Company: KVHI
Filing Date: 2025-11-06
Form Type: 10-Q
Source: 0001007587-25-000022
Chunk: 167

Company: KVH INDUSTRIES INC \DE\
Filing Date: 2025-11-06
Form: 10-Q
Item: Part I, Item 8
Chunk 167
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 September 30, 2025 and 2024, respectively. The increase in cost of service sales as a percentage of service sales was primarily due to increased rates of Starlink airtime data usage by customers prior to expiration of that data and the purchase during the quarter of VSAT airtime in excess of anticipated usage in order to help meet our contractual minimum purchase obligations for VSAT airtime in 2025.

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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, 2025, costs of product sales increased by $5.1 million, or 109%, to $9.8 million from $4.7 million in the three months ended September 30, 2024, primarily due to a $6.0 million increase in various manufacturing and other unabsorbed expenses and a $0.4 million increase in OneWeb cost of product sales. The manufacturing and other unabsorbed costs included a $5.5 million inventory writedown related primarily to further reduced demand for certain of our hardware products as well as a reduction in the prices we charge for certain TracNet H-series terminals. These increases were partially offset by a $0.4 million decrease in Starlink cost of product sales, a $0.4 million decrease in TracVision costs of product sales and a $0.3 million decrease in VSAT Broadband cost of product sales. As a percentage of product sales, costs of product sales were 321% and 103% for the three months ended September 30, 2025 and 2024, respectively. Cost of product sales increased as a percentage of product sales primarily due to the increase in various manufacturing and other unabsorbed expenses.

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 September 30, 2025 decreased by $0.4 million, or 31%, to $1.0 million from $1.4 million for the three months ended September 30, 2024. The decrease in research and development expense resulted primarily from a $0.3 million decrease in salaries, benefits and taxes. As a percentage of net sales, research and development expense was 3% and 5% for the three months ended September 30, 2025 and