Company: KVHI
Filing Date: 2025-03-10
Form Type: 10-K
Source: 0001007587-25-000003
Chunk: 58

Company: KVH INDUSTRIES INC \DE\
Filing Date: 2025-03-10
Form: 10-K
Item: Item 1
Chunk 58
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 sales decreased by $18.2 million, or 16%, to $96.4 million in 2024 from $114.6 million in 2023. The decrease in service sales was primarily due to a $17.1 million decrease in our airtime service sales, driven primarily by a decrease in VSAT-only subscribers, partially offset by an increase in LEO service sales. $2.7 million of this decrease was related to the U.S. Coast Guard contract downgrade. Alternative solutions offered by recent low-earth-orbit (LEO) entrants have heightened competition in the global leisure segment and in commercial and government markets.

We expect that the trend of intensifying competition from LEO satellite service providers will continue and that our revenues from VSAT service sales will continue to decline on a year-over-year basis. It is possible that the rate of reduction will continue to accelerate.

Product sales decreased by $0.4 million, or 2%, to $17.4 million in 2024 from $17.8 million in 2023. The decrease in product sales was primarily the result of a $2.2 million decrease in VSAT Broadband product sales, a $2.0 million decrease in TracVision product sales and a $1.3 million decrease in accessory and service product sales, partially offset by a $5.0 million increase in Starlink product sales and a $0.5 million increase in CommBox Edge product sales. The decline in product sales was primarily driven by product sales mix. Competition from low-cost alternatives to VSAT, which include streaming capabilities, has had a significant impact on sales of both TracVision and VSAT Broadband products.

In the first quarter of 2024, the U.S. Coast Guard, which accounted for approximately $11 million of our service sales in 2023, advised us that it intended to transition its primary satellite service relationship on the vessels we served to SpaceX Starshield. In the third quarter of 2024, we received and processed the anticipated service downgrade request from the U.S. Coast Guard, which reduces anticipated revenue from this customer for 2025 through 2027 by approximately 95%. As a result, we expect to generate substantially less revenue from the U.S. Coast Guard.

Costs of Sales

Costs of sales consists of costs of product sales and costs of service sales. Costs of sales decreased by $15.9 million, or 17%, in 2024 to $78.6 million from $94.