KVH Industries Inc.
11/05/2026 | Press release | Distributed by Public on 11/05/2026 12:09
Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Introduction
The statements included in this quarterly report on Form 10-Q, other than statements of historical fact, are forward-looking statements. Examples of forward-looking statements include statements regarding our future financial results, operating results, business strategies, projected costs, products and services, competitive positions and plans, customer preferences, consumer trends, anticipated product development, and objectives of management for future operations. In some cases, forward-looking statements can be identified by terminology such as "may," "will," "should," "would," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential," "continue," or the negative of these terms or other comparable terminology. Any expectations based on these forward-looking statements are subject to risks and uncertainties and other important factors, including those discussed in the section entitled "Risk Factors" in Item 1A of Part I of our Form 10-K for the year ended December 31, 2025 as updated in Item 1A of Part II of this quarterly report on Form 10-Q. These and many other factors could affect our future financial and operating results and could cause actual results to differ materially from expectations based on forward-looking statements made in this document or elsewhere by us or on our behalf. For example, our expectations regarding certain items as a percentage of sales assume that we will achieve our anticipated sales goals. The following discussion and analysis should be read in conjunction with our consolidated interim financial statements and related notes appearing elsewhere in this report.
Overview
We are a leading global provider of innovative and technology-driven connectivity solutions to primarily maritime commercial and leisure customers. We provide global high-speed internet and Voice over Internet Protocol (VoIP) services via satellite to mobile users at sea and on land. 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.
We generate a substantial majority of our revenues from sales of satellite internet airtime services. We provide, for monthly fixed fees and per-usage fees, satellite connectivity encompassing broadband internet, data and VoIP services, to customers via our KVH ONE hybrid network, which integrates global satellite service (including Starlink, Ku-band VSAT using the SES Flex network, Eutelsat OneWeb, Viasat/Inmarsat and Iridium), KVH-provided cellular service in more than 130 countries, and shore-based Wi-Fi access. In March 2023, we began selling Starlink terminals and, in September 2023, we became a Starlink authorized hardware and airtime reseller offering Global Business data plans for maritime use. In October 2024, we expanded our portfolio to include Starlink Business data plans, which are suitable for fixed and mobile uses on land and inland waterways, including lakes and rivers. We are earning usage fees from our offering of Eutelsat OneWeb maritime service, which we launched in January 2025. Revenue from our cellular airtime service supplements our satellite-only airtime revenue. In December 2024, we introduced our TracNet Coastal and TracNet Coastal Pro terminals, expanding our extensive multi-channel portfolio of maritime services and products with a standalone 5G/cellular and Wi-Fi system. We also generate service revenue from product repairs and extended warranty sales.
Our service sales also include the distribution of entertainment, including movies, television programming, news and music, to commercial customers in the maritime market through KVH Media Group, along with supplemental value-added services.
Historically, our Ku-band VSAT communications service was the primary driver of revenue growth. However, in recent years these services have represented a declining percentage of our revenues in the face of increased demand for and competition from emerging LEO services. Our satellite products enable maritime customers to receive data, VoIP, and value-added services via satellite, cellular, and shore-based Wi-Fi networks onboard commercial and leisure vessels. In addition, our in-motion television terminals permit customers to receive live digital television via regional satellite services on maritime vessels. We sell our products through an extensive international network of dealers and distributors. We also sell and lease products to service providers and end users.
In February 2024, we announced a staged wind-down of our product manufacturing operations. The wind-down was driven by reduced demand for our hardware products in the face of intensifying competition in the third and fourth quarters of 2023. We concluded that we should discontinue our capital-intensive manufacturing activities and concentrate our efforts on growing sales of our multi-orbit, multi-channel, integrated communications solutions. We expect that we will continue our product manufacturing activities in order to generate a targeted amount of inventory of maritime satellite connectivity and satellite television terminals to meet anticipated demand and that we will cease substantially all manufacturing activity by the end of 2026. This wind-down has been extended because our reduced workforce has been prioritizing fulfilling LEO product orders and refurbishing AgilePlans terminals over manufacturing new units. We expect to continue to facilitate customer transition to third-party hardware products compatible with our mobile satellite communications services. We also plan to continue to conduct maintenance, service, warehousing, shipping and receiving activities at our Bristol, Rhode Island location.
During the second quarter of 2024, we expanded our relationship with Space Exploration Technologies Corp. ("Starlink") through a bulk data distribution agreement. Under the agreement, we prepaid $17.0 million for access to a large block of Starlink Global Business data at favorable rates. The agreement provided us flexibility in the development and sale of custom airtime plans using Starlink's Global Business service. We began drawing from this prepaid pooled data in the third quarter of 2024 and this data was fully consumed by the end of 2025. In the fourth quarter of 2025, we entered into an agreement to purchase a substantially larger block of Starlink Global Business data. We made a prepayment of $5.0 million related to this agreement in the fourth quarter of 2025, an additional payment of $10.0 million in January 2026 and payments of $6.0 million in each of February 2026, May 2026 and August 2026. Under this agreement, the remaining balance of $12.0 million is payable in two quarterly payments through the first quarter of 2027.
During the third quarter of 2024, we commenced our plan to sell the warehouse building and surface parking lot located at 75 Enterprise Center in Middletown, Rhode Island ("75 Enterprise Center"). In December 2024, we entered into an agreement to sell 75 Enterprise Center for $8.5 million. The sale was completed in September 2025. We also entered into an agreement with the buyer to lease this property for the period October 2025 through the end of March 2026, which was subsequently extended through April 30, 2026. Total lease expense under this agreement was $0.2 million. The Company has fully migrated its Rhode Island operations to the leased facility located in Bristol, Rhode Island.
Additionally, in the third quarter of 2024, we commenced our plan to sell the property, building, improvements, and land located at 50 Enterprise Center in Middletown, Rhode Island ("50 Enterprise Center"). In March 2025, we entered into an agreement with another buyer to sell 50 Enterprise Center for $5.3 million. The sale was completed in June 2025.
During the three and nine months ended September 30, 2026, we recorded a $2.3 million increase to the inventory reserve primarily due to further reduced demand for certain TracVision TV-service products, as well as a reduction in the prices we charge for these products. We implemented this price reduction at the end of the third quarter of 2026 and, as a result, reduced the value of our remaining inventory of those products to net realizable value based on lower customer pricing. If demand continues to decline, we may need to record additional inventory write-downs.
Critical Accounting Estimates
The discussion and analysis of our financial condition and results of operations are based upon our consolidated interim financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these interim 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 interim financial statements. Our significant accounting policies are summarized in Note 1 to the consolidated financial statements in our annual report on Form 10-K for the year ended December 31, 2025.
Critical accounting estimates are those estimates made that involve a significant level of estimation uncertainty and have had or are reasonably likely to have an impact on our statement of operations. We believe that our accounting estimates for goodwill, intangible assets and other long-lived assets are the only estimates critical to an understanding and evaluation of our financial results for the nine months ended September 30, 2026.
Results of Operations
The following table provides, for the periods indicated, certain financial data relating to our operations expressed as a percentage of net sales:
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| September 30, | September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Sales: | |||||||||||||||||||||||
| Service | 85.7 | % | 89.2 | % | 86.9 | % | 87.1 | % | |||||||||||||||
| Product | 14.3 | 10.8 | 13.1 | 12.9 | |||||||||||||||||||
| Net sales | 100.0 | 100.0 | 100.0 | 100.0 | |||||||||||||||||||
| Cost and expenses: | |||||||||||||||||||||||
| Costs of service sales | 56.8 | 58.7 | 56.7 | 56.1 | |||||||||||||||||||
| Costs of product sales | 21.2 | 34.6 | 16.1 | 21.0 | |||||||||||||||||||
| Research and development | 1.9 | 3.4 | 2.1 | 3.8 | |||||||||||||||||||
| Sales, marketing and support | 13.1 | 17.2 | 14.7 | 18.5 | |||||||||||||||||||
| General and administrative | 10.4 | 13.0 | 11.7 | 13.4 | |||||||||||||||||||
| Total costs and expenses | 103.4 | 126.9 | 101.3 | 112.8 | |||||||||||||||||||
| Loss from operations | (3.4) | (26.9) | (1.3) | (12.8) | |||||||||||||||||||
| Interest income | 1.3 | 2.4 | 1.6 | 2.3 | |||||||||||||||||||
| Other income, net | 0.3 | 0.1 | 0.2 | 1.1 | |||||||||||||||||||
| (Loss) income before income tax (benefit) expense | (1.8) | (24.4) | 0.5 | (9.4) | |||||||||||||||||||
| Income tax (benefit) expense | - | 0.1 | 0.3 | 0.2 | |||||||||||||||||||
| Net (loss) income | (1.8) | % | (24.5) | % | 0.2 | % | (9.6) | % | |||||||||||||||
Three months ended September 30, 2026 and 2025
Net Sales
Our net sales for the three months ended September 30, 2026 and 2025 were as follows:
| Change | |||||||||||||||||||||||
| For the three months ended September 30, | 2026 vs. 2025 | ||||||||||||||||||||||
| 2026 | 2025 | $ | % | ||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||
| Service | $ | 32,954 | $ | 25,388 | $ | 7,566 | 30 | % | |||||||||||||||
| Product | 5,494 | 3,065 | 2,429 | 79 | % | ||||||||||||||||||
| Net sales | $ | 38,448 | $ | 28,453 | $ | 9,995 | 35 | % | |||||||||||||||
Net sales increased by $10.0 million, or 35%, for the three months ended September 30, 2026 as compared to the three months ended September 30, 2025. Service sales increased by $7.6 million, or 30%, to $33.0 million for the three months ended September 30, 2026 from $25.4 million for the three months ended September 30, 2025. The increase in service sales was primarily due to a $7.2 million increase in our airtime service sales, which reflected a substantial increase in LEO service sales driven by an increase in subscribers for both Starlink and OneWeb. This increase in LEO service sales was partially offset by a substantial decrease in VSAT service sales, which was driven primarily by a decrease in VSAT subscribers. For the three months ended September 30, 2026, LEO service sales represented 58% of service sales, as compared to 39% for the three months ended September 30, 2025. The increase in LEO service sales as a percentage of service sales resulted from both the substantial increase in LEO service sales and the substantial decrease in VSAT service sales. Competing LEO service providers have continued to expand their product and service offerings, further heightening competition in the commercial and global leisure markets.
Product sales increased by $2.4 million, or 79%, to $5.5 million for the three months ended September 30, 2026 from $3.1 million for the three months ended September 30, 2025. The increase in product sales was primarily due to a $1.7 million increase in Starlink product sales, a $0.4 million increase in OneWeb product sales, and a $0.5 million increase in accessory and service parts product sales, partially offset by a $0.1 million decrease in TracVision product sales. Competition from low-cost alternatives to VSAT, which include streaming capabilities, has had a significant impact on sales of our TracVision products.
Costs of Sales
Our costs of sales for the three months ended September 30, 2026 and 2025 were as follows:
| Change | |||||||||||||||||||||||
| For the three months ended September 30, | 2026 vs. 2025 | ||||||||||||||||||||||
| 2026 | 2025 | $ | % | ||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||
| Service | $ | 21,832 | $ | 16,694 | $ | 5,138 | 31 | % | |||||||||||||||
| Product | 8,145 | 9,846 | (1,701) | (17) | % | ||||||||||||||||||
| Costs of sales | $ | 29,977 | $ | 26,540 | $ | 3,437 | 13 | % | |||||||||||||||
Costs of sales consists of costs of service sales and costs of product sales. Costs of sales increased by $3.4 million, or 13%, in the three months ended September 30, 2026 to $30.0 million from $26.5 million in the three months ended September 30, 2025. The increase in costs of sales was driven by a $5.1 million increase in costs of service sales, partially offset by a $1.7 million decrease in costs of product sales. As a percentage of net sales, costs of sales were 78% and 93% for the three months ended September 30, 2026 and 2025, respectively.
Our costs of service sales consist primarily of satellite service capacity, depreciation, service network overhead expense associated with our VSAT Broadband network infrastructure, direct network service labor, product installation costs, media materials and distribution costs, and service repair materials. For the three months ended September 30, 2026, costs of service sales increased by $5.1 million, or 31%, to $21.8 million from $16.7 million in the three months ended September 30, 2025, primarily due to a $4.7 million increase in airtime costs of service sales. As a percentage of service sales, costs of service sales were 66% for the three months ended September 30, 2026 and 2025.
Our costs of product sales consist primarily of materials, manufacturing overhead, and direct labor used to produce our products. For the three months ended September 30, 2026, costs of product sales decreased by $1.7 million, or 17%, to $8.1 million from $9.8 million in the three months ended September 30, 2025, primarily due to a $4.0 million decrease in various manufacturing and other unabsorbed expenses, partially offset by a $1.3 million increase in Starlink cost of product sales, a $0.3 million increase in OneWeb cost of product sales and a $0.3 million increase in accessory and other cost of product sales. The decrease in manufacturing and other unabsorbed costs was driven by a $2.3 million increase to the inventory reserve related to TracVision TV-series products during the three months ended September 30, 2026, compared with a $5.5 million inventory write-down related to TracNet H-series terminals during the three months ended September 30, 2025. As a percentage of product sales, costs of product sales were 148% and 321% for the three months ended September 30, 2026 and 2025, respectively. Cost of product sales decreased as a percentage of product sales primarily due to the decrease in various manufacturing and other unabsorbed expenses, driven by the $3.2 million decrease in inventory write-downs.
Operating Expenses
Research and development expenses consist of direct labor, materials, external consultants, and related overhead costs that support our internally funded service and product development and sustaining activities. Research and development expense for the three months ended September 30, 2026 decreased by $0.3 million, or 26%, to $0.7 million from $1.0 million for the three months ended September 30, 2025. The decrease in research and development expense resulted primarily from a $0.2 million decrease in salaries, benefits and taxes. As a percentage of net sales, research and development expense was 2% and 3% for the three months ended September 30, 2026 and 2025, respectively.
Sales, marketing, and support expenses consist primarily of salaries and related expenses for sales and marketing personnel, commissions for both in-house and third-party representatives, costs related to the co-development of certain content, other sales and marketing support costs such as advertising, literature and promotional materials, product service personnel and support costs, warranty-related costs and bad debt expense. Sales, marketing and support expense also includes the operating expenses of our sales office subsidiaries in Denmark, Singapore, Brazil, and Japan. Sales, marketing and support expense for the three months ended September 30, 2026 was $5.0 million, representing an increase of $0.1 million, or 3%, from $4.9 million for the three months ended September 30, 2025. The increase in sales, marketing and support expense resulted primarily from a $0.3 million increase in bad debt expense, offset by a $0.2 million decrease in consulting costs. As a percentage of net sales, sales, marketing and support expense was 13% and 17% for the three months ended September 30, 2026 and 2025, respectively.
General and administrative expenses consist of costs attributable to management, finance and accounting, information technology, human resources, certain outside professional services, and other administrative costs. General and administrative expense for the three months ended September 30, 2026 increased by $0.3 million, or 8%, to $4.0 million from $3.7 million for the three months ended September 30, 2025. The increase in general and administrative expense resulted primarily from a $0.3 million increase in facilities expense, and a $0.2 million increase in dues and subscriptions, offset by a $0.3 million decrease in salaries, benefits and taxes. As a percentage of net sales, general and administrative expense was 10% and 13% for the three months ended September 30, 2026 and 2025, respectively.
Interest and Other Income, Net
Interest income represents interest earned on our cash and cash equivalents, as well as from investments and our sales-type lease receivables. Interest income decreased to $0.5 million for the three months ended September 30, 2026 from $0.7 million for the three months ended September 30, 2025. Of the current period interest income of $0.5 million, $0.4 million is attributable to interest earned on cash and cash equivalents, while $0.1 million was attributable to interest from lease receivables. Other income, net increased by $0.1 million for the three months ended September 30, 2026 from other income, net of less than $0.1 million for the three months ended September 30, 2025. This change was driven primarily by income of $0.1 million in late fees from airtime billings.
Income Tax (Benefit) Expense
Income tax benefit for the three months ended September 30, 2026 was less than $0.1 million and primarily related to foreign income taxes and withholding taxes imposed in foreign jurisdictions. Income tax expense for the three months ended September 30, 2025 was less than $0.1 million and primarily related to withholding taxes imposed in foreign jurisdictions.
Nine months ended September 30, 2026 and 2025
Net Sales
Our net sales for the nine months ended September 30, 2026 and 2025 were as follows:
| Change | |||||||||||||||||||||||
| For the nine months ended September 30, | 2026 vs. 2025 | ||||||||||||||||||||||
| 2026 | 2025 | $ | % | ||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||
| Service | $ | 90,819 | $ | 70,079 | $ | 20,740 | 30 | % | |||||||||||||||
| Product | 13,670 | 10,411 | 3,259 | 31 | % | ||||||||||||||||||
| Net sales | $ | 104,489 | $ | 80,490 | $ | 23,999 | 30 | % | |||||||||||||||
Net sales increased by $24.0 million, or 30%, for the nine months ended September 30, 2026 as compared to the nine months ended September 30, 2025. Service sales increased by $20.7 million, or 30%, to $90.8 million for the nine months ended September 30, 2026 from $70.1 million for the nine months ended September 30, 2025. The increase in service sales was primarily due to a $20.0 million increase in our airtime service sales, which reflected a substantial increase in LEO service sales driven by an increase in subscribers for both Starlink and OneWeb. This increase in LEO service sales was partially offset by a substantial decrease in VSAT service subscribers. For the nine months ended September 30, 2026, LEO service sales represented 52% of service sales, as compared to 31% for the nine months ended September 30, 2025. The increase in LEO service sales as a percentage of total service sales resulted from both a substantial increase in LEO service sales and a substantial decrease in VSAT service sales. Competing LEO service providers have continued to expand their product and service offerings, further heightening competition in the commercial and global leisure markets.
Product sales increased by $3.3 million, or 31%, to $13.7 million for the nine months ended September 30, 2026 from $10.4 million for the nine months ended September 30, 2025. The increase in product sales was primarily due to a $2.7 million increase in Starlink product sales, a $1.3 million increase in OneWeb product sales, and a $1.0 million increase in accessory and service parts product sales, partially offset by a $1.1 million decrease in TracVision product sales and a $0.5 million decrease in VSAT product sales. Competition from low-cost LEO services, which include streaming capabilities, has had a significant impact on sales of our TracVision products.
Costs of Sales
Our costs of sales for the nine months ended September 30, 2026 and 2025 were as follows:
| Change | |||||||||||||||||||||||
| For the nine months ended September 30, | 2026 vs. 2025 | ||||||||||||||||||||||
| 2026 | 2025 | $ | % | ||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||
| Service | $ | 59,284 | $ | 45,139 | $ | 14,145 | 31 | % | |||||||||||||||
| Product | 16,846 | 16,863 | (17) | - | % | ||||||||||||||||||
| Costs of sales | $ | 76,130 | $ | 62,002 | $ | 14,128 | 23 | % | |||||||||||||||
Costs of sales increased by $14.1 million, or 23%, in the nine months ended September 30, 2026 to $76.1 million from $62.0 million in the nine months ended September 30, 2025. The increase in costs of sales was driven by a $14.1 million increase in costs of service sales, while cost of product sales decreased by less than $0.1 million in the same period. As a percentage of net sales, costs of sales were 73% and 77% for the nine months ended September 30, 2026 and 2025, respectively.
For the nine months ended September 30, 2026, costs of service sales increased by $14.1 million, or 31%, to $59.3 million from $45.1 million for the nine months ended September 30, 2025, primarily due to a $13.1 million increase in airtime cost of service sales, a $0.4 million increase in CommBox Edge cost of service sales, a $0.4 million increase in content services cost of service sales, and a $0.2 million increase in activation and service costs. As a percentage of service sales, costs of service sales were 65% and 64% for the nine months ended September 30, 2026 and 2025, respectively.
For the nine months ended September 30, 2026, costs of product sales decreased by less than $0.1 million, to $16.8 million from $16.9 million in the nine months ended September 30, 2025, primarily due to a $2.6 million decrease in various manufacturing and other unabsorbed expenses and a $0.6 million decrease in TracVision cost of product sales, offset by a $2.0 million increase in Starlink cost of product sales and a $1.1 million increase in OneWeb cost of product sales. The decrease in manufacturing and other unabsorbed costs was driven by a $2.3 million increase to the inventory reserve related to TracVision TV-series products during the nine months ended September 30, 2026, compared with a $5.5 million inventory write-down related to TracNet H-series terminals during the nine months ended September 30, 2025. As a percentage of product sales, costs of product sales were 123% and 162% for the nine months ended September 30, 2026 and 2025, respectively. Cost of product sales decreased as a percentage of product sales primarily due to the decrease in various manufacturing and other unabsorbed expenses, driven by the $3.2 million decrease in inventory write-downs.
Operating Expenses
Research and development expenses for the nine months ended September 30, 2026 decreased by $0.8 million, or 27%, to $2.2 million from $3.1 million for the nine months ended September 30, 2025. The decrease in research and development expenses resulted primarily from a $0.8 million decrease in salaries, benefits and taxes. As a percentage of net sales, research and development expenses were 2% and 4% for the nine months ended September 30, 2026 and 2025, respectively.
Sales, marketing and support expenses for the nine months ended September 30, 2026 increased by $0.5 million, or 3%, to $15.3 million from $14.9 million for the nine months ended September 30, 2025. The increase in sales, marketing and support expenses resulted primarily from a $0.6 million increase in salaries, benefits and taxes, and a $0.4 million increase in bad debt expense, partially offset by a $0.4 million decrease in warranty expenses and a $0.2 million decrease in facilities expenses. As a percentage of net sales, sales, marketing and support expenses were 15% and 19% for the nine months ended September 30, 2026 and 2025, respectively.
General and administrative expenses for the nine months ended September 30, 2026 increased by $1.4 million, or 13%, to $12.2 million from $10.8 million for the nine months ended September 30, 2025. The increase in general and administrative expenses resulted primarily from a $0.5 million increase in professional fees, a $0.3 million increase in facilities expenses, a $0.3 million increase in amortization expense and a $0.2 million increase in bank fees. As a percentage of net sales, general and administrative expenses were 12% and 13% for the nine months ended September 30, 2026 and 2025, respectively.
Interest and Other Income, Net
Interest income decreased to $1.6 million for the nine months ended September 30, 2026 from $1.8 million for the nine months ended September 30, 2025. Of the current period interest income of $1.6 million, $1.4 million is attributable to interest earned on cash and cash equivalents, and $0.2 million was attributable to interest from lease receivables. Other income, net decreased by $0.6 million to other income, net of $0.3 million for the nine months ended September 30, 2026 from other income, net of $0.8 million for the nine months ended September 30, 2025. This change was driven primarily by the absence of a net gain of $1.0 million on the sales of 50 Enterprise Center and 75 Enterprise Center, and a net loss of $0.3 million on the disposal of a discontinued project during the nine months ended September 30, 2025. The Company did not record comparable gains and losses from property dispositions and project write-offs during the nine months ended September 30, 2026.
Income Tax Expense
Income tax expense for the nine months ended September 30, 2026 was $0.3 million and primarily related to foreign income taxes and withholding taxes imposed in foreign jurisdictions. Income tax expense for the nine months ended September 30, 2025 was $0.1 million and primarily related to state taxes and withholding taxes imposed in foreign jurisdictions.
Liquidity and Capital Resources
Our primary liquidity needs have been to fund general business requirements, including working capital requirements and capital expenditures. We may also wish to pursue selective acquisitions that add recurring revenue. In recent years, we have funded our operations primarily from the sale of two businesses in 2022, the sale of 50 Enterprise Center, the sale of 75 Enterprise Center, cash flows from operations and proceeds received from exercises of stock options and the issuance of stock. These asset sales were non-recurring, and we do not expect comparable proceeds to be available in future periods. As a result, our future liquidity will depend increasingly on our ability to generate cash from operations, which may not be sufficient to fund our needs.
On August 9, 2022, we sold our inertial navigation business to EMCORE Corporation for net proceeds of $54.9 million, less specified deductions.
As of September 30, 2026, we had $50.7 million in cash and cash equivalents, of which $2.1 million in cash equivalents was held in local currencies by our foreign subsidiaries. As of September 30, 2026, we had $91.3 million in working capital.
Based upon our current working capital position, current operating plans and expected business conditions, we expect to have sufficient funds through at least twelve months from the date that this report is filed with the SEC to fund our short-term and long-term working capital requirements, including capital expenditures, contractual obligations and potential acquisitions. In recognition of the substantial growth of Starlink airtime services as a percentage of our revenue since the second quarter of 2024 and in an effort to increase margins, we entered into an agreement in the fourth quarter of 2025 to purchase a substantial block of Starlink Global Business data for $45.0 million. We made an upfront payment of $5.0 million upon entry into the agreement, a payment of $10.0 million in January 2026, and payments of $6.0 million in each of February 2026, May 2026 and August 2026. Under this agreement the remaining $12.0 million is payable in two quarterly payments through the first quarter of 2027. We are currently in discussions with Starlink regarding a renegotiation of this agreement, which would apply to both the unused data under the existing agreement and the purchase of additional data. We expect that any such agreement would take effect on December 1, 2026. Starlink has recently implemented price increases across its Starlink service offerings, including those available to resellers such as KVH, and we anticipate that price increases will be reflected in the terms of any new arrangement. Our negotiation with Starlink is ongoing and we can make no assurances regarding the terms on which Starlink data (including data under our existing agreement) will be available to us, the timeline to reach a definitive agreement, or whether a definitive agreement will be reached at all. If we do not enter into a new agreement with Starlink or are unable to negotiate terms that are acceptable to us, it will have a material adverse impact on our revenue, profitability and cash flows.
Because the proceeds from the asset sales that funded our operations in recent years are non-recurring, and because cash generated from operations has historically been a less significant source of our liquidity, there can be no assurance that cash from operations will be sufficient to fund our needs if our existing cash resources are depleted. Our ability to generate sufficient operating cash flow will depend significantly on our airtime revenues, which are subject to uncertainty, including as a result of changes in Starlink's pricing to us or to end users, the terms on which Starlink makes its services available to us and our competitors, and customer demand. Our funding plans for our working capital needs and other commitments may be adversely impacted if our underlying assumptions regarding our anticipated revenues and expenses are not realized. If our operating results fail to meet our expectations, we could be required to seek additional funding through public or private financings or other arrangements. In that event, adequate funds may not be available when needed or may be available only on terms which could have a negative impact on our business and results of operations. In addition, if we raise funds by issuing equity securities, our stockholders may experience dilution.
Net cash used in operations was $1.5 million for the nine months ended September 30, 2026 compared to net cash provided by operations of $13.7 million for the nine months ended September 30, 2025. The $15.3 million increase in net cash used in operations was primarily the result of a $19.4 million increase in cash outflows related to prepaid expenses and other current assets, which reflected the $28.0 million purchase of Starlink pooled data in 2026, a $3.6 million increase in cash outflows relating to inventories and a $2.4 million decrease in cash inflows relating to accounts receivable, partially offset by a $7.9 million decrease in net loss, a $1.8 million decrease in cash outflows related to accounts payable, a $0.3 million decrease in cash outflows relating to accrued compensation, product warranty and other expenses and a $0.2 million increase in cash inflows related to deferred revenue.
Net cash used in investing activities was $5.1 million for the nine months ended September 30, 2026 compared to net cash provided by investing activities of $9.8 million for the nine months ended September 30, 2025. The $14.9 million increase in net cash used in investing activities was primarily the result of a decrease in proceeds of $12.8 million from the sales of 50 and 75 Enterprise Center received in the nine months ended September 30, 2025 as compared to no such proceeds in the nine months ended September 30, 2026, as well as a $1.2 million decrease in proceeds from the sale of fixed assets, a $0.6 million increase in acquisition of intangible assets, and a $0.3 million increase in capital expenditures.
Net cash used in financing activities was $12.5 million for the nine months ended September 30, 2026 compared to net cash used in financing activities of $1.3 million for the nine months ended September 30, 2025. The $11.2 million increase in net cash used in financing activities is the result of an $11.9 million increase in cash outflows related to the repurchase of common stock, offset by a $0.7 million increase in cash inflows related to the proceeds from stock options exercised.
Other Matters
On December 9, 2024, our Board of Directors authorized a share repurchase program pursuant to which we could purchase outstanding shares of our common stock for an aggregate purchase price of up to $10.0 million. On March 6, 2026, our Board of Directors authorized an increase in the size of the repurchase program from $10.0 million to $15.0 million. As of September 30, 2026, we completed repurchases totaling $15.0 million and fully exhausted the authorized amount available under the repurchase program. Accordingly, no repurchase capacity remained under the program as of September 30, 2026.
Under the program, we, at management's discretion, could repurchase shares from time to time through various means, including on the open market, in privately negotiated transactions or block transactions, or through an accelerated repurchase agreement. We elected to make purchases pursuant to Rule 10b-18 under the Securities Exchange Act of 1934, as amended, which imposed certain volume limitations, and/or pursuant to Rule 10b5-1 under that act, which permitted repurchases to occur during periods when we might otherwise have been precluded from making purchases under insider trading laws or our company policy. The volume and timing of repurchases depended on a variety of factors, including the availability of shares, price, market conditions, alternative uses of capital, liquidity, general business conditions, satisfaction of debt covenants, and applicable regulatory requirements. The program did not obligate us to repurchase any minimum number or dollar amount of shares, and the program could have been modified, suspended or terminated at any time without prior notice.
During the three months ended September 30, 2026, we repurchased 1.2 million shares of common stock in open market transactions at a cost of approximately $10.7 million. During the nine months ended September 30, 2026, we repurchased 1.5 million shares of common stock in open market transactions at a cost of approximately $13.3 million.
There were no other repurchase programs outstanding.
KVH Industries Inc. published this content on November 05, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on November 05, 2026 at 18:09 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]