Company: KVHI
Filing Date: 2025-05-07
Form Type: 10-Q
Source: 0001007587-25-000008
Chunk: 6

Company: KVH INDUSTRIES INC \DE\
Filing Date: 2025-05-07
Form: 10-Q
Item: Part I, Item 2
Chunk 6
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 As a percentage of net sales, costs of sales were 71% and 66% for the three months ended March 31, 2025 and 2024, 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 March 31, 2025, costs of service sales increased by $0.2 million, or 1%, to $14.2 million from $14.0 million for the three months ended March 31, 2024, primarily due to a $0.2 million increase in content services cost of service sales. As a percentage of service sales, costs of service sales were 66% and 56% for the three months ended March 31, 2025 and 2024, respectively, driven primarily by fixed costs.

Our costs of product sales consist primarily of materials, manufacturing overhead, and direct labor used to produce our products. For the three months ended March 31, 2025, costs of product sales decreased by $1.6 million, or 30%, to $3.7 million from $5.3 million in the three months ended March 31, 2024, primarily due to a $1.2 million decrease in various manufacturing and other unabsorbed expenses, a $0.4 million decrease in TracVision cost of product sales and a $0.2 million decrease in accessory cost of product sales, partially offset by a $0.2 million increase in Starlink cost of product sales. As a percentage of product sales, costs of product sales were 99% and 126% for the three months ended March 31, 2025 and 2024, respectively. Cost of product sales decreased as a percentage of product sales primarily due to the decrease in various manufacturing and other unabsorbed expense.

27

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 the three months ended March 31, 2025 decreased by $1.9 million, or 61%, to $1.2 million from $3.0 million for the three months ended March 31, 2024. The decrease in research and development expense resulted primarily from a $