry leader Fortinet, a cloud email system for commercial fleets and seafarers, crew Internet support, real-time vessel tracking, our KVH Link content service, and CommBox Edge. We expect that the majority of these services will also be available through third-party antennas connected to our network.
Among these value-added services are an enterprise-grade Managed Firewall powered by industry leader Fortinet, a cloud email system for commercial fleets and seafarers, crew Internet support, real-time vessel tracking, our KVH Link content service, and CommBox Edge.
Government Regulation Our manufacturing operations are subject to various laws governing the protection of the environment and our employees. These laws and regulations are subject to change, and any such change may require us to improve our technologies, incur expenditures, or both, in order to comply with such laws and regulations.
These laws and regulations are subject to change, and any such change may require us to improve our technologies, incur expenditures, or both, in order to comply with such laws and regulations.
It also supports Ku-band DISH Network in the United States, select portions of the Caribbean, and Bell TV in Canada. It includes an IP-enabled antenna control unit and, as with the TracVision TV-series, the TracVision UHD7 offers configuration, status, and service capabilities via the optional, free TracVision application for use on iOS and Android mobile devices.
It includes an IP-enabled antenna control unit and, as with the TracVision TV-series, the TracVision UHD7 offers configuration, status, and service capabilities via the optional, free TracVision application for use on iOS and Android mobile devices.
We expect to increase our inventory substantially as we ramp up production during the first and second quarters of 2024 in order to generate a targeted amount of inventory of maritime satellite connectivity and satellite television terminals to meet anticipated demand, as we will then cease substantially all manufacturing activity at the Middletown facility by the end of the second quarter of 2024.
In addition, we have increased our inventory substantially as we ramp up production in order to generate a targeted amount of inventory of maritime satellite connectivity and satellite television terminals to meet anticipated demand, as we intend to cease substantially all manufacturing activity at the Middletown, Rhode Island facility by the end of 2025.
Our KVH Media Group, which is based in the United Kingdom, distributes commercially licensed entertainment, including news, sports, and movies to commercial customers in the maritime and hotel markets, along with supplemental value-added services. Sales from KVH Media Group are included as part of content service sales.
Our KVH Media Group, which is based in the United Kingdom, distributes commercially licensed entertainment, including movies, television programming, news, music and other crew-focused content to customers in the commercial maritime sector. Sales from KVH Media Group are included as part of content service sales.
Our TracNet and TracPhone systems are designed to support an expanding suite of value-added services that both increase the capabilities of our customers' systems as well as generate additional recurring revenue for KVH.
We design and offer an array of value-added services that both increase the capabilities of our customers’ systems as well as generate additional recurring revenue for KVH.
We currently expect to continue to offer our products into 2025 as part of our plan to gradually transition customers to third-party hardware.
We currently expect to continue to offer KVH-manufactured VSAT and satellite TV terminals through 2025 and potentially into 2026 as part of our plan to gradually transition customers to third-party hardware.
These products are compatible with Ku-band SDTV and HDTV programming as well as high-powered regional satellite TV services around the globe, based on the available signal strength and antenna size requirements. TracVision TV-series products also offer configuration, status, and service capabilities via the optional, free TracVision application for use on iOS and Android mobile devices.
These products are compatible with Ku-band SDTV and HDTV programming as well as high-powered regional satellite TV services around the globe, based on the available signal strength and antenna size requirements.
Please see Notes 1 and 14 to our accompanying audited consolidated financial statements for additional information. 3 Table of Contents Our Business We provide integrated, end-to-end services, software, and hardware that support our customers’ need for access to the Internet, VoIP, operations content, and entertainment services while on the move.
KVH is a Delaware corporation formed in 1985. 3 Table of Contents Our Business We provide integrated, end-to-end services, software, and hardware that support our customers’ need for access to the Internet, VoIP, operations content, and entertainment services while on the move.
We expect to continue to facilitate customer transition to third-party hardware products compatible with our mobile satellite communications services.
We expect to continue to facilitate customer transition to third-party hardware products compatible with our mobile satellite communications services. Our leisure marine business is highly seasonal, and seasonality can also impact our commercial marine business.
Unlike our VSAT Broadband airtime, where we control and sell the airtime, we purchase Starlink, Inmarsat, Iridium, and regional cellular data directly from these companies and resell it to our customers. We anticipate using a similar arrangement with Eutelsat OneWeb upon launch of the global service, currently expected to occur in the second quarter of 2024. Maritime Satellite TV .
Unlike our VSAT Broadband airtime, where we control and sell the airtime, we purchase Starlink, OneWeb, Viasat/Inmarsat, Iridium, and regional cellular data directly from these companies and resell it to our customers. Maritime Satellite TV .
Among our 41 key executive leaders and most critical individual technology contributors, our turnover rate was 5% in 2023. The average length of employee service is 10.5 years.
Among our 6 executive leaders and most critical individual technology contributors, our turnover rate in 2024 was 50%, all of which was related to our reduction-in-force. The average length of employee service is 9 years.
Satellite Internet and Phone. Our TracNet hybrid terminals offer an end-to-end, multichannel connectivity solution. Every TracNet terminal includes an integrated Ku-band VSAT antenna, high-efficiency 5G/LTE cellular antenna, and high-powered Wi-Fi bridge for connections to shore-based Wi-Fi channels. TracNet systems offer intelligent hybrid channel switching based on factors such as service availability, costs, and the quality of data transfer.
Satellite Internet and Phone. Our TracNet hybrid terminals (TracNet H-series) offer an end-to-end, multichannel connectivity solution. Every TracNet H-series terminal includes an integrated Ku-band VSAT antenna, high-efficiency 5G/LTE cellular antenna, and high-powered Wi-Fi bridge for connections to shore-based Wi-Fi channels. These same cellular and Wi-Fi technologies are also integral components of our TracNet Coastal products.
Our "news from home" digital newspaper service includes more than 100 daily newspapers in more than 20 languages. The digital content can be printed onboard or viewed on a TV, tablet, smartphone, or laptop.
For movie and television content, we are an approved distributor of licensed content for certain Hollywood, Bollywood, and independent studios worldwide. Our "news from home" digital newspaper service includes more than 100 daily newspapers in more than 20 languages. The digital content can be printed onboard or viewed on a TV (via a set-top box), tablet, smartphone, or laptop.
Whenever practical, we seek to establish multiple sources for the purchase of raw materials, components and services to achieve competitive pricing, maintain flexibility, reduce tariff exposure, and protect against supply disruption. When possible, we employ a company-wide procurement strategy designed to reduce the purchase price of materials, purchased components and services.
From time to time the cost and availability of materials and services is affected by the demands of other industries, as well as other factors. Whenever practical, we seek to establish multiple sources for the purchase of raw materials, components and services to achieve competitive pricing, maintain flexibility, reduce tariff exposure, and protect against supply disruption.
We manufacture, warehouse and distribute our products at our facilities in Middletown, Rhode Island. Our manufacturing processes are controlled by an ISO 9001:2015-certified quality standards program. Raw Materials, Components and Services We purchase raw materials and most of the components used in our various manufacturing processes, such as printed circuit boards, injection-molded plastic parts, machined metal components, connectors and housings.
We manufacture, warehouse and distribute our products at our facilities in Middletown, Rhode Island. Our manufacturing processes are controlled by an ISO 9001:2015-certified quality standards program.
The TracVision A9 stands approximately five inches high and mounts either to a vehicle’s roof rack or directly to the vehicle’s roof, making it practical for use aboard minivans, SUVs and other passenger vehicles. 8 Table of Contents Sales, Marketing and Support Our sales, marketing, and support efforts target markets that are substantial and complex, and require, in many cases, networks of intermediaries, such as dealers, distributors, airtime service providers, and manufacturers’ representatives, to reach our end-user customers.
Sales, Marketing and Support Our sales, marketing, and support efforts target markets that are substantial and complex, and require, in many cases, networks of intermediaries, such as dealers, distributors, airtime service providers, and manufacturers’ representatives, to reach our end-user customers.
Some of our customers add the Iridium service to expand the geographic coverage of the system or as a backup service. We offer Iridium Certus, a next-generation L-band solution providing pole-to-pole global coverage.
We also offer Iridium Certus, a next-generation L-band solution providing pole-to-pole global coverage.
Our TracNet systems also offer the option to add two additional third-party services and their companion terminals to serve as alternate primary or backup services. We also continue to service and support our legacy TracPhone VSAT-only terminals.
TracNet H-series and Coastal systems offer intelligent hybrid channel switching based on factors such as service availability, costs, and the quality of data transfer. Our TracNet H-series and Coastal systems also offer the option to add two additional third-party services and their companion terminals to serve as alternate primary or backup services.
We expect to continue to facilitate customer transition to third-party hardware products compatible with our mobile satellite communications services. We also plan to continue to conduct maintenance, service, warehousing, shipping and receiving activities at the Middletown location. Airtime Services We provide subscription plans that enable customers to obtain Internet and VoIP airtime services.
Although we currently plan to continue to conduct maintenance, service, warehousing, shipping and receiving activities at the Middletown, Rhode Island location, we are assessing alternate locations where we can provide ongoing support. Airtime Services We provide subscription plans that enable customers to obtain Internet and VoIP airtime services.
For our legacy TracPhone systems, we offer CommBox, a ship-to-shore network management product that comprises shipboard hardware, a KVH-hosted or privately-owned shore-based hub, and a suite of software applications. Our CommBox offerings are generally integrated into the majority of our VSAT product offerings. We do not generate significant revenue from sales of standalone CommBox hardware.
TracNet Coastal provides global cellular connectivity with easy integration and management of additional WAN connections. Other Marine Solutions. For our legacy TracPhone systems, we offer CommBox, a ship-to-shore network management product that comprises shipboard hardware, a KVH-hosted or privately-owned shore-based hub, and a suite of software applications.
In addition, we purchase certain services, predominantly networking and mobile broadband services, to support the delivery of our solutions. The materials, molds and dies, subassemblies and components purchased from other manufacturers, and other materials and supplies used in our manufacturing processes have generally been available from a variety of sources.
The materials, molds and dies, subassemblies and components purchased from other manufacturers, and other materials and supplies used in our manufacturing processes have generally been available from a variety of sources. We believe there are a number of acceptable vendors for the components we purchase. We regularly evaluate both domestic and foreign suppliers for quality, dependability and cost effectiveness.
We have also introduced CommBox Edge, a next-generation network and bandwidth management system and related services through our maritime distribution agreement with Kognitive Networks. We also offer Iridium OpenPort service to be used in conjunction with our VSAT service.
Our CommBox offerings are generally integrated into the majority of our VSAT product offerings. We do not generate significant revenue from sales of standalone CommBox hardware. We have also introduced CommBox Edge, a next-generation network and bandwidth management system and related services through our maritime distribution agreement with Kognitive Networks.
The linkHUB unit allows for a digital rights managed entertainment service without the need for a TracPhone or TracNet terminal. Customers that subscribe to one of our entertainment packages generally receive a variety of movie and television content that is cached locally onboard.
KVH Media Group holds the rights to allow non-theatrical exhibitions of this content aboard commercial ships for viewing by crew. Customers that subscribe to one of our entertainment packages generally receive a variety of movie and television content that is cached locally onboard.
Maritime Products In the marine market, we currently offer a range of mobile satellite TV and communications products. As noted above, we are winding down our product manufacturing operations at our Middletown, Rhode Island location and expect to cease substantially all manufacturing activity by the end of the second quarter of 2024.
As noted above, we are winding down our product manufacturing operations at our Middletown, Rhode Island location and ceased substantial manufacturing activity in late 2024. We expect to continue to facilitate customer transition to third-party hardware products compatible with our mobile satellite communications services.
Our TracVision HD-series satellite TV antennas are designed to offer a high-definition TV experience comparable to that available to a home DIRECTV HDTV subscriber. Our TracVision UHD7 uses a 60 cm diameter satellite TV antenna to receive signals from two DIRECTV Ka-band satellites and one DIRECTV Ku-band satellite simultaneously.
The TracVision UHD7 uses a 60 cm diameter satellite TV antenna to receive signals from two DIRECTV Ka-band satellites and one DIRECTV Ku-band satellite simultaneously. It also supports Ku-band DISH Network in the United States, select portions of the Caribbean, and Bell TV in Canada.
Our current research and development activities relate to cellular product and service development, enhancing our VSAT product lines with new features desired by our customers, and integrating available and emerging non-geostationary satellite orbit (NGSO) products and services, specifically Starlink and OneWeb, into our overall maritime offering.
Our current research and development activities relate to cellular products and value-added services supporting platforms and emerging non-geostationary satellite orbit (NGSO) products and services, specifically Starlink and OneWeb, and efforts to integrate these into our overall maritime offering. 11 Table of Contents Government Regulation Our manufacturing operations are subject to various laws governing the protection of the environment and our employees.
In May 2023, we announced a new program for leisure and commercial vessels: the KVH ONE OpenNet Program.
Along with our Ku-band HTS network, we offer airtime services via other networks, such as Starlink and Iridium. We began making Eutelsat OneWeb services available for commercial and leisure vessel deployment starting in January 2025. In May 2023, we announced a new program for leisure and commercial vessels: the KVH ONE OpenNet Program.
Removed
We are headquartered in Middletown, Rhode Island, with active operations in Denmark, the United Kingdom, the Philippines, and Singapore. KVH is a Delaware corporation formed in 1985. We operate as one reportable segment as a result of the sale of our inertial navigation business on August 9, 2022.
Added
We are winding down our product manufacturing operations and currently plan to discontinue the majority of our capital-intensive manufacturing activities by the end of 2025. We are headquartered in Middletown, Rhode Island, with active operations in Denmark, the United Kingdom, the Philippines, and Singapore.
Removed
We are an authorized reseller of airtime and terminals supporting the Starlink LEO service, and we also have a distribution agreement in place with Eutelsat OneWeb for its LEO services.
Added
In addition to satellite communications-based services, we also offer TracNet Coastal, a 5G/cellular and Wi-Fi based solution intended for use along coastal waterways with cellular service offered in more than 130 countries.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeMarket or competitive changes, such as a continuation of the decline in demand for our TracVision products that we experienced in 2023, could lead to future charges for excess or obsolete inventory, especially if we are unable to appropriately adjust the supply of material from our vendors, as we were unable to do in 2023. 19 Table of Contents Risks related to our dependence on third parties and third-party technology Our mobile satellite communications solutions currently depend on third-party satellite services, gateway teleports and terrestrial networks provided by third parties, and a disruption in those services could adversely affect sales.
Biggest changeMarket or competitive changes, such as a continuation of the decline in demand for our hardware products that we experienced in 2023 and 2024, could lead to future charges for excess or obsolete inventory or losses on fixed assets, especially if we are unable to appropriately adjust the supply of material from our vendors, as we were unable to do in 2023.
To the extent that the mix of airtime services we sell shifts away from VSAT services, our gross profit dollars may decline, perhaps materially, if we are unable to significantly increase revenue on non-VSAT airtime services, which will reduce our profitability. Risks related to our operations Our planned transition to reliance on third-party hardware products may be unsuccessful.
To the extent that the mix of airtime services we sell shifts away from VSAT services, our gross profit dollars will decline, perhaps materially, if we are unable to significantly increase revenue on non-VSAT airtime services, which will reduce our profitability. Risks related to our operations Our planned transition to reliance on third-party hardware products may be unsuccessful.
We may not be able to pass along any of these cost increases to our customers, and customers may not wait for our products to become available. These disruptions in our supply chain could worsen, which could delay delivery of our products and services and adversely affect our revenue and results of operations.
We may not be able to pass along any of these cost increases to our customers, and customers may not wait for products to become available. These disruptions in our supply chain could worsen, which could delay delivery of products and services and adversely affect our revenue and results of operations.
If customers become dissatisfied with the pricing, service, availability, programming or other aspects of any of these satellite services, or if any one or more of these services becomes unavailable for any reason, we could suffer a substantial decline in sales of the satellite products or services we offer.
If customers become dissatisfied with the pricing, service, availability, programming or other aspects of any of these satellite services, or if any one or more of these services becomes unavailable for any reason, we could suffer a substantial decline in sales of the satellite services or products we offer.
In addition, the unexpected failure of a satellite could disrupt the availability of programming and services, which could reduce the demand for, or customer satisfaction with, the products and services we offer. We depend on cloud-based data services operated by third parties, and any disruption in the operation of these services could harm our business.
In addition, the unexpected failure of a satellite could disrupt the availability of programming and services, which could reduce the demand for, or customer satisfaction with, the services or products we offer. We depend on cloud-based data services operated by third parties, and any disruption in the operation of these services could harm our business.
In addition, many of the countries where our customers use our products and services have licensing and regulatory requirements for the importation and use of satellite communications and reception equipment, including the use of such equipment in territorial waters, the transmission of satellite signals on certain radio frequencies, the transmission of VoIP services using such equipment and the reception of certain video programming services.
In addition, many of the countries where our customers use our services and products have licensing and regulatory requirements for the importation and use of satellite communications and reception equipment, including the use of such equipment in territorial waters, the transmission of satellite signals on certain radio frequencies, the transmission of VoIP services using such equipment and the reception of certain video programming services.
We exercise little or no control over these third-party providers of satellite, teleport, and terrestrial network services, which increases our vulnerability to problems with the services they provide. Due to our reliance on these service providers, when problems occur, it may be difficult to identify the source of the problem.
We exercise little or no control over these third-party providers of satellite, teleport, and terrestrial network services, which increases our vulnerability to problems with the services and coverage they provide. Due to our reliance on these service providers, when problems occur, it may be difficult to identify the source of the problem.
If we were to experience a resurgence in demand for our current products, we may be unable to restart internal production or to engage a third party to reliably manufacture and deliver them on time and at an affordable cost.
If we were to experience a resurgence in demand for our products, we may be unable to restart internal production or to engage a third party to reliably manufacture and deliver them on time and at an affordable cost.
We generally do not carry significant inventories of product components, which could magnify the impact of the loss of a supplier. If we must use a new source of supply, we could face unexpected manufacturing difficulties and loss of product performance or reliability.
We generally do not carry significant inventories of products or components, which could magnify the impact of the loss of a supplier. If we must use a new source of supply, we could face unexpected manufacturing difficulties and loss of product performance or reliability.
Many of our competitors are well-established companies that have substantially greater financial, managerial, technical, marketing, personnel, and other resources than we do, which may help them to compete more effectively against us. We depend on sole or limited source suppliers, and any disruption in supply could impair our ability to deliver our products on time or at expected cost.
Some of our competitors are well-established companies that have substantially greater financial, managerial, technical, marketing, personnel, and other resources than we do, which may help them to compete more effectively against us. We depend on sole or limited source suppliers, and any disruption in supply could impair our ability to deliver our products on time or at expected cost.
Any of these changes could be disruptive to our business and could result in significant expense, including losses on any asset disposition or divestiture, accounting charges for any inventory or technology-related write-offs or any workforce reduction costs, such as those described in earlier risk factors. We could incur significant transaction costs, including for potential transactions that do not proceed.
Any of these changes could be disruptive to our business and could result in significant expense, including losses on any asset disposition or divestiture, accounting charges for any inventory or technology-related write-offs or any workforce reduction costs, such as those described elsewhere in risk factors. We could incur significant transaction costs, including for potential transactions that do not proceed.
Suppliers might change or discontinue key components, which could require us to modify our product designs or cease production. In general, we do not have written long-term supply agreements with our suppliers but instead buy components through purchase orders, which expose us to potential price increases and termination of supply without notice or recourse.
Suppliers might change or discontinue products or key components, which could require us to modify our product designs or cease production or sales. In general, we do not have written long-term supply agreements with our suppliers but instead buy products and components through purchase orders, which expose us to potential price increases and termination of supply without notice or recourse.
Our results of operations can fluctuate for many reasons, including changes in demand for our products and services; delays in order fulfillment, including as a result of shortages of components and raw materials; the mix of products and services we sell, including the mix of fixed rate and metered contracts for airtime services; our ability to manufacture, test and deliver products in a timely and cost-effective manner; the timing of new service and product introductions by us or our competitors; the scope and success of our investments in research and 15 Table of Contents development; expenses incurred in pursuing acquisitions and investments; expenses incurred in expanding, maintaining, or improving our global HTS network; market and competitive pricing pressures; unanticipated charges or expenses, such as the aggregate $6.0 million impairment charges to goodwill and long-lived assets we recorded in the third quarter of 2023; the $5.2 million charge related to the inventory write-down, the $3.6 million provision for excess purchase order obligations and the $2.1 million charge for the discontinuation of a project for implementing a new manufacturing-centric accounting system that we recorded in the fourth quarter of 2023; expenses incurred in responding to stockholder activism; general economic climate; seasonality of pleasure boat and recreational vehicle usage; and the impact of supply chain disruptions.
Our results of operations can fluctuate for many reasons, including the impact of competition and resulting changes in demand for our products and services; delays in order fulfillment, including as a result of shortages of components and raw materials; the mix of services and products we sell, including the mix of fixed rate and metered contracts for airtime services; our ability to manufacture, test and deliver products in a timely and cost-effective manner; the timing of new service and product introductions by us or our competitors; the scope and success of our investments in research and development; expenses incurred in pursuing acquisitions and investments; expenses incurred in expanding, maintaining, or improving our global HTS network; market and competitive pricing pressures; unanticipated charges or expenses, such as the aggregate $6.0 million impairment charges to goodwill and long-lived assets we recorded in the third quarter of 2023; the $1.1 million impairment charges to long-lived assets we recorded in the third quarter of 2024; the $5.2 million charge related to an inventory write-down, the $3.6 million provision for excess purchase order obligations and the $2.1 million charge for the discontinuation of a project for implementing a new manufacturing-centric accounting system that we recorded in the fourth quarter of 2023; expenses incurred in responding to stockholder activism; general economic climate; seasonality of pleasure boat and recreational vehicle usage; and the impact of supply chain disruptions.
Any interruption in supply could impair our ability to deliver our products until we identify and qualify a new source of supply, which could take several weeks, months or longer and could increase our costs significantly.
Any interruption in supply could impair our ability to deliver the products we sell until we identify and qualify a new source of supply, which could take several weeks, months or longer and could increase our costs significantly.
For example, in 2023, we recorded a $5.2 million inventory write-down charge and a $3.6 million charge for excess purchase order obligations, both relating to the reduced demand for our hardware products, which has led to the staged wind-down of our manufacturing activities at our facility in Middletown, Rhode Island in 2024.
For example, in 2023, we recorded a $5.2 million inventory write-down charge and a $3.6 million charge for excess purchase order obligations, both relating to the reduced demand for our hardware products, which led to the staged wind-down of our manufacturing activities at our facility in Middletown, Rhode Island that we began in 2024.
To manage changes in our business effectively, we must, among other things, successfully complete the wind-down of our manufacturing operations, including correctly estimating the number of units to produce; secure appropriate satellite capacity to match demand for airtime services; manage our inventory more effectively, particularly in light of the substantial provision for excess and obsolete inventory that we recorded in the fourth quarter of 2023; effectively manage our working capital; ensure robust cybersecurity protection of 16 Table of Contents Company and customer data and systems; and ensure that our procedures and internal controls are revised and updated to remain effective for our smaller workforce and the reduced size and scale of our business operations.
To manage changes in our business effectively, we must, among other things, successfully complete the wind-down of our manufacturing operations, including correctly estimating the number of units to produce; secure appropriate satellite capacity to match demand for airtime services; manage our inventory more effectively, particularly in light of the substantial provision for excess and obsolete inventory that we recorded in the fourth quarter of 2023; effectively manage our working capital; ensure robust cybersecurity protection of KVH and customer data and systems; and ensure that our procedures and internal controls are revised and updated to remain effective for our smaller workforce and the reduced size and scale of our business operations.
The U.S. has imposed tariffs on certain foreign goods and may increase tariffs or impose new ones, and certain foreign governments have retaliated and may continue to do so. We derive a majority of our revenues from international sales, which makes us especially vulnerable to increased tariffs.
The U.S. has imposed significant tariffs on a wide range of foreign goods and may continue to increase tariffs or impose new ones, and certain foreign governments have retaliated and may continue to do so. We derive a majority of our revenues from international sales, which makes us especially vulnerable to increased tariffs.
Ongoing or new trade wars or other governmental action related to tariffs or international trade agreements or policies could reduce demand for our products and services, 21 Table of Contents increase our costs, reduce our profitability, adversely impact our supply chain or otherwise have a material adverse effect on our business and results of operations.
Ongoing or new trade wars or other governmental action related to tariffs or international trade agreements or policies could reduce demand for our services and products, increase our costs, reduce our profitability, adversely impact our supply chain or otherwise have a material adverse effect on our business and results of operations.
Accordingly, the loss of one or more of our executive officers or key employees could have a material adverse effect on our business. If we cannot effectively manage changes in our business and continue to attract and retain skilled personnel, our business may suffer.
Accordingly, the loss of one or more of our executive officers or key employees could have a material adverse effect on our business. 15 Table of Contents If we cannot effectively manage changes in our business and continue to attract and retain skilled personnel, our business may suffer.
Temporary suspensions of our airtime services typically increase in the fourth and first quarters of each year as boats are placed out of 17 Table of Contents service during winter months. Our leisure marine business is also significantly affected by the weather.
Temporary suspensions of our airtime services typically increase in the fourth and first quarters of each year as boats are placed out of service during winter months. Our leisure marine business is also significantly affected by the weather.
These laws and regulations are continually changing, making compliance complex. We incur significant costs identifying and maintaining compliance with applicable licensing and regulatory requirements. Our training and compliance programs and our other internal control policies may be insufficient to protect us from acts committed by our employees, agents or third-party contractors.
These laws and regulations are continually changing, making compliance complex. We incur significant costs identifying and maintaining compliance with applicable licensing and regulatory requirements. Our training and compliance programs and our other internal control policies 22 Table of Contents may be insufficient to protect us from acts committed by our employees, agents or third-party contractors.
For example, in February 2024 we announced a staged wind-down of our manufacturing operations and a related reduction-in-force of 75 employees, as a result of which we have incurred or expect to incur aggregate charges of approximately $14.2 million, consisting of a $5.2 million non-cash charge related to the inventory write-down, a $3.6 million provision for excess purchase order obligations, approximately $3.3 million of severance charges, and $2.1 million charge for the discontinuation of a project for implementing a new manufacturing-centric accounting system.
For example, in February 2024 we announced a staged wind-down of our manufacturing operations and a related reduction-in-force of 75 employees, as a result of which we have incurred aggregate charges of approximately $14.8 million, consisting of a $5.2 million non-cash charge related to an inventory write-down, a $3.6 million provision for excess purchase order obligations, approximately $3.9 million of severance charges, and a $2.1 million charge for the discontinuation of a project for implementing a new manufacturing-centric accounting system.
Economic and political conditions in the geographic markets we serve have experienced significant turmoil over the last several years, including a potential global recession, slow economic activity, war and refugee crises in the Middle East and Europe, tight credit markets, inflation and deflation concerns, increased interest rates, low consumer confidence, limited capital spending, adverse business conditions, terrorist attacks, changes in government priorities, trade wars, anti-globalization movements, efforts to combat climate change, restrictions on commercial fishing, a government shutdown, gridlock from a divided Congress, and liquidity concerns.
Economic and political conditions in the geographic markets we serve have experienced significant turmoil over the last several years, including recent changes in U.S. geopolitical priorities, a potential global recession, slow economic activity, war and refugee crises in the Middle East and Europe, tight credit markets, inflation and deflation concerns, increased interest rates, low consumer confidence, limited capital spending, adverse business conditions, terrorist attacks, changes in government priorities, 20 Table of Contents trade wars, anti-globalization movements, efforts to combat climate change, restrictions on commercial fishing, a government shutdown, gridlock from a divided Congress, and liquidity concerns.
Any failure on the part of third-party service providers to achieve or maintain expected performance levels, stability, and security could harm our relationships with our customers, result in claims for credits or damages, damage our reputation, significantly reduce customer demand for our solution and seriously harm our financial condition and operating results.
Any failure on the part of third-party service providers to achieve or maintain expected performance levels, stability, security, or adequate data service coverage in key regions could harm our relationships with our customers, result in claims for credits or damages, damage our reputation, significantly reduce customer demand for our solution and seriously harm our financial condition and operating results.
A material increase in sales of third-party airtime services and products could reduce our gross margins and our profitability. The gross margin percentage from our VSAT airtime services in most cases significantly exceeds the gross margin percentage from other third-party products and airtime services.
A material increase in sales of third-party airtime services and products could reduce our gross margins and our profitability. The gross margin percentage from our VSAT airtime services in some cases exceeds the gross margin percentage from other third-party products and airtime services.
Accordingly, this strategic transition entails meaningful execution risk, particularly in light of our recently announced reduction-in-force and the resulting loss of experienced employees. The failure to implement a successful transition to a new business model based upon third-party hardware would have a material adverse effect on our business, revenues and results of operations.
Accordingly, this strategic transition entails meaningful execution risk, particularly in light of our reductions-in-force in 2024 and the resulting loss of experienced employees. The failure to implement a successful transition to a new business model based upon third-party hardware would have a material adverse effect on our business, revenues and results of operations.
Our future success will depend in part on the services of our executive officers and key employees. The Company's future success depends to a significant degree on the skills and efforts of our executive officers and key employees.
Our future success will depend in part on the services of our executive officers and key employees. The Company's future success depends to a significant degree on the skills and efforts of our executive officers and key employees. Most of our executive officers and key employees are at-will employees.
We obtain many key components for our products from third-party suppliers, and in some cases we use a single or a limited number of suppliers.
We obtain many products and key components for our products, including Starlink terminals, from third-party suppliers, and in some cases we use a single or a limited number of suppliers.
The costs of 23 Table of Contents compliance with, and other burdens imposed by, such laws and regulations may limit the use and adoption of our services and reduce overall demand.
The costs of compliance with, and other burdens imposed by, such laws and regulations may limit the use and adoption of our services and reduce overall demand.
Research and development is inherently complex and uncertain, and our current and anticipated research and development projects may not achieve the results we seek. The financial resources that we can devote to our research and development efforts may be insufficient to achieve our goals.
Research and development is inherently complex and uncertain, and our current and anticipated research and development projects may not achieve the results we seek. The financial resources that we can devote to our research and development 21 Table of Contents efforts may be insufficient to achieve our goals.
Even if available, delays caused by switching our systems to another service provider, if available, and qualifying this new service provider could materially harm our customer relationships, business, financial condition, and operating results.
Even if available, delays caused by switching our systems to another 19 Table of Contents service provider, if available, and qualifying this new service provider could materially harm our customer relationships, business, financial condition, and operating results.
We are highly dependent on qualified personnel at all levels, including our senior management team and other key technical, operational, managerial and sales and marketing personnel, each of whom would be difficult to replace. Our current reduction-in-force increases our dependence on continuing personnel.
We are highly dependent on qualified personnel at all levels, including our senior management team and other key technical, operational, managerial and sales and marketing personnel, each of whom would be difficult to replace. Our reductions-in-force in 2024 increased our dependence on continuing personnel.
Our executive officers and key employees are at-will employees, competition is intense for senior management, and they could terminate their employment with us at any time. We do not maintain key-person life insurance on any of our personnel.
Competition for senior management is intense, and they could terminate their employment with us at any time. We do not maintain key-person life insurance on any of our personnel.
We plan to discontinue our c apital-intensive manufacturing activities by the end of the second quarter of 2024 and concentrate instead on growing sales of our multi-orbit, multi-channel, integrated communications solutions, including a transition to rely increasingly, and eventually exclusively, on third-party hardware compatible with our solutions.
We plan to discontinue our capital-intensive manufacturing activities by the end of 2025 and concentrate instead on growing sales of our multi-orbit, multi-channel, integrated communications solutions, including a transition to rely increasingly, and eventually exclusively, on third-party hardware compatible with our solutions.
We recorded substantial losses from continuing operations in each of the last four fiscal years (notwithstanding the income we recognized in 2022 from the sale of the inertial navigation business and in 2021 from the forgiveness of the PPP Loan).
We recorded substantial losses in each of the last five fiscal years (notwithstanding the income we recognized in 2022 from the sale of the inertial navigation business and in 2021 from the forgiveness of a PPP loan).
Our efforts may not result in any viable products or may result in products whose performance, features, price or availability may not be attractive to customers or that we cannot manufacture and sell profitably. Our business may suffer if we cannot protect our proprietary technology.
Our efforts may not result in any viable service or product offerings or may result in service or product offerings whose performance, features, price or availability may not be attractive to customers or that we cannot sell profitably. Our business may suffer if we cannot protect our proprietary technology.
These companies may continue to implement price reductions and discounts for both products and services, which have required us to reduce our prices or offer discounts in an effort to maintain or increase our market share. The majority of our customers have no long-term commitment and can switch providers without penalty.
These companies may continue to implement price reductions and discounts for both products and services, which have required us to reduce our prices or offer discounts in an effort to prevent erosion of our market share. The majority of our customers have no long-term commitment and can switch providers without penalty. For example, AgilePlans customers are on month-to-month agreements.
If we are unable to renew these agreements on commercially reasonable terms, or if one or more of our data management service providers is acquired, closes, suffers financial difficulty or is unable to meet our growing capacity needs, we may be required to transfer our data to other services, and we may incur significant costs and service interruptions in connection with doing so, which could harm our reputation with our customers and adversely affect our revenues and results of operations. 20 Table of Contents Our media and entertainment business relies on licensing arrangements with content providers, and the loss of, or changes in, those arrangements could adversely affect our business.
If we are unable to renew these agreements on commercially reasonable terms, or if one or more of our data management service providers is acquired, closes, suffers financial difficulty or is unable to meet our growing capacity needs, we may be required to transfer our data to other services, and we may incur significant costs and service interruptions in connection with doing so, which could harm our reputation with our customers and adversely affect our revenues and results of operations.
We may also choose to dispose of assets or make strategic divestitures, such as the sale of our inertial navigation business in August 2022. These efforts may not succeed in improving profitability.
We may also choose to dispose of assets or make strategic divestitures, such as the sale of our inertial navigation business in August 2022.
Our stock price has historically been volatile. During the period from January 1, 2018 to December 31, 2023, the trading price of our common stock ranged from $4.30 to $15.29.
Our stock price has historically been volatile. During the period from January 1, 2020 to December 31, 2024, the trading price of our common stock ranged from $4.17 to $15.29.
Changes in U.S. trade policy, including changes to existing trade agreements and any resulting changes in international trade relations, may have a material adverse effect on us. The U.S. may continue to alter its approach to international trade, which may impact existing bilateral or multi-lateral trade agreements and treaties with foreign countries.
Changes in U.S. trade policy, including changes to existing trade agreements and any resulting changes in international trade relations, may have a material adverse effect on us. The new presidential administration has introduced dramatic changes to the United States’ approach to international trade, which may adversely impact existing bilateral or multi-lateral trade agreements and treaties with foreign countries.
We cannot predict with any certainty changes in foreign currency exchange rates or the degree to which we can cost-effectively mitigate this exposure. Risks related to intellectual property and technological innovation Our research and development efforts may be unsuccessful. If we are unable to improve our existing solutions and develop new, innovative solutions, our sales and market share may decline.
We cannot predict with any certainty changes in foreign currency exchange rates or the degree to which we can cost-effectively mitigate this exposure. Risks related to intellectual property and technological innovation Our research and development efforts may be unsuccessful.
In the marine market for two-way communications equipment, we compete primarily with Intellian and Cobham SATCOM. In the market for land mobile satellite TV equipment, we compete primarily with King Controls and Winegard Company. In the markets for media content, the KVH Media Group competes primarily with Swank Motion Pictures, Baze Technology, and NewspaperDirect, Inc.
In the marine market for satellite TV equipment, we compete primarily with Intellian, Cobham satcom and Raymarine (Intellian-made). In the marine market for two-way communications equipment, we compete primarily with Intellian and Cobham satcom. In the markets for media content, the KVH Media Group competes primarily with Swank Motion Pictures, Baze Technology, and PressReader.
Changes in U.S. trade policy have created ongoing turmoil in international trade relations, and it is unclear what future actions governments will or will not take with respect to tariffs or other international trade agreements and policies.
Unpredictable and shifting priorities in U.S. trade policy are generating significant turmoil in international trade relations, and it is unclear what future actions governments will or will not take with respect to tariffs or other international trade agreements and policies.
Further, some of the companies that we depend on to supply us with capacity on satellite communications networks may vertically integrate by introducing their own products and services to compete with ours, which might motivate them to stop providing satellite network capacity to us, or to make it available on less favorable terms. 18 Table of Contents The Starlink LEO service continues to adversely impact our business, particularly within the global leisure segment.
Further, some of the companies that we depend on to supply us with capacity on satellite communications networks may vertically integrate by introducing their own products and services to compete with ours, which might motivate them to stop providing satellite network capacity to us, or to make it available on less favorable terms.
Starlink provides the data services for Starlink LEO services, while Eutelsat OneWeb will provide the data connectivity for OneWeb LEO service, which we anticipate providing for maritime use in the second quarter of 2024. We rely on Inmarsat for satellite communications services for our FleetBroadband-compatible and FleetOne-compatible products.
Starlink provides the data services for Starlink LEO services, while Eutelsat OneWeb provides the data connectivity for OneWeb LEO service, which we began providing for maritime use in the January 2025. We rely on Viasat/Inmarsat for satellite communications services for our FleetBroadband-compatible and FleetOne-compatible products.
If this trend continues and we are unable to develop a competitive alternative, it could have a material adverse effect on our revenue, profitability, and cash flow. In the marine market for high-speed Internet, voice, fax, and data services, we compete primarily with Inmarsat, Marlink, Speedcast, Viasat, and Network Innovations, along with smaller, single-hub regional services.
If we are unable to sustain growth, it would have a material adverse effect on our revenue, profitability, and cash flow. In the marine market for high-speed Internet, voice, and data services, we have historically competed primarily with Marlink, Speedcast, Viasat/Inmarsat, and Network Innovations, along with smaller, single-hub regional services to deliver VSAT service.
For example, the global chip shortage and supply chain constraints resulting from the COVID-19 pandemic adversely impacted our ability to deliver products in a timely manner and increased our cost of sales due to rising prices for materials. We estimate that raw material costs exceeded our expectations by approximately $0.8 million in 2023.
For example, the global chip shortage and supply chain constraints resulting from the COVID-19 pandemic adversely impacted our ability to deliver products in a timely manner and increased our cost of sales due to rising prices for materials.
Risks related to government regulation 22 Table of Contents Our international operations complicate our business and require us to comply with multiple regulatory environments. Historically, sales to customers outside the United States have accounted for an increasingly significant portion of our net sales.
Risks related to government regulation Our international operations complicate our business and require us to comply with multiple regulatory environments. Historically, sales to customers outside the United States have accounted for an increasingly significant portion of our net sales. We derived 73% and 68% of our revenues in 2024 and 2023, respectively, from sales to these foreign customers.
We currently plan to cease manufacturing products by the end of the second quarter of 2024. Some of our production processes are complex, and we may be unable to respond rapidly to the loss of the use of our production facility.
We currently plan to discontinue the majority of our capital-intensive manufacturing activities by the end of 2025. Some of our production processes are complex, and we may be unable to respond rapidly to the loss of the use of our production facility.
Competition continued to intensify significantly in 2023, both from companies that seek to compete primarily on price as well as new, emerging NGSO services, such as Starlink and OneWeb, as well as future LEO services such as Kuiper, Telesat, and others.
We are facing significant competition from companies that seek to compete primarily on price as well as new, emerging LEO services, such as Starlink and OneWeb, as well as future LEO services such as Kuiper, Telesat, and others.
In order to maintain and improve our competitive position, generate revenue and achieve sustained profitability, we must grow our airtime subscriber base, reduce our bandwidth costs, and continue to introduce new and improved solutions.
Recent inflation in the prices of goods and services, including wages, has also hampered our ability to improve profitability. In order to maintain and improve our competitive position, generate revenue and achieve sustained profitability, we must continue to grow our airtime subscriber base, reduce our bandwidth costs, and continue to introduce new and improved solutions.
Our mobile satellite communications solutions utilize third-party satellite services. We do not own the satellites that provide two-way satellite communications or the terrestrial networks that interconnect our facilities with the satellite teleports that communicate with the satellites.
We do not own the satellites that provide two-way satellite communications, the terrestrial networks that interconnect our facilities with the satellite teleports that communicate with the satellites, or any other communication network.
Failure to pay required license fees could result in termination of our license rights, penalties and damages. The loss of content could adversely affect the attractiveness of our media and entertainment offerings, which could in turn adversely affect our revenues. Any increase in the cost of content could reduce the profitability of these offerings.
The loss of content could adversely affect the attractiveness of our media and entertainment offerings, which could in turn adversely affect our revenues. Any increase in the cost of content could reduce the profitability of these offerings.
A large portion of our expenses, including expenses for network infrastructure, facilities, equipment, and personnel, are relatively fixed. If our net sales decline or do not grow as we anticipate, we may be unable to maintain or improve our operating margins. Any failure to achieve anticipated net sales could therefore significantly harm our operating results.
A large portion of our expenses, including expenses for network infrastructure, facilities, equipment, and personnel, are relatively fixed. If our net sales continue to decline, our operating margins will also likely decline. Any failure to achieve anticipated net sales could therefore significantly harm our operating results.
Changes in the competitive environment, customer demand, supply chain issues, and the transition to new products may require inventory write-downs. From time to time, we have recorded significant inventory charges and/or inventory write-offs as a result of substantial declines in customer demand.
From time to time, we have recorded significant inventory charges and/or inventory write-offs as a result of substantial declines in customer demand.
A significant number of leisure customers have adopted Starlink systems for both two-way communications as well as streaming, which has impacted both our VSAT Broadband and TracVision businesses. Although our leisure business accounts for less than 15% of our total revenue, competition from Starlink adversely impacted our commercial business as well, particularly our growth in that segment.
A significant number of leisure customers have adopted Starlink systems for both two-way communications as well as streaming, which has impacted both our VSAT Broadband and TracVision satellite TV businesses.
Nonetheless, substantially all of our operations and a significant number of our personnel are located in the United States. Our limited international operations may impair our ability to compete successfully in international markets and to meet the service and support needs of our customers in countries where we have little to no infrastructure.
Our limited international operations may impair our ability to compete successfully in international markets and to meet the service and support needs of our customers in countries where we have little to no infrastructure. Risks associated with our international business activities may increase our costs and require significant management attention.
In addition, lead times for certain components can increase significantly due to imbalances in overall market supply and demand. This, in turn, could limit our ability to satisfy demand for our products and could result in the cancellation of customer orders.
In addition, lead times for certain products or components can increase significantly due to imbalances in overall market supply and demand.
Our quarterly net sales and results of operations could continue to vary significantly for various reasons, many of which are outside our control. For example, product sales declined 48% in the fourth quarter of 2023 compared to the fourth quarter of 2022. You should not rely on quarter-to-quarter comparisons of our results of operations as an indication of future performance.
For example, service sales declined 19.5% in the fourth quarter of 2024 compared to the fourth quarter of 2023, and product sales increased 23.6% in the fourth quarter of 2024 compared to the fourth quarter of 2023. You should not rely on quarter-to-quarter comparisons of our results of operations as an indication of future performance.
Changes in exchange rates, particularly the U.S. dollar against the pound sterling, could lead to the recognition of unrealized foreign exchange losses.
We also have intragroup receivables and liabilities, such as loans, that can generate significant foreign currency effects. Changes in exchange rates, particularly the U.S. dollar against the pound sterling, could lead to the recognition of unrealized foreign exchange losses.
We distribute premium news, television shows, sports, and movies to commercial customers in the maritime and hotel markets. We license this content from third parties on a non-exclusive basis without long-term license agreements. Any content provider could terminate our arrangements without notice or could adversely modify the terms of the arrangement, including price increases.
Our media and entertainment business relies on licensing arrangements with content providers, and the loss of, or changes in, those arrangements could adversely affect our business. We distribute premium movies, television programming, news, and music to commercial customers in the maritime market. We license this content from third parties on a non-exclusive basis without long-term license agreements.
Our inability to accomplish any of these goals could have a material adverse effect on our revenues, profitability and cash flow, and we cannot assure you when, or whether, we will regain sustained profitability. Fluctuations in our quarterly net sales and results of operations could depress the market price of our common stock.
Our inability to accomplish any of these goals could have a material adverse effect on our revenues, profitability and cash flow, and we cannot assure you when, or whether, we will achieve sustained profitability. Our losses may increase if we are unable to effectively adapt to changes in our business and industry.
The market for mobile connectivity solutions is characterized by rapid technological change, frequent new product innovations, changes in customer requirements and expectations, and evolving industry standards. For example, we are facing competition from new LEO networks such as SpaceX’s Starlink and OneWeb.
If we are unable to improve our existing solutions and develop new, innovative solutions, our sales and market share will likely continue to decline. The market for mobile connectivity solutions is characterized by rapid technological change, frequent new product innovations, changes in customer requirements and expectations, and evolving industry standards.
Further, the licenses we obtain are limited in scope, and any violation of the terms of a license could expose us to liability for copyright infringement. We pay license fees based in part on the revenue we generate from sublicenses, and our licensors generally have the right to audit our records.
We pay license fees based in part on the revenue we generate from sublicenses, and our licensors generally have the right to audit our records. Failure to pay required license fees could result in termination of our license rights, penalties and damages.
We derived 68% and 63% of our revenues from continuing operations in the years ended December 31, 2023 and 2022, respectively, from sales to these foreign customers. We have foreign offices in Denmark, the United Kingdom, Singapore, Japan, Norway and the Philippines, as well as a subsidiary in Brazil that manages local sales.
We have foreign offices in Denmark, the United Kingdom, Singapore, Japan, Norway and the Philippines, as well as a subsidiary in Brazil that manages local sales. Nonetheless, substantially all of our operations and a significant number of our key personnel are located in the United States.
Current and future competitors have greater financial resources than we do, enabling them to operate at lower margins to gain market share. We believe increased competition contributed materially to the decrease in our product sales in 2023, including unit sales of our VSAT products, and we expect that this trend will continue in future periods.
We believe increased competition contributed to the decreases in both our service sales and our product sales in 2024, including unit sales of our VSAT products, and we expect that this trend will continue in future periods. Some of our VSAT competitors have already leveraged partnerships amongst themselves in order to capture larger combined market share.
Additionally, we are facing meaningful competition from new NGSO networks such as SpaceX’s Starlink and OneWeb. We also face competition from providers of low-speed data services, which include Inmarsat and Iridium Satellite LLC. In the marine market for satellite TV equipment, we compete primarily with Intellian, Cobham SATCOM and Raymarine (Intellian-made).
Additionally, we are facing meaningful competition from new LEO-focused providers such as SpaceX’s Starlink and an emerging group of smaller providers, such as Clarus, Pivotel and Elcome. We also face competition from providers of low-speed data services, which include Viasat/Inmarsat and Iridium Satellite LLC.
The failure to improve our global HTS service gross margins and unit or subscriber sales would have a material adverse effect on our overall profitability. Our ability to compete in the maritime airtime services market will be impaired if we are unable to provide sufficient service capacity to meet customer demand.
If service sales, including through our AgilePlans subscription model, continue to decline, our service gross margins will also continue to decline. The failure to improve our global HTS service gross margins and unit sales would have a material adverse effect on our overall profitability.
If we fail to make innovations in our existing products and services and reduce the costs of our products and services, our market share will likely decline. Products or services using new technologies, or emerging industry standards, could render our products and services obsolete.
For example, we are facing significant competition from new LEO networks such as Starlink and Eutelsat OneWeb. If we fail to make innovations in our existing services and products, reduce the costs of our services and products, or successfully integrate third-party services and products into our portfolio, our market share will likely continue to decline.
Although our continuing operations were profitable in the fourth quarter of 2022 and second quarter of 2023, we may incur losses in the future as we face increasingly stiff competition and as we increase satellite capacity to handle our growing subscriber base. Recent inflation in the prices of goods and services, including wages, has hampered our ability to improve profitability.
Although our business was profitable in the fourth quarter of 2022 and second quarter of 2023, we may continue to incur losses as we face increasingly stiff competition. Our recent restructuring, workforce reductions and other cost-reduction measures may be insufficient to offset recent and accelerating reductions in our revenues.
For example, during 2022, the U.S. dollar strengthened against certain foreign currencies, which adversely affected revenues reported in U.S. dollars and decreased the reported value of our assets in foreign countries. Conversely, the U.S. dollar weakened against certain foreign currencies during 2023. We also have intragroup receivables and liabilities, such as loans, that can generate significant foreign currency effects.
When the U.S. dollar strengthens against certain foreign currencies, this adversely affects revenues reported in U.S. dollars and decreases the reported value of our assets in foreign countries. Conversely, when the U.S. dollar weakens against certain foreign currencies, this positively affects revenues reported in U.S. dollars and increases the reported value of our assets in foreign countries.
Removed
The cost of our HTS network has increased significantly each year as we have expanded our network to accommodate additional subscriber demand and/or coverage areas. If service sales, including through our AgilePlans subscription model, do not generate the level of revenue that we expect or if those revenues decline, our service gross margins would likely decline.
Added
The traditional geosynchronous satellite communications industry is experiencing significant disruption arising from customers’ rapid transition to less expensive LEO services, including Starlink, as well as increased reliance on other forms of data transmission, including Wi-Fi and cellular data services.
Removed
For example, AgilePlan customers are on month-to-month agreements, and our agreement with the U.S. Coast Guard, a significant government customer, is structured as an indefinite delivery/indefinite quantity contract. The U.S.
Added
Like others in our industry, we are experiencing reduced demand for our traditional satellite communications services and products, which we expect will continue.
Removed
Coast Guard has advised us that it intends to transition its primary satellite service relationship on the vessels we currently serve to Starlink, as a result of which we currently anticipate a material decline in revenue from the Coast Guard starting in the second quarter of 2024.
Added
Although we are adapting to this transition by becoming an authorized reseller of Starlink, OneWeb, and cellular data services and related products, there can be no assurance that we will generate the same level of revenue or gross margin from these sources that we derived from sales of VSAT airtime and related products.
Removed
Some of our VSAT competitors have already leveraged partnerships amongst themselves in order to capture larger combined market share.
Added
Moreover, our VSAT services require a separate infrastructure, which generates certain costs that are relatively fixed for a period of time. As customers transition away from VSAT services, our remaining VSAT services become less profitable and may eventually become insufficiently profitable to continue.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeBoth the Board of Directors and the audit committee receive regular reports regarding material cybersecurity developments. In the case of a security incident, the ISO will report the incident directly to the Chief Executive Officer, Chief Technology Officer, Chief Financial Officer and Senior Vice President, General Counsel & Compliance Officer.
Biggest changeIn the case of a security incident, the ISO will report the incident directly to the Chief Executive Officer, Chief Financial Officer, CISO and Senior Vice President, General Counsel & Compliance Officer. The breach will then be communicated to the audit committee dependent on the materiality of the incident.
Risk Factors – Risks related to our dependence on third parties and third-party technology – Cybersecurity breaches could disrupt our operations, expose us to liability, damage our reputation, and require us to incur significant costs or otherwise adversely affect our financial results." We obtain cybersecurity threat intelligence information from law enforcement reports and our cybersecurity operations providers and communicate this information to relevant stakeholders within the organization.
Risk Factors – Risks related to our dependence on third parties and third-party technology – Cybersecurity breaches could disrupt our operations, expose us to liability, damage our reputation, and require us to incur significant costs or otherwise adversely affect our financial results.” We obtain cybersecurity threat intelligence information from law enforcement reports and our cybersecurity operations providers and communicate this information to relevant stakeholders within the organization.
Because we rely on their greater expertise, our ability to identify and remediate weaknesses or vulnerabilities in the services they provide is necessarily limited. We have not engaged third parties to assess our cybersecurity defenses or to audit our cybersecurity program, nor have we conducted direct or indirect technical evaluations of the information systems that our third-party service providers use.
Because we rely on their greater expertise, our ability to identify and remediate weaknesses or vulnerabilities in the services they provide is limited. We have not engaged third parties to assess our cybersecurity defenses or to audit our cybersecurity program, nor have we conducted direct or indirect technical evaluations of the information systems that our third-party service providers use.
Current prevention measures include, among other things, to the extent we determine to be appropriate for our information systems in light of our financial, personnel and other resources, restricted physical access, restricted systems access, multi-factor authentication, software solutions such as intrusion detection systems, anti-virus, anti-malware, e-mail filtering and quarantining programs, routine system maintenance and updates, backup and recovery systems, routine employee cybersecurity training and testing, and quarterly internal audits.
Current prevention measures include, among other things, to the extent we determine to be appropriate for our information systems in light of our financial, personnel and other resources, restricted physical access, restricted systems access, multi-factor authentication, software solutions such as intrusion detection systems, anti-virus, anti-malware, email filtering and quarantining programs, routine system maintenance and updates, backup and recovery systems, routine employee cybersecurity training and testing, and quarterly internal audits.
We have utilized the National Institute of Standards and Technology’s Cybersecurity Framework (NIST CSF) as a baseline for the WISP procedures in addition to General Data Protection Regulation (GDPR) standards. In addition to our data privacy policy, the WISP policy defines how sensitive and private data are protected.
We have utilized the National Institute of Standards and Technology’s Cybersecurity Framework (NIST CSF) as a baseline for the WISP procedures in addition to General Data Protection Regulation (GDPR) standards. In addition to our data privacy policy, the WISP policy defines how sensitive and private data is protected.
Because of the relatively small size of our information 24 Table of Contents technology workforce, we have limited internal cybersecurity expertise and monitoring capabilities; accordingly, we seek to augment our internal capabilities by engaging larger, well-known third-party service providers with significantly greater cybersecurity capabilities than we possess.
Because of the relatively small size of our information technology workforce, we have limited internal cybersecurity expertise and monitoring capabilities; accordingly, we seek to augment our internal capabilities by engaging larger, well-known third-party service providers with significantly greater cybersecurity capabilities than we possess.
Our Information Security Officer ("ISO") is responsible for implementing, supervising and maintaining the WISP, including the implementation of prevention measures. The ISO reports directly to the Chief Technology Officer, who is also our Chief Information Security Officer (“CISO”). The CISO establishes the company-wide system security plan and defines the parameters of users’ access privileges.
Our Information Security Officer (“ISO”) is responsible for implementing, supervising and maintaining the WISP, including the implementation of prevention measures. The ISO reports directly to the VP Network Systems/Services Engineering, who is also our Chief Information Security Officer (“CISO”). The CISO establishes the company-wide system security plan and defines the parameters of users’ access privileges.
We have also implemented an Incident Response Plan (“IRP”), which provides a set of guidelines on the appropriate responsive actions to take in the event of a cybersecurity incident, depending on the particular facts and circumstances of the incident. The audit committee assists the Board of Directors in overseeing our cybersecurity program.
At KVH, the CISO has been lead on security as a service for customer implementations. We have also implemented an Incident Response Plan (“IRP”), which provides a set of guidelines on the appropriate responsive actions to take in the event of a cybersecurity incident, depending on the particular facts and circumstances of the incident.
We have implemented a written information security program ("WISP") to create administrative, technical and physical safeguards at KVH for the protection of confidential information of KVH and its employees and customers and other third parties.
Cybersecurity We have established procedures to assess, identify, and manage material risks from cybersecurity threats and have integrated those procedures into our overall risk management systems and processes. 23 Table of Contents We have implemented a written information security program ("WISP") to create administrative, technical and physical safeguards at KVH for the protection of confidential information of KVH and its employees and customers and other third parties.
Removed
ITEM 1C. Cybersecurity We have established procedures to assess, identify, and manage material risks from cybersecurity threats and have integrated those procedures into our overall risk management systems and processes.
Added
The CISO has over 30 years in the network, security systems engineering fields and has been with KVH for 15 years. Before KVH, the CISO worked in the telecom and ISP spaces covering transport, design and implementations. In these roles, the CISO was responsible for all network-oriented security and developed in-depth experience on core security platforms.
Removed
The CISO has worked in information technology and communications services for over 30 years, starting as a contractor at the Defense Advanced Research Projects Agency of the Department of Defense, managing the design and operation of the DARPA IT network, as the Network Operations Manager.
Added
The audit committee assists the Board of Directors in overseeing our cybersecurity program. Both the Board of Directors and the audit committee receive regular reports regarding material cybersecurity developments.
Removed
At DARPA, the CISO oversaw the desktop computers, servers, local area networks, and Internet access, including edge security from 1992 to 1998. Since then, the CISO has managed customer network integrations for commercial satellite services at Hughes and at KVH. The CISO also developed a managed security service offering at KVH based on Fortinet technology.
Removed
The breach will then be communicated to the audit committee dependent on the materiality of the incident.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeITEM 2. Properties The following table provides information about our principal facilities as of December 31, 2023. Location Type Principal Uses Approximate Square Footage Ownership Lease Expiration Middletown, Rhode Island Office Corporate headquarters, research and development, sales and service, marketing and administration 75,000 Owned — Middletown, Rhode Island Plant and warehouse Manufacturing and warehousing 75,300 Owned —
Biggest changeAs of that date, both properties were classified as assets held for sale. 24 Table of Contents Location Type Principal Uses Approximate Square Footage Ownership Lease Expiration Middletown, Rhode Island Office Corporate headquarters, research and development, sales and service, marketing and administration 75,000 Owned — Middletown, Rhode Island Plant and warehouse Manufacturing and warehousing 75,300 Owned —
Added
ITEM 2. Properties The following table provides information about our principal facilities as of December 31, 2024.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 3. Legal Proceedings From time to time, we are involved in litigation incidental to the conduct of our business. In the ordinary course of business, we are a party to inquiries, legal proceedings and claims including, from time to time, disagreements with vendors and customers.
Biggest changeITEM 3. Legal Proceedings From time to time, we are involved in litigation incidental to the conduct of our business. In the ordinary course of business, we are a party to inquiries, legal proceedings and claims including, from time to time, disagreements with vendors and customers. ITEM 4. Mine Safety Disclosures Not applicable. PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeWe currently intend to retain any future earnings to finance our operations and future growth. Issuer Purchases of Equity Securities . In January 2023, we repurchased 23,415 shares of common stock to satisfy specific tax withholding obligations arising from accelerated vesting of executive stock grants for an aggregate purchase price of $0.2 million, or $10.22 per share. ITEM 6. Reserved
Biggest changeWe currently intend to retain any future earnings to finance our operations and future growth. Issuer Purchases of Equity Securities . On December 9, 2024, our Board of Directors authorized a share repurchase program pursuant to which we may purchase outstanding shares of our common stock for an aggregate purchase price of up to $10 million.
ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information. Our common stock trades on the Nasdaq Global Select Market under the symbol “KVHI.” Stockholders. As of March 1, 2024, we had 58 holders of record of our common stock.
ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information. Our common stock trades on the Nasdaq Global Select Market under the symbol “KVHI.” Stockholders. As of March 3, 2025, we had 58 holders of record of our common stock.
Added
Under the program, at management’s discretion, we 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.
Added
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 KVH policy.
Added
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.
Added
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.
Added
During the fourth quarter of 2024, we did not repurchase any shares of common stock, nor did we acquire any shares of common stock, whether through surrender or withholding, to pay any exercise price or satisfy any tax withholding obligations.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeOn December 31, 2022, all four executives also became entitled to one year of accelerated vesting of their outstanding equity awards. 28 Table of Contents Results of Operations The following table provides, for the periods indicated, certain financial data relating to our continuing operations expressed as a percentage of net sales: Year Ended December 31, 2023 2022 Sales: Product 13.4 % 19.3 % Service 86.6 80.7 Net sales 100.0 100.0 Costs and expenses: Costs of product sales 22.0 18.1 Costs of service sales 49.4 44.0 Research and development 7.1 7.5 Sales, marketing and support 15.8 16.7 General and administrative 14.3 17.8 Goodwill impairment charge 4.0 — Long-lived assets impairment charge 0.5 — Total costs and expenses 113.1 104.1 Loss from operations (13.1) (4.1) Interest income 2.8 1.1 Interest expense — — Other (expense) income, net (1.1) 0.6 Loss from continuing operations before income taxes expense (11.4) (2.4) Income tax expense from continuing operations 0.2 0.4 Net loss from continuing operations (11.6) % (2.8) % Years ended December 31, 2023 and 2022 Our net sales for 2023 and 2022 were as follows: Change Year Ended December 31, 2023 vs. 2022 2023 2022 $ % (in thousands) Product sales $ 17,757 $ 26,842 $ (9,085) (34) % Service sales 114,622 111,908 2,714 2 % Net sales 132,379 138,750 (6,371) (5) % Net sales decreased by $6.4 million, or 5%, in 2023 as compared to 2022.
Biggest changeResults of Operations The following table provides, for the periods indicated, certain financial data expressed as a percentage of net sales: Year Ended December 31, 2024 2023 Sales: Service 84.7 % 86.6 % Product 15.3 13.4 Net sales 100.0 100.0 Costs and expenses: Costs of service sales 52.7 49.4 Costs of product sales 16.3 22.0 Research and development 7.4 7.1 Sales, marketing and support 18.5 15.8 General and administrative 14.5 14.3 Goodwill impairment charge — 4.0 Long-lived assets impairment charge 1.0 0.5 Total costs and expenses 110.4 113.1 Loss from operations (10.4) (13.1) Interest income 2.7 2.8 Interest expense — — Other expense, net (1.6) (1.1) Loss before income taxes expense (9.3) (11.4) Income tax expense 0.4 0.2 Net loss (9.7) % (11.6) % 28 Table of Contents Years ended December 31, 2024 and 2023 Our net sales for 2024 and 2023 were as follows: Change Year Ended December 31, 2024 vs. 2023 2024 2023 $ % (in thousands) Service sales $ 96,446 $ 114,622 $ (18,176) (16) % Product sales 17,382 17,757 (375) (2) % Net sales 113,828 132,379 (18,551) (14) % Net sales decreased by $18.6 million, or 14%, in 2024 as compared to 2023.
Excess and Obsolete Inventory and Excess Purchase Orders In 2023, we recorded a $5.2 million charge related to the inventory write-down and a $3.6 million charge for excess purchase order obligations, both relating to the reduced demand for our hardware products, which has led to the staged wind-down of our manufacturing activities at our facility in Middletown, Rhode Island noted above.
Excess and Obsolete Inventory and Excess Purchase Orders In 2023, we recorded a $5.2 million charge related to the inventory write-down and a $3.6 million charge for excess purchase order obligations, both relating to the reduced demand for our hardware products, which led to the staged wind-down of our manufacturing activities at our facility in Middletown, Rhode Island noted above.
Revenue from our cellular airtime service has increasingly 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.
Revenue from our cellular airtime service has supplemented, and we expect will continue to supplement, our satellite-only airtime revenue. In addition, we earn monthly usage fees from sales of third-party satellite connectivity for VoIP, data and Internet services to our Inmarsat, Iridium, and Starlink customers who choose to activate their subscriptions with us.
We expect to continue to facilitate customer transition to third-party hardware products compatible with our mobile satellite communications services. We also plan to continue to conduct maintenance, service, warehousing, shipping and receiving activities at the Middletown location.
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.
The $6.0 million impairment charges were driven by the significant decline in our stock price that followed the August 9, 2023 announcement of our financial results for the second quarter of 2023. Under applicable accounting rules, this circumstance required us to evaluate our goodwill and long-lived assets for impairment.
The $6.0 million impairment charges were driven by the 27 Table of Contents significant decline in our stock price that followed the August 9, 2023 announcement of our financial results for the second quarter of 2023. Under applicable accounting rules, this circumstance required us to evaluate our goodwill and long-lived assets for impairment.
Please see Note 15 of our accompanying financial statements for additional details surrounding the wind-down of our manufacturing activities. Supply Chain During 2022 and 2023, we continued to experience delays in the availability and delivery of certain raw material components. We also experienced increased raw material costs.
Please see Note 14 of our accompanying financial statements for additional details surrounding the wind-down of our manufacturing activities. Supply Chain During 2023, we continued to experience delays in the availability and delivery of certain raw material components. We also experienced increased raw material costs.
The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets 31 Table of Contents and liabilities, revenues and expenses, and related disclosure at the date of our financial statements. Our significant accounting policies are summarized in Note 1 to our accompanying audited consolidated financial statements.
The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosure at the date of our financial statements. Our significant accounting policies are summarized in Note 1 to our accompanying audited consolidated financial statements.
We generate revenues in the United States and various international locations, including primarily Singapore, Canada, South American countries, European Union countries and other European countries, and countries in Africa, the Middle East and Asia/Pacific, including India. Sales to customers outside the United States accounted for 68% and 63% of our consolidated net revenues for 2023 and 2022, respectively.
We generate revenues in the United States and various international locations, including primarily Singapore, Canada, South American countries, European Union countries and other European countries, and countries in Africa, the Middle East and Asia/Pacific, including India. Sales to customers outside the United States accounted for 73% and 68% of our consolidated net revenues for 2024 and 2023, respectively.
We provide global high-speed Internet and Voice over Internet Protocol (VoIP) services via satellite to mobile users at sea and on land. We are also a leading provider of commercially licensed entertainment, including news, sports, music, and movies, to commercial customers in the maritime and hotel markets, along with supplemental value-added cybersecurity, email, and crew internet services.
We provide global high-speed Internet and Voice over Internet Protocol (VoIP) services via satellite to mobile users at sea and on land. We are also a leading provider of commercially licensed entertainment, including movies, television programming, news, and music, to commercial customers in the maritime market, along with supplemental value-added cybersecurity, email, and crew internet services.
For 2023 and 2022, the effective tax rates from continuing operations differed from the statutory tax rate primarily due to our maintaining a valuation allowance reserve on our U.S. deferred tax assets, impairment of goodwill, discrete tax adjustments and the composition of income from foreign jurisdictions taxed at lower rates.
For 2024 and 2023, the effective tax rates differed from the statutory tax rate primarily due to our maintaining a valuation allowance reserve on our U.S. deferred tax assets, impairment of goodwill, discrete tax adjustments and the composition of income from foreign jurisdictions taxed at varying rates.
In recent years, we have funded our operations primarily from the sale of two businesses in 2022, the sale of a business in 2019, a PPP loan that was subsequently forgiven, cash flows from operations 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 a business in 2019, a PPP loan, cash flows from operations, bank financings and proceeds received from exercises of stock options and the issuance of stock.
Financing Activities Net cash provided by financing activities for 2023 was $2.3 million as compared to net cash provided by financing activities in 2022 of $0.7 million.
Financing Activities Net cash provided by financing activities for 2024 was $0.1 million as compared to net cash provided by financing activities in 2023 of $2.3 million.
Impairment Charge During the year ended December 31, 2023, aggregate impairment charges of $6.0 million were taken against goodwill and long-lived assets for the Mobile Broadband reporting unit and the KVH Media Group reporting unit.
Impairment Charge In 2023, aggregate impairment charges of $6.0 million were taken against goodwill and long-lived assets for the Mobile Broadband reporting unit and the KVH Media Group reporting unit.
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.
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. Sales of our airtime services accounted for 79% and 81% of our consolidated net sales for 2024 and 2023, respectively.
As of December 31, 2023, we had $69.8 million in cash, cash equivalents, and marketable securities, of which $3.7 million in cash equivalents was held in local currencies by our foreign subsidiaries. Our foreign subsidiaries held no marketable securities as of December 31, 2023. As of December 31, 2023, we had $93.8 million in working capital.
As of December 31, 2024, we had $50.6 million in cash and cash equivalents, of which $3.8 million in cash equivalents was held in local currencies by our foreign subsidiaries. Our foreign subsidiaries held no marketable securities as of December 31, 2024. As of December 31, 2024, we had $106.7 million in working capital.
Investing Activities Net cash used in investing activities for 2023 was $14.7 million as compared to net cash provided by investing activities of $0.4 million for 2022.
Investing Activities Net cash provided by investing activities for 2024 was $52.4 million as compared to net cash used by investing activities of $14.7 million for 2023.
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 the second quarter of 2024.
We expect that we will continue our product manufacturing activities in order to generate a targeted 26 Table of Contents amount of inventory of maritime satellite connectivity and satellite television terminals to meet anticipated demand through 2025 and potentially into 2026 and that we will cease substantially all manufacturing activity by the end of 2025.
Our service sales also include the distribution of entertainment, including news, sports, music, and movies, to commercial customers in the maritime, hotel, and retail markets through KVH Media Group, along with supplemental value-added services. Sales of content services accounted for 3% and 4% of our consolidated net revenues for 2023 and 2022, respectively.
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. Sales of content services accounted for 3% of our consolidated net revenues for both 2024 and 2023.
Given the sustained decline in the market value of our outstanding equity and the uncertain impact of ongoing competition, we concluded that this impairment charge was appropriate as of September 30, 2023. Please see Note 8 of our accompanying financial statements for further information.
Given the sustained decline in the market value of our outstanding equity and the uncertain impact of ongoing competition, we concluded that this impairment charge was appropriate as of September 30, 2023.
As a percentage of net sales, research and development expense was 7% and 8% in 2023 and 2022, respectively.
As a percentage of net sales, research and development expense was 7% in both 2024 and 2023.
Income Tax Expense Income tax expense for 2023 and 2022 was $0.3 million and $0.5 million, respectively, and related to taxes on income earned in foreign jurisdictions. The effective tax rate from continuing operations for 2023 and 2022 was (2.1)% and (15.8)%, respectively.
Income Tax Expense Income tax expense for 2024 and 2023 was $0.4 million and $0.3 million, respectively, and related to taxes on income earned in foreign jurisdictions. The effective tax rate for 2024 and 2023 was (4.0)% and (2.1)%, respectively.
If these comparisons indicate that an asset is not recoverable, we will recognize an impairment loss for the amount by which the carrying value of the asset or asset group exceeds the related estimated fair value.
If these comparisons indicate that an asset is not recoverable, we will recognize an impairment loss for the amount by which the carrying value of the asset or asset group exceeds the related estimated fair value. Estimated fair value is based on either discounted future operating cash flows or appraised values, depending on the nature of the asset.
Of the current period interest income of $3.6 million, $3.0 million is attributable to interest earned on cash and cash equivalents, while the remaining $0.6 million was attributable to interest from lease receivables.
Interest income decreased by $0.6 million to $3.0 million from $3.6 million for 2023. Of the current period interest income of $3.0 million, $2.6 million is attributable to interest earned on cash and cash equivalents, while the remaining $0.5 million was attributable to interest from lease receivables. Interest declined primarily due to lower cash balances.
For 2023, costs of product sales increased by $4.0 million, or 16%, to $29.1 million from $25.2 million in 2022, primarily due a $6.8 million increase in various manufacturing and other unabsorbed expenses, $3.6 million of excess purchase order obligations, a $1.7 million increase in Starlink cost of product sales and a $0.3 million increase in accessories cost of product sales, partially offset by a $4.7 million decrease in TracVision cost of product sales and a $3.3 million decrease in VSAT Broadband cost of product sales.
For 2024, costs of product sales decreased by $10.5 million, or 36%, to $18.6 million from $29.1 million in 2023, primarily due to an $8.7 million decrease in various manufacturing and other unabsorbed expenses, a $3.6 million decrease in excess purchase order obligations, a $1.5 million decrease in TracVision cost of product sales, a $0.9 million decrease in VSAT Broadband cost of product sales and a $0.3 million decrease in accessory cost of product sales, partially offset by a $4.5 million increase in LEO cost of product sales and a $0.4 million increase in CommBox Edge cost of product sales.
The $1.6 million increase in net cash provided by financing activities is primarily attributable to a $1.6 million increase in cash inflows relating to proceeds from the exercise of stock options and purchases under our employee stock purchase plan and a $0.2 million decrease in cash outflows related to the payment of finance leases, partially offset by a $0.2 million increase in cash outflows related to the repurchase of common stock to satisfy specific tax withholding obligations arising from accelerated vesting of executive stock grants. 33 Table of Contents Other Matters We intend to continue to invest in our global HTS network on a worldwide basis.
The $2.2 million decrease in net cash provided by financing activities is primarily attributable to a $2.5 million decrease in cash inflows relating to proceeds from the exercise of stock options and purchases under our employee stock purchase plan, partially offset by a $0.2 million decrease in cash outflows related to the repurchase of common stock to satisfy specific tax withholding obligations arising from accelerated vesting of executive stock grants in 2023.
Temporary suspensions of our airtime services typically increase in the third and fourth quarters of each year as boats are placed out of service during the winter months.
Seasonality Our marine leisure business has been highly seasonal, and seasonality can also impact our commercial marine business. Temporary suspensions of our airtime services typically increase in the third and fourth quarters of each year as boats are placed out of service during the winter months.
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 decreased by $2.3 million, or 10%, to $20.9 million in 2023 from $23.2 million in 2022.
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 increased by $0.1 million, or less than 1%, to $21.0 million in 2024 from $20.9 million in 2023.
The decline in product sales was primarily due to a decrease in unit sales volume, particularly in our global leisure segment. Competition from low-cost alternatives to VSAT, which include streaming capabilities, has had a significant impact on sales of both TracVision and VSAT Broadband products in the leisure segment.
The decline in product sales was primarily driven by product sales mix. Competition from low-cost alternatives to VSAT, which include streaming capabilities, has had a significant impact on sales of both TracVision and VSAT Broadband products. In the first quarter of 2024, the U.S.
As a percentage of net sales, general and administrative expense was 14% and 18% for 2023 and 2022, respectively. Interest and Other (Expense) 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 $2.1 million to $3.6 million from $1.5 million for 2022.
As a percentage of net sales, general and administrative expense was 15% and 14% for 2024 and 2023, respectively. This increase resulted primarily from a reduction in net sales. Interest and Other Expense, Net Interest income represents interest earned on our cash and cash equivalents, as well as from investments and our sale-type lease receivables.
Intangible assets with finite lives and other long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
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 2024, as discussed below. 31 Table of Contents Intangible Assets and other Long-Lived Assets Intangible assets with finite lives and other long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
Sales of our global HTS airtime services accounted for 81% and 75% of our consolidated net sales for 2023 and 2022, respectively. In mid-2022, we launched our KVH ONE hybrid network, which integrates global satellite service with KVH-provided cellular service in more than 150 countries, along with shore-based Wi-Fi access.
In mid-2022, we launched our KVH ONE hybrid network, which integrates global satellite service (including Ku-band VSAT using the Intelsat HTS network along with Starlink, Iridium, and other satellite services), KVH-provided cellular service in more than 150 countries, and shore-based Wi-Fi access.
Our costs of service sales consist primarily of satellite service capacity, depreciation, service network overhead expense associated with our global HTS network infrastructure, direct network service labor, Iridium and Inmarsat service costs, product installation costs, media materials and distribution costs, and service repair materials.
As a percentage of net sales, costs of sales were 69% and 71% for 2024 and 2023, respectively. Our costs of service sales consist primarily of satellite service capacity, depreciation, service network overhead expense associated with our VSAT Broadband network infrastructure, direct network service labor, product installation costs, media distribution costs, and service repair materials.
Partially offsetting these items were a $2.1 million charge for the discontinuation of a project for implementing a new manufacturing-centric accounting system and a $0.3 million reduction in reimbursements made by EMCORE for expenses incurred under the transition services agreement relating to the sale of the inertial navigation business in 2022.
Partially offsetting these items were $0.8 million in costs incurred related to the reduction in our workforce, a $0.7 million reduction in reimbursements made by EMCORE for expenses incurred under the transition services agreement relating to the sale of the inertial navigation business in August 2022, and a $0.4 million increase in facility expenses.
Coast Guard, which accounted for approximately $11 million of our service sales in 2023, advised us that it intends to transition its primary satellite service relationship on the vessels we currently serve to Starlink.
Coast Guard, which accounted for approximately $11 million of our service sales in 2023, advised us that it intended to transition its primary satellite service relationship on the vessels we served to SpaceX Starshield. In the third quarter of 2024, we received and processed the anticipated service downgrade request from the U.S.
The $15.1 million increase in net cash used in investing activities was primarily the result of a $55.0 million decrease in proceeds from the sale of the inertial navigation business, a decrease of $2.4 million in proceeds from the sale of KVH Media Group Entertainment Limited and a $1.2 million increase in cash paid for acquisition of intangible assets, partially offset by a $39.8 million decrease in net investment in marketable securities and a $3.8 million decrease in capital expenditures.
The $67.1 million increase in net cash provided by investing activities was primarily the result of a $61.3 million decrease in net investment in marketable securities, which was driven by the liquidation of our marketable securities held by Wells Fargo, a $3.2 decrease in capital expenditures, a $1.4 million increase in proceeds from the sale of fixed assets and a $1.2 million decrease in cash paid for the acquisition of intangible assets.
As a percentage of net sales, sales, marketing and support expense was 16% and 17% in 2023 and 2022, respectively. 30 Table of Contents 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.
This increase resulted primarily from a reduction in net sales. 30 Table of Contents 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 2024 decreased by $2.4 million, or 13%, to $16.5 million from $18.9 million for 2023.
As a percentage of service sales, costs of service sales were 57% and 55% for 2023 and 2022, respectively. 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.
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 2024 decreased by $1.0 million, or 10%, to $8.4 million from $9.4 million in 2023.
Results for discontinued operations are as follows: Year Ended December 31, 2022 (dollar in thousands) Sales from discontinued operations $ 16,721 Gain on sale of discontinued operations before tax expense $ 30,763 Income from discontinued operations, net of tax $ 28,025 Critical Accounting Estimates The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States.
Critical Accounting Estimates The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States.
We are continuing to monitor global developments, including the impact of inflation, and are prepared to implement actions that we determine to be necessary to sustain our business. Dispositions 27 Table of Contents On August 9, 2022, we sold our inertial navigation business to EMCORE Corporation for net proceeds of $54.9 million, less specified deductions.
We are continuing to monitor global developments, including the impact of inflation, and are prepared to implement actions that we determine to be necessary to sustain our business.
Service sales increased by $2.7 million, or 2%, to $114.6 million in 2023 from $111.9 million in 2022.
Service sales decreased by $18.2 million, or 16%, to $96.4 million in 2024 from $114.6 million in 2023.
Product sales decreased by $9.1 million, or 34%, to $17.8 million in 2023 from $26.8 million in 2022. The decrease in product sales was primarily the result of a $6.2 million decrease in TracVision product sales and a $4.2 million decrease in VSAT Broadband product sales, partially offset by a $1.7 million increase in Starlink product sales.
The decrease in product sales was primarily the result of a $2.2 million decrease in VSAT Broadband product sales, a $2.0 million decrease in TracVision product sales and a $1.3 million decrease in accessory and service product sales, partially offset by a $5.0 million increase in Starlink product sales and a $0.5 million increase in CommBox Edge product sales.
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 c apital-intensive manufacturing activities and concentrate our efforts on growing sales of our multi-orbit, multi-channel, integrated communications solutions .
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 to incur aggregate severance charges of approximately $3.3 million, consisting of approximately $3.0 million of cash charges and approximately $0.3 million of non-cash charges arising from pre-existing contractual obligations to accelerate vesting of certain outstanding equity compensation awards.
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. Starlink Distribution Agreement During the second quarter of 2024, we expanded our relationship with Starlink through a bulk data distribution agreement.
Please see Note 15 to our accompanying audited financial statements for further information. As a percentage of product sales, costs of product sales were 164% and 94% for 2023 and 2022, respectively.
The excess purchase order obligations related to unconditional purchase orders outstanding as of December 31, 2023 that we determined would exceed our anticipated needs. Please see Note 14 to our accompanying audited financial statements for further information. As a percentage of product sales, costs of product sales were 107% and 164% for 2024 and 2023, respectively.
We believe that our primary long-term capital requirements relate to AgilePlans revenue-generating assets, as well as servicing and repaying our satellite service capacity and equipment lease obligations. At December 31, 2023, we had outstanding non-cancellable satellite service capacity and other lease obligations with future minimum payments of $82.5 million.
We believe that our primary long-term capital requirements relate to AgilePlans revenue-generating assets and the development and implementation of our new enterprise resource planning system, as well as servicing and paying our satellite service capacity and equipment lease obligations.
From time to time we have entered into multi-year agreements to lease satellite capacity, and we have also purchased numerous satellite hubs to support the added capacity. These transactions can involve millions of dollars. Off-Balance Sheet Arrangements As of December 31, 2023, we had certain satellite service capacity obligations that are not considered operating or financing leases under ASC 842.
Off-Balance Sheet Arrangements As of December 31, 2024, we had certain satellite service capacity obligations that are not considered operating or financing leases under ASC 842.
Historically, we have also offered satellite communications products, but these products have represented a declining percentage of our revenues in recent years. Our satellite-only and hybrid products enable marine customers to receive data, 26 Table of Contents VoIP, and value-added services via satellite, cellular, and shore-based Wi-Fi networks onboard commercial, leisure, and military/government vessels.
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.
Other (expense) income, net changed to other expense, net of $1.4 million for 2023 from other income, net of $0.8 million for 2022 primarily due to the $0.7 million gain on sale of KVH Media Group Entertainment Limited in 2022, a $0.6 million increase in foreign exchange losses from our UK operations, a $0.5 million increase in the loss on disposal of fixed assets, and a $0.3 million loss in 2023 on an unfavorable future contract.
The increase was primarily due to a $0.5 million increase in foreign exchange losses and a $0.4 million expense incurred in 2024 for a prior period Brazil tax settlement, partially offset by a $0.3 million loss in 2023 on an unfavorable future contract and a $0.1 million decrease in the loss on the disposal of fixed assets.
Product sales accounted for 13% and 19% of our consolidated net sales for 2023 and 2022, respectively. In February 2024, we announced a staged wind-down of our product manufacturing operations at our Middletown, Rhode Island location.
Manufacturing Wind-down; Restructuring In February 2024, we announced a staged wind-down of our product manufacturing operations at our Middletown, Rhode Island location. 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.
Research and development expense for 2023 decreased by $1.0 million, or 9%, to $9.4 million from $10.4 million in 2022. The decrease in research and development expense resulted primarily from a $0.8 million decrease in salaries, benefits and taxes driven by the reduction in our workforce in March 2022.
The decrease in research and development expense resulted primarily from a $1.6 million decrease in salaries, benefits and taxes, excluding costs related to the previously mentioned reduction in workforce, and a $0.3 million decrease in expensed materials. These decreases were partially offset by $1.4 million in costs incurred related to the reduction in our workforce.
The increase was primarily due to a $3.9 million increase in our VSAT service sales driven by an increase in average subscribers, partially offset by a $1.0 million decrease in our content services sales, primarily driven by the sale of a subsidiary in April 2022.
The decrease in service sales was primarily due to a $17.1 million decrease in our airtime service sales, driven primarily by a decrease in VSAT-only subscribers, partially offset by an increase in LEO service sales. $2.7 million of this decrease was related to the U.S. Coast Guard contract downgrade.
Costs of Sales Costs of sales consists of costs of product sales and costs of service sales. Costs of sales increased by $8.3 million, or 10%, in 2023 to $94.5 million from $86.3 million in 2022.
Costs of sales decreased by $15.9 million, or 17%, in 2024 to $78.6 million from $94.5 million in 2023. The decrease in costs of sales was driven by a $5.4 million decrease in costs of service sales and a $10.5 million decrease in costs of product sales.
Partially offsetting these items were a change of $37.9 million related to non-cash items, driven by the $30.8 million gain on sale of the inertial navigation business in 2022 and the $6.0 million impairment of goodwill and long-lived assets, a $12.2 million decrease in cash outflows relating to inventories, a $8.4 million decrease in cash outflows relating to accrued compensation, product warranty and other expenses, a $1.2 million increase in cash inflows relating to accounts receivable, and a $0.8 million increase in cash inflows related to deferred revenue.
The $15.7 million increase in net cash used by operations was primarily the result of a $11.5 million increase in cash outflows relating to accrued compensation, product warranty and other expenses, a $10.4 million increase in cash outflows relating to prepaid expenses and other current assets, a $7.6 million increase in cash outflows relating to inventories, a change of $5.6 million related to non-cash items, a $1.1 million decrease in cash inflows relating to deferred revenue, and a $1.1 million increase in cash outflows relating to other non-current assets.
The increase in costs of sales was driven by a $4.3 million increase in costs of service sales and a $4.0 million increase in costs of product sales. As a percentage of net sales, costs of sales were 71% and 62% for 2023 and 2022, respectively.
For 2024, costs of service sales decreased by $5.4 million, or 8%, to $60.0 million from $65.4 million in 2023. Costs of service sales decreased primarily due to a $5.5 million decrease in airtime costs of service sales. As a percentage of service sales, costs of service sales were 62% and 57% for 2024 and 2023, respectively.
As part of the restructuring, we expect to reduce our headcount by approximately 75 employees, or approximately 20% of our total workforce as of the time we announced the restructuring. Approximately one-third of the employee terminations have been completed, and the remaining terminations are expected to be completed by the end of the second quarter of 2024.
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 had been completed. During 2024, we incurred an aggregate of $3.9 million of severance charges for this and other restructurings.
The manufacturing and other unabsorbed costs included a $6.6 million inventory write-down, as well as lower unit volume, resulting in less absorption of overhead. The excess purchase order obligations relate to unconditional purchase orders outstanding as of December 31, 2023 that we determined, in connection with the preparation of our audited financial statements for 2023, would exceed our anticipated needs.
The decrease in manufacturing and other unabsorbed costs was primarily due to additional expenses taken in 2023 as a result of the wind-down of our manufacturing activities, which included a $6.6 million inventory write-down, as well as lower unit volume, resulting in reduced absorption of overhead.
Our costs of product sales consist primarily of materials, manufacturing overhead, and direct labor used to produce our products.
Despite this higher gross margin on Starlink airtime services, the overall gross margin on service sales was negatively impacted by fixed costs associated with the VSAT Broadband network. 29 Table of Contents Our costs of product sales consist primarily of materials, manufacturing overhead, and direct labor used to produce our products.
We expect to earn usage fees from OneWeb service upon the launch of that service in 2024. We also generate service revenue from product repairs and extended warranty sales.
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. We also generate service revenue from product repairs and extended warranty sales.
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. 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.
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. Product sales accounted for 15% and 13% of our consolidated net sales for 2024 and 2023, respectively.
The $6.4 million decrease in net cash provided by operations was primarily the result of a $39.5 million increase in net loss and a $27.0 million increase in cash outflows related to accounts payable.
Partially offsetting these items were a $15.2 million decrease in cash outflows related to accounts payable, a $4.4 million decrease in net loss (which included impairment charges of $1.1 million and $6.0 million in 2024 and 2023, respectively), and a $2.1 million increase in cash inflows relating to accounts receivable.
While service sales grew in 2023, alternative solutions offered by recent LEO entrants have heightened competition in the global leisure segment, and in commercial and government markets. As a result, service sales declined in the fourth quarter of 2023. 29 Table of Contents In the first quarter of 2024, the U.S.
Alternative solutions offered by recent low-earth-orbit (LEO) entrants have heightened competition in the global leisure segment and in commercial and government markets. We expect that the trend of intensifying competition from LEO satellite service providers will continue and that our revenues from VSAT service sales will continue to decline on a year-over-year basis.
The decrease in general and administrative expense resulted primarily from a $5.7 million decrease in salaries, benefits and taxes driven by the reduction in our workforce in March 2022, as well as a reduction in expenses related to the separation and retirement of our former President and Chief Executive Officer in March 2022.
The decrease in general and administrative expense resulted primarily from the $2.1 million charge incurred in 2023 for the discontinuation of a project for implementing a new manufacturing-centric accounting system, a $1.0 million decrease in professional fees, driven by additional accounting and consulting costs incurred in 2023 to prepare our 2022 annual filings, a $0.6 million decrease in salaries, benefits and taxes, excluding costs related to the previously mentioned reduction in workforce, and a $0.4 million decrease in computer expenses.
The decrease in sales, marketing and support expense resulted primarily from a $2.9 million decrease in salaries, benefits and taxes driven by the reduction in our workforce in March 2022 and a $0.7 million decrease in external commission expense, partially offset by a $0.9 million increase in facilities expense and a $0.2 million increase in travel expense.
In 2024, we incurred $0.7 million in costs related to the reduction in our workforce, which was partially offset by a $0.4 million decrease in external commissions. As a percentage of net sales, sales, marketing and support expense was 18% and 16% in 2024 and 2023, respectively.
Removed
In the fourth quarter of 2023, we also recorded a $2.1 million charge related to the write-off of certain costs for a new accounting system intended for use in connection with our manufacturing operations. Our marine leisure business has been highly seasonal, and seasonality can also impact our commercial marine business.
Added
In March 2023, we began selling Starlink terminals and, in September 2023, we became a Starlink authorized hardware and airtime reseller offering Mobile Priority data plans for maritime use. In October 2024, we expanded our portfolio to include Starlink Business Priority data plans, which will primarily be used for stationary commercial use on land.
Removed
We also agreed to provide certain transition services for six months following the sale with two extension options of three months each. We received both fixed monthly fees of approximately $0.1 million as well as variable amounts for certain additional services with escalation increases on the fixed and variable rates for each extension option.
Added
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 competition from emerging LEO services.
Removed
We did not have any continuing involvement in these operations other than short-term transition services, which were recorded as an offset to general and administrative expenses in continuing operations. We determined that the sale met the requirements for reporting as discontinued operations in accordance with Financial Accounting Standards Board Accounting Standards Codification (ASC) 205-20.
Added
Under the agreement, we prepaid $17.0 million for access to a large block of Starlink Mobile Priority data at favorable rates. The new agreement offers us increased flexibility in the development and sale of custom airtime plans using Starlink’s Mobile Priority service.
Removed
Please see Notes 1 and 14 of our accompanying audited consolidated financial statements for further information. On April 29, 2022, we sold KVH Media Group Entertainment Limited for net cash proceeds of $2.4 million. This transaction did not meet the criteria for reporting as discontinued operations under ASC 205-20.
Added
Assets Held for Sale 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.
Removed
We recorded a gain on the sale of approximately $0.6 million, which is recorded in other income, net in the accompanying consolidated statements of operations. See Note 8 to our accompanying audited consolidated financial statements for the reduction of goodwill and intangibles associated with the KVH Media Group reporting unit as it relates to the sale of this subsidiary.
Added
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.
Removed
Management Transition and Restructurings On March 7, 2022, we announced the retirement of our President and Chief Executive Officer, Martin Kits van Heyningen. We negotiated a separation and consulting agreement with Mr. Kits van Heyningen, pursuant to which we provided a separation payment, consulting fees and health insurance coverage, as well as reimbursement of certain professional and advisory fees.
Added
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.
Removed
We incurred aggregate costs relating to the separation agreement of $0.5 million. In March 2022, we also restructured our operations to reduce costs and pursue a more focused strategy. We reduced our workforce by approximately 10% and began incurring reduced expenses from these actions beginning in the second quarter of 2022.
Added
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.
Removed
Approximately $2.2 million of severance payments, other employee benefits, and legal and advisory fees were incurred in connection with this restructuring for the year ended December 31, 2022. We did not incur any additional expenses associated with this restructuring for the year ended December 31, 2023. We also modified impacted employee's stock option and restricted stock awards.
Added
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.
Removed
During the third quarter of 2022, we restructured our foreign operations by closing our India and Cyprus offices and our Denmark warehouse to reduce costs. Approximately $0.4 million of severance payments, other employee benefits, and legal and advisory fees were incurred in connection with this restructuring for the year ended December 31, 2022.

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