KVH Industries(KVHI) - 2024 Q2 - Quarterly Report

Sales Performance - Net sales decreased by $4.9 million, or 15%, for the three months ended June 30, 2024, compared to the same period in 2023, primarily due to a$ 5.6 million decrease in VSAT service sales driven by a decrease in subscribers[101]. - Service sales decreased by $4.1 million, or 14%, to$ 24.7 million for the three months ended June 30, 2024, while Starlink service sales increased by $1.7 million[101]. - Product sales decreased by$ 0.8 million, or 17%, to $4.0 million for the three months ended June 30, 2024, primarily due to a decrease in unit sales volume[104]. - Net sales for the six months ended June 30, 2024 decreased by$ 9.8 million, or 14%, to $57.9 million compared to$ 67.7 million for the same period in 2023[114]. - Service sales decreased by $7.8 million, or 14%, to$ 49.7 million, primarily due to a $9.7 million decrease in VSAT service sales[114]. - Product sales decreased by$ 2.0 million, or 20%, to $8.2 million, driven by a$ 2.4 million decrease in VSAT Broadband product sales[115]. Costs and Expenses - Costs of sales decreased by $2.0 million, or 9%, in the three months ended June 30, 2024, to$ 19.8 million from $21.8 million in the same period in 2023[105]. - Costs of service sales remained flat at$ 15.5 million for both the three months ended June 30, 2024, and 2023, with costs of service sales as a percentage of service sales increasing to 63% from 54%[106]. - Costs of sales decreased by $4.0 million, or 9%, to$ 39.1 million, with costs of service sales at 59% of service sales for H1 2024, up from 55% in H1 2023[116]. - Research and development expense for Q2 2024 decreased by $0.1 million, or 4%, to$ 2.3 million, representing 8% of net sales compared to 7% in Q2 2023[108]. - Research and development expense for H1 2024 increased by $0.4 million, or 8%, to$ 5.4 million, representing 9% of net sales compared to 7% in H1 2023[118]. - Sales, marketing, and support expense for Q2 2024 increased by $0.2 million, or 4%, to$ 5.3 million, accounting for 19% of net sales, up from 15% in Q2 2023[109]. - General and administrative expense for Q2 2024 remained flat at $4.1 million, with an increase in percentage of net sales to 14% from 12% in Q2 2023[110]. - General and administrative expense for H1 2024 increased by$ 0.7 million, or 7%, to $9.4 million, accounting for 16% of net sales, up from 13% in H1 2023[120]. Strategic Changes - The company prepaid$ 17.0 million for access to a large block of Starlink Mobile Priority data under a new bulk data distribution agreement[96]. - The company expects the trend of declining VSAT service sales to continue, particularly due to the accelerated transition of the U.S. Coast Guard to Starlink services[103]. - The restructuring plan included a reduction of approximately 75 employees, or about 20% of the total workforce, resulting in severance charges of $3.4 million for the six months ended June 30, 2024[95]. - The company anticipates ceasing substantially all manufacturing activity by the end of 2025 as part of its strategic shift towards multi-orbit, multi-channel integrated communications solutions[94]. Customer Growth - Starlink terminal subscribers approximately doubled from March 31, 2024, to June 30, 2024, indicating a significant growth in the customer base for Starlink services[101]. Cash Flow - Net cash used in operations for H1 2024 was$ 15.5 million, an increase of $12.3 million compared to$ 3.2 million in H1 2023[125].