Company: KVHI
Filing Date: 2025-11-06
Form Type: 10-Q
Source: 0001007587-25-000022
Chunk: 182

Company: KVH INDUSTRIES INC \DE\
Filing Date: 2025-11-06
Form: 10-Q
Item: Part I, Item 8
Chunk 182
---
 from restructuring activities, dispositions of assets or divestitures could adversely affect our results of operations and use of cash in the periods in which we take these actions. Any disposition of assets or divestiture could also result in the retention of liabilities and expenses that are not assumed by the buyer or the loss of operating income from the divested assets or operations, either of which could negatively impact profitability after any divestiture.

36

We must generate a certain level of service sales in order to maintain or improve our service gross margins. 

As a result of our global satellite network infrastructure, we incur certain costs that generally do not vary directly in proportion to the volume of service sales, and we have limited ability to reduce these fixed costs. If service sales, including through our AgilePlans subscription model, continue to decline, our service gross margins will also continue to decline, particularly if the contractual minimum expenditure requirements of our VSAT airtime supply agreements, referred to above, continue to require us to make payments in excess of our needs. The failure to improve our global HTS service gross margins and unit sales would have a material adverse effect on our overall profitability.

During the second quarter of 2024, we prepaid $17.0 million for access to a large block of Starlink Mobile Priority data at favorable rates. If the volume of services sales is not significant enough to consume this pooled data within the applicable period, our gross margins will suffer. While we currently expect to consume all of this pooled data within the contract period, if at any time we were to determine that it is more likely than not that we would not consume a portion of the pooled data, we may expense the applicable portion at the time of each such determination. Although we intend to seek to purchase another large block of data at favorable rates in the fourth quarter of 2025, there can be no assurance that our efforts will be successful or that we can make such purchase at the same or better rates. A failure to purchase bulk data at favorable rates may result in increased costs, lower profit margins and increased volatility in airtime expenses.

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.

We currently offer our global HTS VSAT service and LEO services in the Americas, Europe, the Middle East, Africa, Asia-Pacific, Indian, and Australian and New Zealand waters, as permitted by local regulatory authorities and licensing. We may need to maintain or expand capacity in existing coverage areas to support our