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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 2023
OR
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             
Commission File Number 0-28082
KVH Industries, Inc.
(Exact Name of Registrant as Specified in its Charter)
Delaware05-0420589
(State or Other Jurisdiction of Incorporation or Organization)(I.R.S. Employer Identification Number)
50 Enterprise Center, Middletown, RI 02842
(Address of Principal Executive Offices) (Zip Code)
(401) 847-3327
(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading Symbol(s)Name of Each Exchange on which Registered
The Nasdaq Stock Market LLC
Common Stock, par value $0.01 per shareKVHI
(Nasdaq Global Select Market)


Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒  No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer☐Accelerated filer☒
Non-accelerated filer☐Smaller reporting company☒
Emerging growth company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
DateClassOutstanding shares
October 30, 2023Common Stock, par value $0.01 per share19,610,790



KVH INDUSTRIES, INC. AND SUBSIDIARIES
Form 10-Q
INDEX
  Page No.
ITEM 1.
Consolidated Balance Sheets as of September 30, 2023 (unaudited) and December 31, 2022
Consolidated Statements of Operations for the three and nine months ended September 30, 2023 and 2022 (unaudited)
Consolidated Statements of Comprehensive (Loss) Income for the three and nine months ended September 30, 2023 and 2022 (unaudited)
Consolidated Statements of Stockholders' Equity for the three and nine months ended September 30, 2023 and 2022 (unaudited)
Consolidated Statements of Cash Flows for the nine months ended September 30, 2023 and 2022 (unaudited)
ITEM 2.
ITEM 4.
ITEM 1A.
ITEM 6.
 
2


PART I. FINANCIAL INFORMATION
ITEM 1.    Financial Statements
KVH INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
September 30, 2023December 31, 2022
ASSETS(unaudited)
Current assets:
Cash and cash equivalents$11,484 $21,056 
Marketable securities57,710 55,680 
Accounts receivable, net of allowance for credit losses of $1,010 and $1,268 as of September 30, 2023 and December 31, 2022, respectively
28,190 27,427 
Inventories26,423 22,730 
Prepaid expenses and other current assets 4,617 3,067 
Current contract assets1,130 1,243 
Total current assets129,554 131,203 
Property and equipment, net
49,407 53,118 
Intangible assets, net
— 404 
Goodwill— 5,308 
Right of use assets1,191 2,168 
Other non-current assets3,985 5,037 
Non-current contract assets2,557 3,033 
Deferred income tax asset258 259 
Total assets$186,952 $200,530 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$3,644 $20,449 
Accrued compensation and employee-related expenses4,936 7,621 
Accrued other11,609 4,234 
Accrued product warranty costs642 1,287 
Contract liabilities3,268 3,108 
Current operating lease liability921 1,532 
Liability for uncertain tax positions693 637 
Total current liabilities25,713 38,868 
Long-term operating lease liability272 636 
Long-term contract liabilities3,905 4,315 
Deferred income tax liability55 55 
Total liabilities$29,945 $43,874 
Commitments and contingencies (Notes 2, 10, and 15)
Stockholders’ equity:
Preferred stock, $0.01 par value. Authorized 1,000,000 shares; none issued
— — 
Common stock, $0.01 par value. Authorized 30,000,000 shares; 21,066,899 and 20,631,152 shares issued at September 30, 2023 and December 31, 2022, respectively; and 19,610,790 and 19,198,458 shares outstanding at September 30, 2023 and December 31, 2022, respectively
211 206 
Additional paid-in capital164,505 160,475 
Retained earnings8,603 11,936 
Accumulated other comprehensive loss(4,222)(4,110)
169,097 168,507 
Less: treasury stock at cost, common stock, 1,456,109 and 1,432,694 shares as of September 30, 2023 and December 31, 2022, respectively.
(12,090)(11,851)
Total stockholders’ equity157,007 156,656 
Total liabilities and stockholders’ equity$186,952 $200,530 
See accompanying Notes to Unaudited Consolidated Financial Statements.
3

KVH INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except earnings per share amounts, unaudited)
 
Three Months EndedNine Months Ended
September 30,September 30,
 2023202220232022
Sales:
Product$4,152 $6,625 $14,526 $19,808 
Service29,397 28,544 86,883 83,065 
Net sales33,549 35,169 101,409 102,873 
Costs and expenses:
Costs of product sales4,729 6,747 16,596 17,363 
Costs of service sales16,238 15,379 47,848 45,505 
Research and development2,398 2,745 7,379 8,380 
Sales, marketing and support4,854 5,710 15,708 18,355 
General and administrative4,367 5,559 13,139 19,532 
Goodwill impairment charge5,333 — 5,333 — 
Long-lived assets impairment charge657 — 657 — 
Total costs and expenses38,576 36,140 106,660 109,135 
Loss from operations(5,027)(971)(5,251)(6,262)
Interest income997 389 2,660 798 
Interest expense— 1 — 3 
Other (expense) income, net(121)569 (583)1,561 
Loss from continuing operations before income tax expense(4,151)(14)(3,174)(3,906)
Income tax expense from continuing operations95 81 159 645 
Net loss from continuing operations$(4,246)$(95)$(3,333)$(4,551)
Net income from discontinued operations, net of tax— 29,741 — 28,061 
Net (loss) income$(4,246)$29,646 $(3,333)$23,510 
Net loss from continuing operations per common share
Basic$(0.22)$(0.01)$(0.17)$(0.25)
Diluted$(0.22)$(0.01)$(0.17)$(0.25)
Net income from discontinued operations per common share
Basic$0.00 $1.59 $0.00 $1.51 
Diluted$0.00 $1.59 $0.00 $1.51 
Net (loss) income per common share
Basic$(0.22)$1.58 $(0.17)$1.27 
Diluted$(0.22)$1.58 $(0.17)$1.27 
Weighted average number of common shares outstanding:
Basic19,231 18,706 19,090 18,574 
Diluted19,231 18,706 19,090 18,574 


See accompanying Notes to Unaudited Consolidated Financial Statements.
4

KVH INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(in thousands, unaudited)
 
Three Months EndedNine Months Ended
 September 30,September 30,
 2023202220232022
Net (loss) income$(4,246)$29,646 $(3,333)$23,510 
Other comprehensive loss, net of tax:
Unrealized gain on available-for-sale securities— — 12 — 
Foreign currency translation adjustment(267)(646)(124)(1,258)
Other comprehensive loss, net of tax(1)
(267)(646)(112)(1,258)
Total comprehensive (loss) income$(4,513)$29,000 $(3,445)$22,252 
(1) Tax impact was nominal for all periods.

See accompanying Notes to Unaudited Consolidated Financial Statements.
5

KVH INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands, unaudited)
 Common StockAdditional
Paid-in
Capital		Retained EarningsAccumulated
Other
Comprehensive
Loss 		Treasury StockTotal
Stockholders’
Equity
 SharesAmountSharesAmount
Balance at June 30, 202320,969 $210 $163,690 $12,849 $(3,955)(1,456)$(12,090)$160,704 
Net loss— — — (4,246)— — — (4,246)
Other comprehensive loss— — — — (267)— — (267)
Stock-based compensation— — 559 — — — — 559 
Issuance of common stock under employee stock purchase plan17 — 123 — — — — 123 
Exercise of stock options and issuance of restricted stock awards, net of forfeitures81 1 133 — — — — 134 
Balance at September 30, 202321,067 $211 $164,505 $8,603 $(4,222)(1,456)$(12,090)$157,007 
 Common StockAdditional
Paid-in
Capital		Retained EarningsAccumulated
Other
Comprehensive
Loss 		Treasury StockTotal
Stockholders’
Equity
 SharesAmountSharesAmount
Balance at December 31, 202220,631 $206 $160,475 $11,936 $(4,110)(1,433)$(11,851)$156,656 
Net loss— — — (3,333)— — — (3,333)
Other comprehensive loss— — — — (112)— — (112)
Stock-based compensation— — 1,433 — — — — 1,433 
Issuance of common stock under employee stock purchase plan17 — 123 — — — — 123 
Acquisition of treasury stock— — — — — (23)(239)(239)
Exercise of stock options and issuance of restricted stock awards, net of forfeitures419 5 2,474 — — — — 2,479 
Balance at September 30, 202321,067 $211 $164,505 $8,603 $(4,222)(1,456)$(12,090)$157,007 
 Common StockAdditional
Paid-in
Capital		(Accumulated Deficit) Retained EarningsAccumulated
Other
Comprehensive Loss		Treasury StockTotal
Stockholders’
Equity
 SharesAmountSharesAmount
Balance at June 30, 202220,503 $205 $157,996 $(18,301)$(4,021)(1,433)$(11,851)$124,028 
Net income— — — 29,646 — — — 29,646 
Other comprehensive loss— — — — (646)— — (646)
Stock-based compensation— — 1,109 — — — — 1,109 
Exercise of stock options and issuance of restricted stock awards, net of forfeitures103 1 450 — — — — 451 
Balance at September 30, 202220,606 $206 $159,555 $11,345 $(4,667)(1,433)$(11,851)$154,588 
 Common StockAdditional
Paid-in
Capital		(Accumulated Deficit) Retained EarningsAccumulated
Other
Comprehensive Loss		Treasury StockTotal
Stockholders’
Equity
 SharesAmountSharesAmount
Balance at December 31, 202120,343 $203 $156,199 $(12,165)$(3,409)(1,433)$(11,851)$128,977 
Net income— — — 23,510 — — — 23,510 
Other comprehensive loss— — — — (1,258)— — (1,258)
Stock-based compensation— — 2,695 — — — — 2,695 
Issuance of common stock under employee stock purchase plan22 — 193 — — — — 193 
Exercise of stock options and issuance of restricted stock awards, net of forfeitures241 3 599 — — — — 602 
Taxes accrued for net share settlement of options— — (131)— — — — (131)
Balance at September 30, 202220,606 $206 $159,555 $11,345 $(4,667)(1,433)$(11,851)$154,588 
See accompanying Notes to Unaudited Consolidated Financial Statements.
6

KVH INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, unaudited) 
Nine Months Ended
 September 30,
 20232022
Cash flows from operating activities:
Net (loss) income$(3,333)$23,510 
Adjustments to reconcile net loss to net cash used in operating activities:
Provision for credit losses(168)459 
Depreciation and amortization10,119 10,756 
Impairment charge to goodwill and long-lived assets5,990 — 
Deferred income taxes1 (31)
Loss on disposals of fixed assets511 362 
Compensation expense related to stock-based awards and employee stock purchase plan
1,433 2,695 
Unrealized currency translation gain(150)(808)
Gain on sale of KVH Media Group Entertainment Limited— (631)
Gain on sale of inertial navigation business
— (30,858)
Changes in operating assets and liabilities:
Accounts receivable(593)(117)
Inventories(3,693)(9,643)
Prepaid expenses, other current assets, and current contract assets(1,430)(1,543)
Other non-current assets and non-current contract assets1,530 1,574 
Accounts payable(16,758)612 
Contract liabilities and long-term contract liabilities(255)203 
Accrued compensation, product warranty and other4,119 1,993 
Net cash used in operating activities$(2,677)$(1,467)
Cash flows from investing activities:
Capital expenditures(7,170)(11,000)
Cash paid for acquisition of intangible asset(35)(42)
Proceeds from the sale of KVH Media Group Entertainment Limited, net of cash sold— 2,378 
Proceeds from the sale of inertial navigation business— 55,000 
Purchases of marketable securities(17,441)(55,203)
Maturities and sales of marketable securities15,422 13,164 
Net cash (used in) provided by investing activities$(9,224)$4,297 
Cash flows from financing activities:
Proceeds from stock options exercised and employee stock purchase plan2,604 796 
Purchase of treasury stock(239)— 
Payment of finance lease(22)(198)
Net cash provided by financing activities$2,343 $598 
Effect of exchange rate changes on cash and cash equivalents(14)(402)
Net (decrease) increase in cash and cash equivalents(9,572)3,026 
Cash and cash equivalents at beginning of period21,056 11,376 
Cash and cash equivalents at end of period$11,484 $14,402 
Supplemental disclosure of non-cash investing and financing activities:
Changes in accrued other and accounts payable related to property and equipment additions$3 $6 
Taxes accrued for net share settlement of options$— $131 
See accompanying Notes to Unaudited Consolidated Financial Statements.
7

KVH INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Interim Financial Statements
(Unaudited, all amounts in thousands except per share amounts)

(1)    Description of Business

KVH Industries, Inc. (together with its subsidiaries, the Company or KVH) designs, develops, manufactures and markets mobile connectivity products and services for the marine and land markets.

KVH’s satellite-only and hybrid products enable marine customers to receive data, Voice over Internet Protocol (VoIP), and value-added services via satellite, cellular, and shore-based Wi-Fi networks onboard commercial, leisure, and military/government vessels. In addition, the Company’s in-motion television terminals permit customers to receive live digital television via regional satellite services in marine vessels, recreational vehicles, buses and automobiles. KVH sells its products through an extensive international network of dealers and distributors. KVH also sells and leases products to service providers and end users.

KVH’s service sales primarily represent revenue earned from satellite Internet airtime services. KVH provides, for monthly fixed and per-usage fees, satellite connectivity encompassing broadband Internet and VoIP services, to its TracNet H-series and TracPhone V-HTS series customers via KVH’s global high-throughput satellite (HTS) network. Revenue from our cellular airtime service increasingly supplements KVH’s satellite-only airtime revenue following the July 2022 launch of the KVH ONE hybrid network and TracNet H-series terminals. This product and service combination integrates global satellite service with KVH-provided cellular service in more than 150 countries, along with shore-based Wi-Fi access. The May 2023 introduction of the KVH ONE OpenNet Program expanded access to KVH's global HTS network and airtime services to non-KVH terminals for the first time.

AgilePlans, KVH’s connectivity as a service offering, is a monthly subscription model that provides global connectivity to commercial maritime customers. The subscription includes the choice of satellite-only and hybrid terminals, airtime data service, VoIP, daily news, subsidized shipping and installation, and global support for a monthly fee with no minimum contract commitment. KVH offers AgilePlans subscribers a variety of airtime data plans with varying data speeds and fixed data usage levels with per megabyte overage charges. These airtime plans are similar to those the Company offers to customers who elect to purchase or lease a TracNet H-series or TracPhone V-HTS series terminal.

The Company recognizes the monthly AgilePlans subscription fee as service revenue over the service delivery period. The Company retains ownership of the hardware it provides to AgilePlans customers, who must return the hardware to KVH if they decide to terminate the service. Because KVH does not sell the hardware under AgilePlans, the Company does not recognize any product revenue when the hardware is deployed to an AgilePlans customer. KVH records the cost of the hardware used by AgilePlans customers as revenue-generating assets and depreciates the cost over an estimated useful life of five years. Since the Company is retaining ownership of the hardware, it does not accrue any warranty costs for AgilePlans hardware; however, any maintenance costs on the hardware are expensed in the period these costs are incurred.

Service sales also include the distribution of commercially licensed entertainment, including news, sports, and movies to commercial customers in the maritime and hotel markets through the KVH Media Group, along with supplemental value-added cybersecurity, email, and crew internet services. In addition, KVH earns monthly usage fees from third-party satellite connectivity services, including VoIP, data and Internet services, provided to its Inmarsat and Iridium customers who choose to activate their subscriptions with KVH. Service sales also include sales from product repairs and extended warranty sales.

KVH's marine leisure business is highly seasonal, and seasonality can also impact the Company's commercial marine business, although typically to a lesser degree. Historically, the Company has generated the majority of its marine leisure product revenues during the first and second quarters of each year, and these revenues typically decline in the third and fourth quarters of each year, compared to the first two quarters. Temporary suspensions of the Company's airtime services typically increase in the fourth and first quarters of each year as boats are placed out of service during the winter months.

8

On August 9, 2022, the Company sold its inertial navigation business to EMCORE Corporation for net proceeds of $54,904, less specified deductions. On August 9, 2022, the Company also entered into a Transition Services Agreement with EMCORE, pursuant to which the Company agreed to provide certain transition services to support the continued operation of the inertial navigation business for six months following the sale with two extension options of three months each. The fee comprised both fixed monthly fees of approximately $100 as well as variable amounts for certain additional services with escalation increases on the fixed and variable rates for each extension option. The Company did not have any continuing involvement in these operations other than the transition services, which were recorded as an offset to general and administrative expenses in continuing operations. As of September 30, 2023, the Company is no longer providing transition services. For the three and nine months ended September 30, 2023, the Company recognized an offset to general and administrative expenses associated with the Transition Services Agreement of $(13) and $710, respectively. The Company determined that the sale met the requirements for reporting as discontinued operations in accordance with Accounting Standards Codification (ASC) 205-20. Please see Note 16 for the discontinued operations disclosures. As a result of the sale of its inertial navigation business, the Company operates as one reportable segment.

(2)     Summary of Significant Accounting Policies

Basis of Presentation

The accompanying consolidated interim financial statements of KVH Industries, Inc. and its wholly owned subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States of America. The Company has evaluated all subsequent events through the date of this filing. All significant intercompany accounts and transactions have been eliminated in consolidation.

The 2022 consolidated interim financial statements reflect the sale of the inertial navigation business as discontinued operations. See Notes 1 and 16 for further information on the sale of the inertial navigation business.

The consolidated interim financial statements have not been audited by the Company’s independent registered public accounting firm and include all adjustments (consisting of only normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation of the financial condition, results of operations, and cash flows for the periods presented. These consolidated interim financial statements do not include all disclosures associated with annual financial statements and accordingly should be read in conjunction with the Company’s consolidated financial statements and related notes included in the Company’s annual report on Form 10-K for the year ended December 31, 2022 filed on March 16, 2023 with the Securities and Exchange Commission. The results for the three and nine months ended September 30, 2023 are not necessarily indicative of operating results for the remainder of the year.

Significant Estimates and Assumptions and Other Significant Non-Recurring Transactions

The preparation of interim financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the interim financial statements and the reported amounts of sales and expenses during the reporting periods. As described in the Company’s annual report on Form 10-K, the estimates and assumptions used by management affect the Company’s revenue recognition, valuation of accounts receivable, valuation of inventory, expected future cash flows including growth rates, discount rates, terminal values and other assumptions and estimates used to evaluate the recoverability of long-lived assets and goodwill, estimated fair values of long-lived assets, including goodwill, amortization methods and periods, certain accrued expenses and other related charges, stock-based compensation, contingent liabilities, forfeitures and key valuation assumptions for its share-based awards, estimated fulfillment costs for warranty obligations, tax reserves and recoverability of the Company’s net deferred tax assets and related valuation allowance, and the valuation of right-of-use assets and lease liabilities.

Although the Company regularly assesses these estimates, actual results could differ materially from these estimates. Changes in estimates are recorded in the period in which they become known. The Company bases its estimates on historical experience and various other assumptions that it believes to be reasonable under the circumstances.

Foreign Currency Translation
9


The financial statements of the Company’s foreign subsidiaries located in Denmark and Singapore are maintained using the United States dollar as the functional currency. Exchange rates in effect on the date of the transaction are used to record monetary assets and liabilities. Revenue and other expense elements are recorded at rates that approximate the rates in effect on the transaction dates. Foreign currency exchange gains and losses are recognized within “other (expense) income, net” in the accompanying consolidated statements of operations. The Company recorded a total of net foreign currency exchange gains (losses), which are comprised of both realized and unrealized foreign currency exchange gains and losses, in its accompanying consolidated statements of operations of $92 and $450 for the three months ended September 30, 2023 and 2022, respectively, and $(18) and $1,009 for the nine months ended September 30, 2023 and 2022, respectively.

The financial statements of the Company’s foreign subsidiaries located in the United Kingdom, Brazil, Norway, Cyprus, India and Japan use the foreign subsidiaries’ respective local currencies as the functional currency. The Company translates the assets and liabilities of these foreign subsidiaries at the exchange rates in effect at the end of each reporting period. Net sales, costs and expenses are translated using average exchange rates in effect during the period. Gains and losses from foreign currency translation are credited or charged to accumulated other comprehensive loss included in stockholders' equity in the accompanying consolidated balance sheets.

CEO Executive Employment Agreement

In May 2022, the Company entered into an executive employment agreement with Brent C. Bruun in order to retain his services and provide him with certain benefits in the event that the Company terminates his employment without cause (as defined in the agreement) or Mr. Bruun terminates his employment for good reason (as defined in the agreement) (either such termination, a “Qualifying Termination”), including following a change in control. The agreement provided that, if Mr. Bruun continued to serve as an employee through December 31, 2022 (the “Retention Date”), the Company would pay him a retention bonus equal to 75% of his base salary on the agreement date, and the Company would accelerate the vesting of his equity awards that would otherwise have vested in the twelve months after the Retention Date.

On October 11, 2022, the Company entered into an amendment to the employment agreement with Mr. Bruun that, among other things, increased his annual base salary to $448 per year, retroactive to July 1, 2022, increased his target annual incentive compensation for the second half of 2022 to 80% of his base salary (without changing his target annual incentive compensation for the first half of 2022), extended his Retention Date from December 31, 2022 to December 31, 2023, which effectively extended the period during which Mr. Bruun must remain employed by the Company in order to earn his retention bonus, and modified the amount of the retention bonus from 75% of his base salary in effect on May 2, 2022 to 75% of the highest base salary in effect for Mr. Bruun on or before the date he becomes entitled to receive the retention bonus or the “Partial Retention Bonus” (as defined in the employment agreement). If a Qualifying Termination occurs before December 31, 2023, Mr. Bruun will receive a pro rata portion of the retention bonus. If in connection with such a termination he becomes entitled to receive the change in control severance payments and benefits, he will also become entitled to receive the full retention bonus, and the Retention Date will be the later of the date of such change in control or such termination of employment. The amendment did not modify the terms of the employment agreement relating to acceleration of vesting of certain equity awards if Mr. Bruun remains employed by the Company through December 31, 2022.

As of September 30, 2023, the Company has accrued approximately $286 for the retention bonus payable to Mr. Bruun.

Contemporaneously with the amendment to Mr. Bruun’s employment agreement, the Compensation Committee also granted Mr. Bruun a restricted stock award and a non-statutory stock option, which together had an aggregate grant date fair value of approximately $100. The restricted stock award and the non-statutory stock option have terms that are materially consistent with the previously disclosed terms of similar grants to the Company’s executive officers.

(3)     Recently Issued Accounting Standards and Accounting Standards Not yet Adopted

There are no recent accounting pronouncements issued by the FASB, but not yet effective, that the Company expects would have a material impact on the Company's financial statements.

10

(4)    Marketable Securities

Marketable securities as of September 30, 2023 and December 31, 2022 consisted of the following:
September 30, 2023Amortized
Cost		Gross
Unrealized
Gains		Gross
Unrealized
Losses		Fair
Value
Money market mutual funds$57,710 $— $— $57,710 
United States treasuries— — — — 
Total marketable securities designated as available-for-sale$57,710 $— $— $57,710 
 
December 31, 2022Amortized
Cost		Gross
Unrealized
Gains		Gross
Unrealized
Losses		Fair
Value
Money market mutual funds$30,977 $— $— $30,977 
United States treasuries24,715 — (12)24,703 
Total marketable securities designated as available-for-sale$55,692 $— $(12)$55,680 

Interest income from marketable securities was $744 and $193 during the three months ended September 30, 2023 and 2022, respectively, and $2,019 and $203 during the nine months ended September 30, 2023 and 2022, respectively.

(5)     Stockholder's Equity

(a) Stock Equity and Incentive Plan
The Company recognizes stock-based compensation in accordance with the provisions of ASC Topic 718, Compensation-Stock Compensation. On June 8, 2022, at the Company's 2022 Annual Meeting of Stockholders, the stockholders of the Company approved an amendment and restatement of the Company’s current equity compensation plan to increase the number of shares of common stock reserved for issuance under the plan by 1,280 shares, from 4,800 shares to 6,080 shares (excluding rollover shares). Stock-based compensation expense was $558 and $1,103, excluding $1 and $6 of compensation charges related to our Amended and Restated 1996 Employee Stock Purchase Plan, or the ESPP, for the three months ended September 30, 2023 and 2022, respectively, and $1,408 and $2,663, excluding $25 and $32 of compensation shares related to the ESPP, for the nine months ended September 30, 2023 and 2022, respectively. As of September 30, 2023, there was $2,272 of total unrecognized compensation expense related to stock options, which is expected to be recognized over a weighted-average period of 2.66 years. As of September 30, 2023, there was $2,953 of total unrecognized compensation expense related to restricted stock awards, which is expected to be recognized over a weighted-average period of 2.52 years.

Stock Options

During the three months ended September 30, 2023, the Company issued 14 shares of common stock upon the exercise of stock options and received $113 as payment for the exercise price. No shares were surrendered to the Company to satisfy minimum tax withholding obligations. Additionally, during the three months ended September 30, 2023, no stock options were granted and 133 stock options expired, were canceled or were forfeited.

During the nine months ended September 30, 2023, the Company issued 274 shares of common stock upon the exercise of stock options and received $2,480 as payment for the exercise price. No shares were surrendered to the Company to satisfy minimum tax withholding obligations. Additionally, during the nine months ended September 30, 2023, 317 stock options were granted and 564 stock options expired, were canceled or were forfeited. During the nine months ended September 30, 2022, 398 stock options were granted. The Company has historically estimated the fair value of each option grant on the date of grant using the Black-Scholes option-pricing model. The weighted average assumptions utilized to determine the fair value of options granted during the nine months ended September 30, 2023 and 2022 are as follows:
11

Nine Months Ended September 30,
 20232022
Risk-free interest rate4.49 %2.97 %
Expected volatility43.93 %43.16 %
Expected life (in years)4.304.24
Dividend yield0 %0 %

As of September 30, 2023, there were 1,230 options outstanding with a weighted average exercise price of $9.57 per share and 510 options exercisable with a weighted average exercise price of $9.56 per share.

Restricted Stock

During the three months ended September 30, 2023, 66 shares of restricted stock were granted with a weighted average grant date fair value of 8.75 per share and no shares of restricted stock were forfeited. Additionally, during the three months ended September 30, 2023, 7 shares of restricted stock vested, of which no shares of common stock were surrendered to the Company as payment by employees in lieu of cash to satisfy minimum tax withholding obligations in connection with the vesting of restricted stock.

During the nine months ended September 30, 2023, 217 shares of restricted stock were granted with a weighted average grant date fair value of $9.49 per share and 72 shares of restricted stock were forfeited. Additionally, during the nine months ended September 30, 2023, 101 shares of restricted stock vested, of which no shares of common stock were surrendered to the Company as payment by employees in lieu of cash to satisfy minimum tax withholding obligations in connection with the vesting of restricted stock.

As of September 30, 2023, the Company had no unvested outstanding options and no outstanding shares of restricted stock that were subject to performance-based or market-based vesting conditions.

Common Stock Repurchase

In the first quarter of 2023, the Company’s Board of Directors authorized the repurchase of a portion of executive common stock. The Company repurchased 23 shares of common stock held by executives at the Company to satisfy minimum tax withholding obligations in lieu of cash payment. No shares of common stock were repurchased during the twelve months ended December 31, 2022.

(b) Employee Stock Purchase Plan

The Company's ESPP affords eligible employees the right to purchase common stock, via payroll deductions, through various offering periods at a purchase price equal to 85% of the fair market value of the common stock on the first or last day of the offering period, whichever is lower. During the three months ended September 30, 2023 and 2022, 17 and 0 shares were issued under the ESPP plan, respectively. During the nine months ended September 30, 2023 and 2022, 17 and 22 shares were issued under the ESPP plan, respectively. The Company recorded compensation charges related to the ESPP of $1 and $6 for the three months ended September 30, 2023 and 2022, respectively, and $25 and $32 for the nine months ended September 30, 2023 and 2022, respectively.

12

(c) Stock-Based Compensation Expense
The following table presents stock-based compensation expense, including expense for the ESPP, in the Company's consolidated statements of operations for the three and nine months ended September 30, 2023 and 2022:

Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Cost of product sales$9 $333 $25 $468 
Cost of service sales6 3 15 8 
Research and development162 371 399 702 
Sales, marketing and support63 14 160 225 
General and administrative319 388 834 1,292 
$559 $1,109 $1,433 $2,695 

(d) Accumulated Other Comprehensive Loss (AOCL)

Comprehensive income (loss) includes net income (loss), unrealized gains and losses from foreign currency translation, and unrealized gains and losses on available for sale marketable securities. The components of the Company’s comprehensive income (loss) and the effect on earnings for the periods presented are detailed in the accompanying consolidated statements of comprehensive (loss) income.

The balances for the three months ended September 30, 2023 and 2022 are as follows:
Foreign Currency TranslationTotal Accumulated Other Comprehensive Loss
Balance, June 30, 2023$(3,955)$(3,955)
Other comprehensive loss(267)(267)
Net other comprehensive loss(267)(267)
Balance, September 30, 2023$(4,222)$(4,222)

Foreign Currency TranslationTotal Accumulated Other Comprehensive Loss
Balance, June 30, 2022$(4,021)$(4,021)
Other comprehensive loss(646)(646)
Net other comprehensive loss(646)(646)
Balance, September 30, 2022$(4,667)$(4,667)

The balances for the nine months ended September 30, 2023 and 2022 are as follows:
Foreign Currency TranslationUnrealized (Loss) Gain on Available for Sale Marketable SecuritiesTotal Accumulated Other Comprehensive Loss
Balance, December 31, 2022$(4,098)$(12)$(4,110)
Other comprehensive (loss) income(124)12 (112)
Net other comprehensive (loss) income(124)12 (112)
Balance, September 30, 2023$(4,222)$— $(4,222)

13

Foreign Currency TranslationTotal Accumulated Other Comprehensive Loss
Balance, December 31, 2021$(3,409)$(3,409)
Other comprehensive loss(1,258)(1,258)
Net other comprehensive loss(1,258)(1,258)
Balance, September 30, 2022$(4,667)$(4,667)

(6)     Net (Loss) Income from Continuing Operations per Common Share

    Basic net (loss) income per share is calculated based on the weighted average number of common shares outstanding during the period. Diluted net income per share incorporates the dilutive effect of common stock equivalent options, warrants and other convertible securities, if any, as determined with the treasury stock accounting method. For the three and nine months ended September 30, 2023, since there was a net loss from continuing operations, the Company excluded 1,572 and 1,053 shares, respectively, underlying outstanding stock options and non-vested restricted shares from its diluted loss per share calculation, as inclusion of these convertible securities would have reduced the net loss per share. For the three and nine months ended September 30, 2022, since there was a net loss from continuing operations, the Company excluded 1,572 and 1,763 shares, respectively, underlying outstanding stock options and non-vested restricted shares from its diluted loss per share calculation, as inclusion of these convertible securities would have reduced the net loss per share.

A reconciliation of the basic and diluted weighted average common shares outstanding is as follows:
 
Three Months EndedNine Months Ended
 September 30,September 30,
 2023202220232022
Weighted average common shares outstanding—basic19,231 18,706 19,090 18,574 
Dilutive common shares issuable in connection with stock plans— — — — 
Weighted average common shares outstanding—diluted19,231 18,706 19,090 18,574 

(7)     Inventories

Inventories are stated at the lower of cost or net realizable value using the first-in first-out costing method. Inventories as of September 30, 2023 and December 31, 2022 include the costs of material, labor, and factory overhead. Components of inventories consist of the following:
September 30,
2023		December 31,
2022
Raw materials$15,325 $14,203 
Work in process4,083 4,164 
Finished goods7,015 4,363 
$26,423 $22,730 

14

(8)     Property and Equipment

Property and equipment, net, as of September 30, 2023 and December 31, 2022 consist of the following:
September 30,
2023		December 31,
2022
Land$2,833 $2,833 
Building and improvements18,839 18,869 
Leasehold improvements439 513 
Machinery and equipment5,927 5,948 
Revenue-generating assets75,440 72,527 
Office and computer equipment13,613 14,652 
Motor vehicles31 31 
117,122 115,373 
Less accumulated depreciation(67,715)(62,255)
$49,407 $53,118 

Depreciation expense was $3,180 and $3,283 for the three months ended September 30, 2023 and 2022, respectively and $9,952 and $9,591 for the nine months ended September 30, 2023 and 2022, respectively.

Certain revenue-generating hardware assets are utilized by the Company in the delivery of the Company's airtime services, media and other content.

As part of the Company's impairment testing, an internally developed software asset was deemed the primary asset of the asset group known as KVH Media Group. The $383 net asset value was determined to be fully impaired as a result of the review. The movement associated with the impairment is reflected as a component of the office and computer equipment. Please see Note 12 for additional details surrounding the impairment.

(9)     Product Warranty

The Company’s products carry standard limited warranties that range from one to two years and vary by product. The warranty period begins on the date of retail purchase or lease by the original purchaser. The Company accrues estimated product warranty costs at the time of sale and any additional amounts are recorded when such costs are probable and can be reasonably estimated. Factors that affect the Company’s warranty liability include the number of units sold or leased, historical and anticipated rates of warranty repairs and the cost per repair. Warranty and related costs are reflected within sales, marketing and support in the accompanying consolidated statements of operations. As of September 30, 2023 and December 31, 2022, the Company had accrued product warranty costs of $642 and $1,287, respectively.

The following table summarizes product warranty activity during 2023 and 2022:
 
Nine Months Ended
 September 30,
 20232022
Beginning balance$1,287 $1,084 
Charges to expense521 964 
Costs incurred(1,166)(764)
Ending balance$642 $1,284 

(10)     Legal Matters
    
    In the ordinary course of business, the Company is a party to inquiries, legal proceedings and claims including, from time to time, disagreements with vendors and customers. The Company is not a party to any lawsuit or proceeding that, in management's opinion, is likely to materially harm the Company's business, results of operations, financial condition, or cash flows.

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(11)     Fair Value Measurements

ASC Topic 820, Fair Value Measurements and Disclosures (ASC 820), provides a framework for measuring fair value and requires expanded disclosures regarding fair value measurements. ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:

Level 1:    Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. The Company’s Level 1 assets are investments in money market mutual funds and United States treasuries.

Level 2:    Quoted prices for similar assets or liabilities in active markets; or observable prices that are based on observable market data, based on directly or indirectly market-corroborated inputs. The Company has no Level 2 assets or liabilities.

Level 3:    Unobservable inputs that are supported by little or no market activity, and are developed based on the best information available given the circumstances. The Company has no Level 3 assets.

Assets and liabilities measured at fair value are based on the valuation techniques identified in the table below.

The following tables present financial assets and liabilities at September 30, 2023 and December 31, 2022 for which the Company measures fair value on a recurring basis, by level, within the fair value hierarchy:

September 30, 2023TotalLevel 1Level 2Level 3Valuation
Technique
Assets
Money market mutual funds$57,710 $57,710 $— $— (a)
December 31, 2022TotalLevel 1Level 2Level 3Valuation
Technique
Assets
Money market mutual funds$30,977 $30,977 $— $— (a)
United States treasuries$24,703 $24,703 $— $— (a)
(a)Market approach—prices and other relevant information generated by market transactions involving identical or comparable assets.
The carrying amount of certain financial instruments approximates fair value due to their short-term, highly liquid nature. These instruments include cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses. The carrying amount of the Company's operating and financing lease liabilities approximates fair value based on currently available quoted rates of similarly structured borrowings.

Assets Measured and Recorded at Fair Value on a Nonrecurring Basis

The Company's non-financial assets, such as goodwill, intangible assets, and other long-lived assets resulting from business combinations, are measured at fair value using income approach valuation methodologies at the date of acquisition and subsequently re-measured if indications of impairment exist. During the nine months ended September 30, 2023, the Company recorded an impairment charge of $5,990 to goodwill and long-lived assets. There were no other impairments of the Company's non-financial assets noted during the nine months ended September 30, 2023. Please see Note 12 for further discussion. The Company does not have any liabilities that are recorded at fair value on a non-recurring basis.

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(12)     Goodwill and Other Long-Lived Assets

The Company performs a goodwill impairment test at least annually, or more frequently if certain events occur, or circumstances change, that indicate it is more likely than not that the fair value of a reporting unit is less than its carrying amount. A goodwill impairment loss is recognized for the amount that the carrying amount of a reporting unit, including goodwill, exceeds its fair value, limited to the total amount of goodwill allocated to that reporting unit. The Company’s two reporting units are: Mobile Broadband (MBB) and KVH Media Group (Media).

Other long-lived assets, which include intangible assets with finite lives, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable. Recoverability of other long-lived assets is measured by a comparison of the carrying amount of an asset group to its future undiscounted cash flows. If these comparisons indicate that an asset group is not recoverable, the Company will recognize an impairment loss for the amount by which the carrying value of the asset group exceeds its related estimated fair value. The Company has determined that the assets within each of the Company's reporting units (MBB and Media) are highly interrelated and interdependent on each other to generate revenues, and thus independent cash flows are not identifiable at a level lower than that of these reporting units. Accordingly, the Company's asset groups were determined to be its reporting units (MBB and Media).

In the third quarter of 2023, the Company experienced a sustained decrease in its stock price, which was identified by the Company as an indicator of impairment. Consequently, the Company performed a quantitative assessment of impairment of goodwill and other long-lived assets for the MBB and Media reporting units and asset groups. These assessments require considerable judgment and are largely based on assumptions and estimates developed by management including estimation of future cash flows, estimation of long-term growth rates, determination of the period over which future cash flows will occur, determination of a weighted average cost of capital, and consideration of market, industry, and other factors.

In performing the quantitative impairment assessment for goodwill, the Company determined the fair value of its reporting units by discounting its estimated future cash flows using an appropriate weighted average cost of capital. As of September 30, 2023, the estimated fair values of the MBB and Media reporting units were lower than their carrying values. After recognition of a long-lived asset impairment charge (as discussed below), the Company recognized a goodwill impairment charge of $5,333, which represented the total goodwill for both reporting units, in the consolidated statements of operations for the three and nine months ended September 30, 2023.

In performing the quantitative impairment assessment for other long-lived assets, the Company used undiscounted cash flows expected to be generated over the estimated remaining useful life of the primary asset of each asset group, to determine whether the carrying amounts of each asset group are recoverable. As of September 30, 2023, the Company’s analysis indicated that the carrying amount of the MBB asset group is recoverable, and therefore no impairment charge was recognized. As of September 30, 2023, the Company’s analysis indicated that the carrying amount of the Media asset group is not recoverable and that such carrying amount exceeded its fair value. Accordingly, the Company recognized a long-lived assets impairment charge of $657 in the consolidated statements of operations for the three and nine months ended September 30, 2023.

Goodwill

The following table sets forth the changes in the carrying amount of goodwill for the nine months ended September 30, 2023:

Amounts
Balance at December 31, 2022
$5,308 
Impairment(5,333)
Foreign currency translation adjustment25 
Balance at September 30, 2023
$— 
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Intangible Assets

The changes in the carrying amount of intangible assets during the nine months ended September 30, 2023 are as follows:
Amounts
Balance at December 31, 2022
$404 
Amortization expense(167)
Intangible assets acquired in asset acquisition35 
Impairment(274)
Foreign currency translation adjustment2 
Balance at September 30, 2023
$— 

Intangible assets arose from the acquisition of KVH Media Group (acquired as Headland Media Limited) in May 2013. These intangible assets were being amortized on a straight-line basis over the estimated useful life of 10 years for acquired subscriber relationships. The intangible assets were recorded in pounds sterling and fluctuations in exchange rates cause these amounts to increase or decrease from time to time.

Acquired intangible assets are subject to amortization. The following table summarizes acquired intangible assets at September 30, 2023 and December 31, 2022, respectively:
Gross Carrying AmountAccumulated AmortizationNet Carrying Value
September 30, 2023
Subscriber relationships$— $— $— 
Distribution rights— — — 
Internally developed software— — — 
Proprietary content— — — 
Intellectual property2,284 2,284 — 
$2,284 $2,284 $— 
December 31, 2022
Subscriber relationships$7,649 $7,245 $404 
Distribution rights315 315 — 
Internally developed software446 446 — 
Proprietary content153 153 — 
Intellectual property2,284 2,284 — 
$10,847 $10,443 $404 

Amortization expense related to intangible assets was $19 and $90 for the three months ended September 30, 2023 and 2022, respectively, and $167 and $409 for the nine months ended September 30, 2023 and 2022, respectively. Amortization expense was categorized as general and administrative expense.

(13)     Revenue from Contracts with Customers

In accordance with ASC 606, revenue is recognized when a customer obtains control of promised products and services. The amount of revenue recognized reflects the consideration which the Company expects to be entitled to receive in exchange for these products and services.

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Disaggregation of Revenue for Continuing Operations

The following table summarizes net sales from contracts with customers for the three and nine months ended September 30, 2023 and 2022:

Three Months EndedNine Months Ended
September 30,September 30,
2023202220232022
Product, transferred at point in time$3,531 $5,974 $12,578 $18,057 
Product, transferred over time621 651 1,948 1,751 
Service 29,397 28,544 86,883 83,065 
 Total net sales$33,549 $35,169 $101,409 $102,873 
Revenue recognized during the three months ended September 30, 2023 and 2022 from amounts included in contract liabilities at the beginning of the period was $533 and $572, respectively. Revenue recognized during the nine months ended September 30, 2023 and 2022 from amounts included in contract liabilities at the beginning of the period was $1,826 and $1,645, respectively.

For product sales, the delivery of the Company’s performance obligations is generally transferred to the customer, and associated revenue is recognized, at a point in time, with the exception of certain VSAT contracts which are transferred to customers over time. For service sales, the delivery of the Company’s performance obligations is transferred to the customer, and associated revenue is recognized, over time. The Company's performance is impacted by the levels of activity in the marine and land mobile markets, among other factors. Performance in any particular period could be impacted by the timing of sales to certain large customers.

The Company primarily manufactures and distributes a comprehensive family of mobile satellite antenna products and services that provide access to the Internet, television, and VoIP services while on the move. Product sales accounted for 12% and 19% of the Company's consolidated net sales for the three months ended September 30, 2023 and 2022, respectively, and 14% and 19% of the Company's consolidated net sales for the nine months ended September 30, 2023 and 2022, respectively. Service sales of VSAT Broadband airtime service accounted for 82% and 76% of the Company's consolidated net sales for the three months ended September 30, 2023 and 2022, respectively, and 80% and 74% of the Company's consolidated net sales for the nine months ended September 30, 2023 and 2022, respectively. The balance of service sales is comprised of distribution of commercially licensed entertainment and news, product repairs, and extended warranty sales.

No other single product class accounts for 10% or more of the Company's consolidated net sales.

The Company operates in a number of major geographic areas, including internationally. Revenues from international locations primarily include Singapore, Canada, South America countries, European Union countries and other European countries, and countries in Africa, the Middle East and Asia/Pacific, including India. Revenues are based upon customer location and revenues from international locations represented 69% and 62% of consolidated net sales for the three months ended September 30, 2023 and 2022, respectively, and 67% and 61% of consolidated net sales for the nine months ended September 30, 2023 and 2022, respectively. Sales to Singapore customers represented 18% and 17% of the Company's consolidated net sales for the three months ended September 30, 2023 and 2022, respectively. No other individual foreign country represented 10% or more of the Company's consolidated net sales for the three months ended September 30, 2023 or 2022. Sales to Singapore customers represented 18% and 16% of the Company's consolidated net sales for the nine months ended September 30, 2023 and 2022, respectively. No other individual foreign country represented 10% or more of the Company's consolidated net sales for the nine months ended September 30, 2023 or 2022.

As of September 30, 2023 and December 31, 2022, the long-lived tangible assets related to the Company’s international subsidiaries were less than 10% of the Company’s long-lived tangible assets.

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Business and Credit Concentrations

Concentrations of risk with respect to trade accounts receivable are generally limited due to the large number of customers and their dispersion across several geographic areas. Although the Company does not foresee that credit risk associated with these receivables will deviate from historical experience, repayment is dependent upon the financial stability of those individual customers. The Company establishes allowances for credit losses and evaluates, on a monthly basis, the adequacy of those reserves based upon expected losses, historical experience and its expectation for future collectability concerns.

No single customer accounted for 10% or more of consolidated net sales for the nine months ended September 30, 2023 or 2022. Two customers accounted for approximately 18% and 11% of accounts receivable at September 30, 2023, respectively. Two customers accounted for approximately 16% and 12%, respectively, of accounts receivable at December 31, 2022. One customer accounted for 64% and 66% of long-term accounts receivable included in other non-current assets on the consolidated balance sheets related to sales-type leases at September 30, 2023 and December 31, 2022, respectively.

Certain components from third parties used in the Company’s products are procured from single sources of supply. The failure of a supplier, including a subcontractor, to deliver on schedule could delay or interrupt the Company’s delivery of products and thereby materially adversely affect the Company’s revenues and operating results.

Customer Contract Balances

The following table provides the balance sheet location and amounts of contract assets, or unbilled accounts receivable, and contract liabilities, or deferred revenue, from contracts with customers as of September 30, 2023 and December 31, 2022:

Contract Balance TypeBalance Sheet LocationSeptember 30, 2023December 31, 2022
Current portion of deferred costsCurrent contract assets$1,130 $1,243 
Non-current portion of deferred costsNon-current contract assets2,557 3,033 
Current portion of deferred revenuesContract liabilities*1,668 1,743 
Non-current portion of deferred revenuesLong-term contract liabilities3,905 4,315 

*Management notes that the remaining “Contract liabilities” balance not included in the above table (which as of September 30, 2023 and December 31, 2022 is $1,600 and $1,365, respectively) relates to deferred income unaffiliated with the Company’s primary revenue streams, the majority of which relates to our content subscription business. These values are therefore excluded from the contract assets and contract liabilities from contracts with customers.

There were no material changes to contract asset balances for the nine months ended September 30, 2023 as a result of changes in estimates or impairments. The change in the contract liability balance from December 31, 2022 to September 30, 2023 was primarily due to the increase in upfront support billings received in the first nine months of 2023 in comparison to revenues recognized in the prior period from historical support billings.

(14)     Income Taxes

The Company’s effective tax rate from continuing operations for the three and nine months ended September 30, 2023 was (2.3)% and (5.0)%, respectively, compared with (578.6)% and (16.5)% for the corresponding periods in the prior year. The effective income tax rate is based on estimated income for the year, the estimated composition of the income in different jurisdictions and discrete adjustments, if any, in the applicable periods, including retroactive changes in tax legislation, settlements of tax audits or assessments, and the resolution or identification of tax position uncertainties.

For the three and nine months ended September 30, 2023 and 2022, the effective tax rates from continuing operations differed from the statutory tax rate primarily due to the Company maintaining a valuation allowance reserve on its U.S. deferred tax assets, discrete tax adjustments and the composition of income from foreign jurisdictions taxed at lower rates.

As of September 30, 2023 and December 31, 2022, the Company had reserves for uncertain tax positions of $693 and $637, respectively. There were no material changes during the nine months ended September 30, 2023 to the Company’s reserve for uncertain tax positions. The Company estimates that it is reasonably possible that the balance of unrecognized tax
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benefits as of September 30, 2023 may decrease $38 in the next twelve months as a result of a lapse of statutes of limitations and settlements with taxing authorities.

The Company’s tax jurisdictions include the United States, the United Kingdom, Denmark, Cyprus, Norway, Brazil, Singapore, Japan and India. In general, the statute of limitations with respect to the Company's United States federal income taxes has expired for years prior to 2019, and the relevant state and foreign statutes vary. However, preceding years remain open to examination by United States federal and state and foreign taxing authorities to the extent of future utilization of net operating losses and research and development tax credits generated in each preceding year.

(15)     Leases

Lessee

The Company has operating leases for office facilities, equipment, and satellite service capacity and related equipment. Lease expense from continuing operations was $417 and $507 for the three months ended September 30, 2023 and 2022, respectively, and was $1,291 and $1,588 for the nine months ended September 30, 2023 and 2022, respectively. Short-term operating lease costs were $15 and $41 for the three months ended September 30, 2023 and 2022, respectively, and were $55 and $139 for the nine months ended September 30, 2023 and 2022, respectively. Maturities of lease liabilities as of September 30, 2023 under operating leases having an initial or remaining non-cancelable term of one year or more are as follows:

Remainder of 2023$400 
2024629 
202593 
202647 
2027 and thereafter79 
Total minimum lease payments$1,248 
Less amount representing interest$(55)
Present value of net minimum operating lease payments$1,193 
Less current installments of obligation under current-operating lease liabilities$921 
Obligations under long-term operating lease liabilities, excluding current installments$272 
Weighted-average remaining lease term - operating leases (years)1.53
Weighted-average discount rate - operating leases5.50 %

Lessor

The Company enters into leases with certain customers primarily for the TracPhone VSAT systems. These leases are classified as sales-type leases because title to the equipment transfers to the customer at the end of the lease term. The Company records the leases at a price typically equivalent to normal selling price and in excess of the cost or carrying amount. Upon delivery, the Company records the net present value of all payments under these leases as product revenue, and the related costs of the product are charged to cost of sales. Interest income is recognized throughout the lease term (typically three to five years) using an implicit interest rate. The sales-type leases do not have unguaranteed residual assets.

The current portion of the net investment in these leases was $3,739 as of September 30, 2023 and the non-current portion of the net investment in these leases was $3,984 as of September 30, 2023. The current portion of the net investment in the leases is included in accounts receivable, net of allowance for doubtful accounts on the accompanying consolidated balance sheets and the non-current portion of the net investment in these leases is included in other non-current assets on the accompanying consolidated balance sheets. Interest income from sales-type leases was $159 and $191 during the three months ended September 30, 2023 and 2022, respectively, and was $501 and $591 during the nine months ended September 30, 2023 and 2022, respectively.

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The future undiscounted cash flows from these leases as of September 30, 2023 are:
Remainder of 2023$1,547 
20243,346 
20252,016 
20261,033 
2027514 
202898
Total undiscounted cash flows$8,554 
Present value of lease payments$7,723 
Difference between undiscounted cash flows and discounted cash flows $831 

In 2021, the Company began entering into three-year leases for its TracPhone VSAT systems, in which ownership of the hardware does not transfer to the lessee by the end of the lease term. As a result, and in light of other factors indicated in ASC 842, these leases are classified as operating leases.

As of September 30, 2023, the gross costs and accumulated depreciation associated with these operating leases are included in revenue generating assets and amounted to $1,880 and $798, respectively. They are depreciated on a straight-line basis over a five-year estimated useful life. Depreciation expense for these assets was $94 and $282 for the three and nine months ended September 30, 2023, respectively.

Lease revenue recognized was $138 and $415 for the three and nine months ended September 30, 2023, respectively, in service sales in the consolidated statements of operations.

As of September 30, 2023, minimum future lease payments to be recognized on the operating leases are as follows:
Remainder of 2023$138 
2024343 
202525 
Total $506 

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(16)     Discontinued Operations

During the third quarter of 2022, the Company sold its inertial navigation business. The Company determined that the sale met the requirements for reporting as discontinued operations in accordance with Accounting Standards Codification (ASC) 205-20. There were no assets or liabilities of the inertial navigation business as of December 31, 2022 or September 30, 2023. Please see Note 1 for further discussion.

The following table presents a reconciliation of the major financial line items constituting the results for discontinued operations to the net income from discontinued operations, net of tax, presented separately in the Company's consolidated statement of operations for the three and nine months ended 2022:

Three Months EndedNine Months Ended
September 30,September 30,
20222022
Sales:
Product$1,276 $16,042 
Service218 679 
Net sales1,494 16,721 
Costs and expenses:
Costs of product sales1,504 12,732 
Costs of service sales169 457 
Research and development374 3,147 
Sales, marketing and support348 3,035 
Other income, net12 81 
Loss from discontinued operations before income tax expense(889)(2,569)
Gain on sale of discontinued operations before tax expense30,858 30,858 
Total income from discontinued operations before tax expense$29,969 $28,289 
Income tax expense on discontinued operations228 228 
Net income from discontinued operations, net of tax$29,741 $28,061 
Net income from discontinued operations per common share
Basic$1.59 $1.51 
Diluted$1.59 $1.51 
Weighted average number of common shares outstanding:
Basic18,706 18,574 
Diluted18,706 18,574 

The following table presents supplemental cash flow information of the discontinued operations:
Three Months EndedNine Months Ended
September 30,September 30,
20222022
Cash used in operating activities - discontinued operations$(252)$(3,853)
Cash used in investing activities - discontinued operations$(220)$(307)

23

The following table presents non-cash expenses from discontinued operations:

Three Months EndedNine Months Ended
September 30,September 30,
20222022
Depreciation$91 $622 
Compensation expense related to stock-based awards and employee stock purchase plan$237 $475 

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ITEM 2.    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 annual report on Form 10-K for the year ended December 31, 2022 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 design, develop, manufacture and market mobile connectivity products and services for the marine and land mobile markets. We generate a majority of our revenue from the sale of satellite internet airtime services. We offer both satellite-only and hybrid products that enable marine customers to receive data, Voice over Internet Protocol (VoIP), and value-added services via satellite, cellular, and shore-based Wi-Fi networks onboard commercial, leisure and military/government vessels. Our service sales also include the distribution of entertainment, including news, sports, music, and movies, to commercial customers in the maritime, hotel, and retail markets, along with supplemental value-added cybersecurity, email, and crew internet services. We generate a majority of our revenues from various international locations.

Impairment Charge

During the nine months ended September 30, 2023, aggregate impairment charges of $6.0 million were taken against goodwill and long-lived assets for the Mobile Broadband reporting unit and the KVH Media Group reporting unit. The $6.0 million impairment charges were driven by the significant decline in our stock price that followed the August 9, 2023 announcement of our financial results for the second quarter of 2023. Under applicable accounting rules, this circumstance required us to evaluate our goodwill and long-lived assets for impairment. Given the sustained decline in the market value of our outstanding equity and the uncertain impact of ongoing competition, we concluded that this impairment charge was appropriate as of September 30, 2023. Please see Note 12 of our accompanying financial statements for further information.

Supply Chain

During the nine months ended September 30, 2023, we continued to experience delays in the availability and delivery of certain raw material components. We also experienced increased raw material costs, which we expect to continue throughout 2023. We are continuing to monitor global developments, including the impact of inflation, and are prepared to implement actions that we determine to be necessary to sustain our business.

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. 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, 2022.

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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, 2023, as discussed below.

Goodwill, Intangible Assets and other Long-Lived Assets

In accordance with ASC Update No. 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test of Goodwill Impairment (ASC 350), we perform a goodwill impairment test at least annually, or more frequently if certain events occur, or circumstances change, that indicate it is more likely than not that the fair value of a reporting unit is less than its carrying amount (frequently referred to as impairment indicators or triggering events). A goodwill impairment loss is recognized for the amount that the carrying amount of a reporting unit, including goodwill, exceeds its fair value, limited to the total amount of goodwill allocated to that reporting unit.

Intangible assets with finite lives and other long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of intangible assets with finite lives and other long-lived assets is measured by a comparison of the carrying amount of an asset or asset group to future undiscounted cash flows expected to be generated by the asset or asset group. Asset groups are determined at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. If these comparisons indicate that an asset is not recoverable, we will recognize an impairment loss for the amount by which the carrying value of the asset or asset group exceeds the related estimated fair value.

In the third quarter of 2023, we observed a sustained stock price decline resulting in a significant shortfall in market capitalization when compared to the aggregate carrying value of our net assets. These circumstances led us to conclude that quantitative goodwill impairment assessments of the Mobile Broadband (MBB) and KVH Media Group (Media) reporting units were required.

Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions, estimates, and market factors. Estimating the fair value of individual reporting units requires us to make assumptions and estimates regarding future plans, as well as industry and economic conditions. These assumptions and estimates include estimated future cash flows, income tax rates, discount rates, growth rates, and other market factors. In performing the quantitative assessment, we estimated the fair value of its reporting units using the income approach, also known as the discounted cash flow ("DCF") method, which utilizes the present value of cash flows to estimate fair value. The DCF method involves estimating the discounted cash flows of a reporting unit by forecasting cash flows each year, calculating a terminal value, and discounting all of the cash flows to present value at an appropriate discount rate (in consideration of the time value of money, the risk inherent in the cash flow stream, and in the context of current rates of return for equity and debt capital). The final determination of fair value was based on a probability-weighted approach comparing management’s forecasts with a market expectation forecast.

As of September 30, 2023, the determined fair values of the MBB and Media reporting units were lower than their carrying values. After recognition of a long-lived asset impairment charge (as discussed below), we recognized goodwill impairment charges equal to the total amount of goodwill attributed to the MBB and Media reporting units, which were approximately $4.4 million and $0.9 million, respectively.

We also determined that the sustained decrease in stock price and shortfall in market capitalization indicated that the carrying amounts of our asset groups (MBB and Media) may not be recoverable. We therefore performed impairment tests on the long-lived assets in each asset group, including definite-lived intangible assets using an undiscounted cash flow analysis over the estimated remaining useful life of the primary asset, to determine whether the carrying amounts of each asset group are recoverable. As of September 30, 2023, our analysis indicated that the carrying amount of the MBB asset group is recoverable, and therefore no fair value estimate was required. The Media asset group failed the undiscounted cash flow recoverability test and therefore we estimated the fair value of the asset group to determine whether any asset impairment was present. Our estimation of the fair value of the long-lived assets included the use of discounted cash flow and cost analyses, reflecting estimates of future revenues, cost factors, cash flows, discount rates, and obsolescence. Based on these analyses, we concluded that the fair values of certain assets were lower than their carrying amounts. As of September 30, 2023, we recognized long-lived asset impairment charges totaling $0.4 million and $0.3 million for the KVH Media Group’s internally developed software assets and acquired subscriber relationships, respectively, reducing the carrying amounts to zero.

Please see Note 12 of our accompanying financial statements for further discussion.

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Results of Operations
The following table provides, for the periods indicated, certain financial data relating to our continuing operations expressed as a percentage of net sales:
Three Months EndedNine Months Ended
 September 30,September 30,
 2023202220232022
Sales:
Product12.4 %18.8 %14.3 %19.3 %
Service87.6 81.2 85.7 80.7 
Net sales100.0 100.0 100.0 100.0 
Cost and expenses:
Costs of product sales14.1 19.2 16.4 16.9 
Costs of service sales48.4 43.7 47.2 44.2 
Research and development7.1 7.8 7.3 8.1 
Sales, marketing and support14.5 16.2 15.5 17.8 
General and administrative13.0 15.8 13.0 19.0 
Goodwill impairment charge15.9 — 5.3 — 
Intangible asset impairment charge2.0 — 0.6 — 
Total costs and expenses115.0 102.7 105.3 106.0 
Loss from operations(15.0)(2.7)(5.3)(6.0)
Interest income3.0 1.1 2.6 0.8 
Interest expense— — — — 
Other (expense) income, net(0.4)1.6 (0.6)1.5 
Loss from continuing operations before income tax expense(12.4)— (3.3)(3.7)
Income tax expense from continuing operations0.3 0.2 0.2 0.6 
Net loss from continuing operations(12.7)%(0.2)%(3.5)%(4.3)%

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Three months ended September 30, 2023 and 2022

Net Sales

Our net sales for the three months ended September 30, 2023 and 2022 were as follows:
Change
For the three months ended September 30,2023 vs. 2022
20232022$%
(dollars in thousands)
Product$4,152 $6,625 $(2,473)(37)%
Service29,397 28,544 853 3 %
Net sales$33,549 $35,169 $(1,620)(5)%

Net sales decreased by $1.6 million, or 5%, for the three months ended September 30, 2023 as compared to the three months ended September 30, 2022. Product sales decreased by $2.5 million, or 37%, to $4.2 million for the three months ended September 30, 2023 from $6.6 million for the three months ended September 30, 2022. The decrease in product sales was primarily due to a $1.9 million decrease in TracVision product sales and a $1.1 million decrease in VSAT Broadband product sales, partially offset by a $0.6 million increase in Starlink product sales. The decline in product sales was primarily due to a decrease in unit sales volume, particularly in our global leisure segment. 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 leisure segment. In addition, alternative solutions offered by recent low-earth-orbit (LEO) entrants have heightened competition in both the global leisure segment and commercial markets.

Service sales increased by $0.9 million, or 3%, to $29.4 million for the three months ended September 30, 2023 from $28.5 million for the three months ended September 30, 2022. The increase was primarily due to a $0.7 million increase in our VSAT airtime sales.

Costs of Sales
    
Costs of sales consists of costs of product sales and costs of service sales. Costs of sales decreased by $1.2 million, or 5%, in the three months ended September 30, 2023 to $21.0 million from $22.1 million in the three months ended September 30, 2022. The decrease in costs of sales was driven by a $2.0 million decrease in costs of product sales, partially offset by a $0.9 million increase in costs of service sales. As a percentage of net sales, costs of sales were 62% and 63% for the three months ended September 30, 2023 and 2022, respectively.

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, 2023, costs of product sales decreased by $2.0 million, or 30%, to $4.7 million from $6.7 million in the three months ended September 30, 2022, primarily due to a $1.5 million decrease in TracVision cost of product sales and a $0.9 million decrease in VSAT Broadband cost of product sales, partially offset by a $0.5 million increase in Starlink product sales. As a percentage of product sales, costs of product sales were 114% and 102% for the three months ended September 30, 2023 and 2022, respectively. Cost of product sales increased as a percentage of product sales primarily due to a $0.3 million increase in the excess and obsolescence reserve and $0.2 million of higher unit component costs.

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, 2023, costs of service sales increased by $0.9 million, or 6%, to $16.2 million from $15.4 million for the three months ended September 30, 2022, primarily due to a $0.9 million increase in VSAT airtime costs of service sales. The increase in airtime cost of sales is primarily related to capacity increases necessary to support growth in our airtime subscriber base. As a percentage of service sales, costs of service sales were 55% and 54% for the three months ended September 30, 2023 and 2022, respectively.

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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, 2023 decreased by $0.3 million, or 13%, to $2.4 million from $2.7 million for the three months ended September 30, 2022. The decrease primarily resulted from a $0.3 million decrease in salaries, benefits and taxes. As a percentage of net sales, research and development expense was 7% and 8% for the three months ended September 30, 2023 and 2022, respectively.

Sales, marketing, and support expense consists 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, 2023 decreased by $0.9 million, or 15%, to $4.9 million from $5.7 million for the three months ended September 30, 2022. The decrease primarily resulted from a $0.5 million decrease in salaries, benefits and taxes, and a $0.3 million decrease in bad debt expense. As a percentage of net sales, sales, marketing and support expense was 14% and 16% for the three months ended September 30, 2023 and 2022, respectively.

General and administrative expense consists 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, 2023 decreased by $1.2 million, or 21%, to $4.4 million from $5.6 million, for the three months ended September 30, 2022. The decrease primarily resulted from a $1.1 million decrease in salaries, benefits, and taxes, which was driven by the reduction in our workforce in March 2022 of approximately 10%, partially offset by a $0.3 million increase in legal and professional fees. As a percentage of net sales, general and administrative expense was 13% and 16% for the three months ended September 30, 2023 and 2022, respectively.

Interest and Other (Expense) Income, Net
    
Interest income represents interest earned on our cash and cash equivalents, as well as from investments and our sale-type lease receivables. Interest income increased $0.6 million for the three months ended September 30, 2023 to $1.0 million from $0.4 million for the three months ended September 30, 2022. Of the current period interest income of $1.0 million, $0.8 million is attributable to interest earned on cash and cash equivalents, while the remaining $0.2 million was attributable to interest from lease receivables. Interest expense remained flat period-over-period at less than $0.1 million for both of the three months ended September 30, 2023 and 2022. Other (expense) income, net changed to other expense, net of $0.1 million for the three months ended September 30, 2023 from other income, net of $0.6 million for the three months ended September 30, 2022 primarily due to the decrease in foreign exchange gains from our UK operations.

Income Tax Expense

Income tax expense for each of the three months ended September 30, 2023 and 2022 was $0.1 million and related to taxes on income earned in foreign jurisdictions.
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Nine months ended September 30, 2023 and 2022

Net Sales

Our net sales for the nine months ended September 30, 2023 and 2022 were as follows:
Change
For the nine months ended September 30,2023 vs. 2022
20232022$%
(dollars in thousands)
Product $14,526 $19,808 $(5,282)(27)%
Service86,883 83,065 3,818 5 %
Net sales$101,409 $102,873 $(1,464)(1)%
    
Net sales decreased by $1.5 million, or 1%, for the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022. Product sales decreased by $5.3 million, or 27%, to $14.5 million for the nine months ended September 30, 2023 from $19.8 million for the nine months ended September 30, 2022. The decrease in product sales was primarily due to a $3.9 million decrease in TracVision product sales and a $2.4 million decrease in VSAT Broadband product sales, partially offset by a $0.9 million increase in Starlink product sales. The decline in product sales was primarily due to a decrease in unit sales volume, particularly in our global leisure segment. 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 leisure segment. In addition, alternative solutions offered by recent LEO entrants have heightened competition in both the global leisure segment and commercial markets.

Service sales increased by $3.8 million, or 5%, to $86.9 million for the nine months ended September 30, 2023 from $83.1 million for the nine months ended September 30, 2022. The increase was primarily due to a $4.9 million increase in our VSAT service sales driven by an increase in subscribers, partially offset by a $0.9 million decrease in our content services sales, primarily driven by the sale of a subsidiary in April 2022.

Costs of Sales
    
Costs of sales increased by $1.6 million, or 3%, in the nine months ended September 30, 2023 to $64.4 million from $62.9 million in the nine months ended September 30, 2022. The increase in costs of sales was driven by a $2.3 million increase in costs of service sales, partially offset by a $0.8 million decrease in costs of product sales. As a percentage of net sales, costs of sales were 64% and 61% for the nine months ended September 30, 2023 and 2022, respectively.

For the nine months ended September 30, 2023, costs of product sales decreased by $0.8 million, or 4%, to $16.6 million from $17.4 million in the nine months ended September 30, 2022, primarily due to a $2.9 million decrease in TracVision cost of product sales and a $1.6 million decrease in VSAT Broadband cost of product sales, partially offset by a $2.4 million increase in various manufacturing and other unabsorbed expenses, a $0.9 million increase in Starlink cost of product sales and a $0.5 million increase in accessories cost of product sales. The manufacturing and other unabsorbed costs included a $0.7 million write-down of inventory, a $0.6 million increase in the excess and obsolescence reserve, as well as lower unit volume resulting in less absorption of overhead. As a percentage of product sales, costs of product sales were 114% and 88% for the nine months ended September 30, 2023 and 2022, respectively. Cost of product sales increased as a percentage of product sales primarily due to the write-down of inventory, the increase in the excess and obsolescence reserve and $0.7 million of higher unit component costs.

For the nine months ended September 30, 2023, costs of service sales increased by $2.3 million, or 5%, to $47.8 million from $45.5 million for the nine months ended September 30, 2022, primarily due to a $2.7 million increase in VSAT airtime costs of service sales. The increase in airtime cost of sales is primarily related to capacity increases to support growth in our airtime subscriber base. This was partially offset by a $0.3 million decrease in content services cost of service sales, primarily driven by the sale of a subsidiary in April 2022. As a percentage of service sales, costs of service sales were 55% for both the nine months ended September 30, 2023 and 2022.

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Operating Expenses
    
Research and development expense for the nine months ended September 30, 2023 decreased by $1.0 million, or 12%, to $7.4 million from $8.4 million for the nine months ended September 30, 2022. The decrease in research and development expense resulted primarily from a $0.6 million decrease in salaries, benefits and taxes driven by the reduction in our workforce in March 2022 and a $0.3 million decrease in expensed materials. As a percentage of net sales, research and development expense was 7% and 8% for the nine months ended September 30, 2023 and 2022, respectively.

Sales, marketing and support expense for the nine months ended September 30, 2023 decreased by $2.6 million, or 14%, to $15.7 million from $18.4 million for the nine months ended September 30, 2022. The decrease in sales, marketing and support expense resulted primarily from a $2.3 million decrease in salaries, benefits and taxes driven by the reduction in our workforce in March 2022, a $0.6 million decrease in bad debt expense, a $0.4 million decrease in warranty expense and a $0.3 million decrease in external commission expense, partially offset by a $0.7 million increase in facilities expenses. As a percentage of net sales, sales, marketing and support expense was 15% and 18% for the nine months ended September 30, 2023 and 2022, respectively.

General and administrative expense for the nine months ended September 30, 2023 decreased by $6.4 million, or 33%, to $13.1 million from $19.5 million for the nine months ended September 30, 2022. The decrease in general and administrative expense resulted primarily from a $4.3 million decrease in salaries, benefits and taxes driven by the reduction in our workforce in March 2022, as well as a reduction in expenses related to the separation and retirement of our former President and Chief Executive Officer in March 2022. In addition, we were reimbursed by EMCORE for $0.7 million of expenses incurred under the Transition Service Agreement relating to the sale of the inertial navigation business in 2022. There was also a $0.6 million decrease in recruiting expenses, which was driven by professional fees incurred during the nine months ended September 30, 2022 associated with the search for a new Chief Executive Officer and replacements for two departed members of our board of directors. Lastly, there was a $0.4 million decrease in facilities expenses and a $0.3 million decrease in bank fees, partially offset by a $0.3 million increase in professional fees. As a percentage of net sales, general and administrative expense was 13% and 19% for the nine months ended September 30, 2023 and 2022, respectively.

Interest and Other (Expense) Income, Net
    
Interest income increased by $1.9 million to $2.7 million for the nine months ended September 30, 2023 from $0.8 million for the nine months ended September 30, 2022. Of the current period interest income of $2.7 million, $2.2 million is attributable to interest earned on cash and cash equivalents, and the remaining $0.5 million was attributable to interest from lease receivables. Interest expense remained flat period-over-period at less than $0.1 million for both the nine months ended September 30, 2023 and 2022. Other (expense) income, net changed to other expense, net of $0.6 million for the nine months ended September 30, 2023 from other income, net of $1.6 million for the nine months ended September 30, 2022 primarily due to the sale of KVH Media Group Entertainment Limited during the nine months ended September 30, 2022 and an increase in foreign exchange losses from our UK operations.

Income Tax Expense

Income tax expense for the nine months ended September 30, 2023 and 2022 was $0.2 million and $0.6 million, respectively, and related to taxes on income earned in foreign jurisdictions.

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Discontinued Operations

On August 9, 2022, we sold our inertial navigation business for net proceeds of $54.9 million, less specified deductions. We determined that the sale met the requirements for reporting as discontinued operations in accordance with ASC 205-20. Accordingly, we have classified the results of the inertial navigation business as discontinued operations for all prior periods presented. Please see Notes 1 and 16 of our accompanying financial statements for further discussion. Results for discontinued operations are as follows:

Three months ended September 30,Nine months ended September 30,
20222022
(dollars in thousands)
Sales from discontinued operations$1,494 $16,721 
Net income from discontinued operations, net of tax$29,741 $28,061 

Liquidity and Capital Resources

Our primary liquidity needs have been to fund general business requirements, including working capital requirements and capital expenditures. In recent years, we have funded our operations primarily from the sale of two businesses in 2022, the sale of a business in 2019, a PPP loan that was subsequently forgiven, cash flows from operations and proceeds received from exercises of stock options and the issuance of stock.

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, 2023, we had $69.2 million in cash, cash equivalents, and marketable securities, of which $3.6 million in cash and cash equivalents was held in local currencies by our foreign subsidiaries. Our foreign subsidiaries held no marketable securities as of September 30, 2023. As of September 30, 2023, we had $103.8 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 and contractual obligations. 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 $2.7 million for the nine months ended September 30, 2023 compared to net cash used in operations of $1.5 million for the nine months ended September 30, 2022. The $1.2 million increase in net cash used in operations was primarily the result of a $26.8 million decrease in net income, a $17.4 million increase in cash outflows related to accounts payable, a $0.5 million increase in cash outflows related to contract liabilities and long-term contract liabilities and a $0.5 million decrease in cash inflows relating to accounts receivable. Partially offsetting these items were a change of $35.8 million related to non-cash items, driven by the $30.9 million gain on sale of the inertial navigation business in 2022 and the $6.0 million impairment of goodwill and long-lived assets, a $6.0 million decrease in cash outflows relating to inventories and a $2.1 million decrease in cash outflows relating to accrued compensation, product warranty and other expenses.

Net cash used in investing activities was $9.2 million for the nine months ended September 30, 2023 compared to net cash provided by investing activities of $4.3 million for the nine months ended September 30, 2022. The $13.5 million increase in net cash used in investing activities was primarily the result of a $55.0 million decrease in proceeds from the sale of the inertial navigation business and a decrease of $2.4 million in proceeds from the sale of KVH Media Group Entertainment Limited, partially offset by a $40.0 million increase in net investment in marketable securities and a $3.8 million decrease in capital expenditures.

Net cash provided by financing activities was $2.3 million for the nine months ended September 30, 2023 compared to net cash provided by financing activities of $0.6 million for the nine months ended September 30, 2022. The $1.7 million increase in net cash provided by financing activities is primarily attributable to a $1.8 million increase in cash inflows relating
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to proceeds from the exercise of stock options and purchases under our employee stock purchase plan and a $0.2 million decrease in cash outflows related to the payment of finance leases, partially offset by a $0.2 million increase in cash outflows related to the repurchase of common stock to satisfy specific tax withholding obligations arising from accelerated vesting of executive stock grants.

ITEM 4.    CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, which are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, our management has evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2023, the end of the period covered by this interim report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of September 30, 2023.

Evaluation of Changes in Internal Control over Financial Reporting

Under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, our management has evaluated changes in our internal control over financial reporting that occurred during the third quarter of 2023. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer did not identify any change in our internal control over financial reporting during the third quarter of 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Important Considerations

The effectiveness of our disclosure controls and procedures and our internal control over financial reporting is subject to various inherent limitations, including cost limitations, judgments used in decision making, assumptions about the likelihood of future events, the soundness of our systems, the possibility of human error, and the risk of fraud. Moreover, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions and the risk that the degree of compliance with policies or procedures may deteriorate over time. Because of these limitations, there can be no assurance that any system of disclosure controls and procedures or internal control over financial reporting will be successful in preventing all errors or fraud or in making all material information known in a timely manner to the appropriate levels of management.
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PART II. OTHER INFORMATION

ITEM 1A.    RISK FACTORS
An investment in our common stock involves a high degree of risk. You should carefully consider the following risk factors in evaluating our business. If any of these risks, or other risks not presently known to us or that we currently believe are not significant, develops into an actual event, then our business, financial condition and results of operations could be adversely affected. If that happens, the market price of our common stock could decline.

Risks related to our financial performance

We have a history of losses, and achieving sustained profitability may take longer than we anticipate or may not be achievable.

We recorded substantial losses from continuing operations in each of the last three fiscal years (notwithstanding the income we recognized in 2022 from the sale of the inertial navigation business and in 2021 from the forgiveness of the PPP Loan). Although our continuing operations were profitable in the fourth quarter of 2022 and second quarter of 2023, we may incur losses in the future as we face increasing competition, as we increase satellite capacity to handle our growing subscriber base, as we confront supply chain constraints and as we continue to invest in research and development to improve our existing products and develop new products. In order to maintain and improve our competitive position, generate revenue and achieve sustained profitability, we must grow our airtime subscriber base, reduce our bandwidth costs, and continue to introduce new and improved products. Our inability to accomplish any of these goals could have a material adverse effect on our revenues, profitability and cash flow, and we cannot assure you when, or whether, we will regain sustained profitability.

Fluctuations in our quarterly net sales and results of operations could depress the market price of our common stock.

Our quarterly net sales and results of operations could continue to vary significantly for various reasons, many of which are outside our control. You should not rely on quarter-to-quarter comparisons of our results of operations as an indication of future performance. Our net sales or results of operations in a quarter may fall below the expectations of securities analysts or investors. If this occurs, the market price of our common stock could fall significantly. Our results of operations can fluctuate for many reasons, including changes in demand for our products and services; delays in order fulfillment, including as a result of shortages of components and raw materials; the mix of products and services we sell, including the mix of fixed rate and metered contracts for airtime services; our ability to manufacture, test and deliver products in a timely and cost-effective manner; the timing of new product introductions by us or our competitors; the scope and success of our investments in research and development; expenses incurred in pursuing acquisitions and investments; expenses incurred in expanding, maintaining, or improving our global HTS network; market and competitive pricing pressures; unanticipated charges or expenses; expenses incurred in responding to stockholder activism; general economic climate; seasonality of pleasure boat and recreational vehicle usage; and the impact of supply chain disruptions.

A large portion of our expenses, including expenses for network infrastructure, facilities, equipment, and personnel, are relatively fixed. If our net sales decline or do not grow as we anticipate, we may be unable to maintain or improve our operating margins. Any failure to achieve anticipated net sales could therefore significantly harm our operating results.

Risks related to our operations

Our future success will depend in part on the services of our executive officers.

The Company's future success depends to a significant degree on the skills and efforts of our executive officers. Our executive officers are at-will employees, competition is intense for executive management, and they could terminate their employment with us at any time. We do not maintain key-person life insurance on any of our personnel. Accordingly, the loss of one or more of our executive officers or key employees could have a material adverse effect on our business.

If we cannot effectively manage changes in our business and continue to attract and retain skilled personnel, our business may suffer.

If we cannot adjust expenses in response to changes in our operations, our results of operations may be harmed. To manage changes in our business effectively, we must, among other things, match our manufacturing facilities and capacity to demand for our products and services; secure appropriate satellite capacity to match demand for airtime services; effectively manage our inventory and working capital; ensure robust cybersecurity protection of Company and customer data and systems; and ensure
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that our procedures and internal controls are revised and updated to remain appropriate for our workforce and the size and scale of our business operations.

We are highly dependent on qualified personnel at all levels, including our senior management team and other key technical, operational, managerial and sales and marketing personnel, each of whom would be difficult to replace. If we fail to retain and attract the necessary personnel, we may be unable to achieve our business objectives and may lose our competitive position, which could lead to a significant decline in net sales. The current job market for personnel is very competitive, resulting in increased compensation. We face challenges retaining our personnel and attracting new personnel to fulfill our unmet needs. Replacing key personnel may be difficult and may take an extended period of time because of the limited number of individuals with the skills and experience to execute our business strategy. We may be unable to identify or employ qualified personnel for any such position on acceptable terms, if at all. We may also need to pay higher compensation than we expect, which would make it more difficult to achieve our goal of sustained profitability.

Future cost-containment activities could disrupt our business and affect our results of operations.

In response to increasing competitive pressure, we may take additional measures intended to increase profitability and align our business more closely with our current strategic and financial objectives, including engagement with new suppliers, modifications to our manufacturing arrangements and other cost-reduction efforts. We may also choose to dispose of assets or make strategic divestitures, such as the sale of our inertial navigation business in August 2022. These efforts may not succeed in improving profitability. Any of these changes could be disruptive to our business, including our research and development and product launch efforts, and could result in significant expense, including losses on any asset disposition or divestiture, accounting charges for any inventory or technology-related write-offs or any workforce reduction costs. We could incur significant transaction costs, including for potential transactions that do not proceed. Substantial expense or charges resulting 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.

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 HTS 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 in the short term. The cost of our HTS network has increased significantly each year as we have expanded our network to accommodate additional subscriber demand and/or coverage areas. We expect that this trend will continue through the end of 2023. If service sales, including through our AgilePlans subscription model, do not generate the level of revenue that we expect or if those revenues decline, our service gross margins may decline. The failure to improve our global HTS service gross margins and unit or subscriber sales would have a material adverse effect on our overall profitability.

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 in the Americas, Europe, the Middle East, Africa, Asia-Pacific, Indian, and Australian and New Zealand waters. We may need to expand capacity in existing coverage areas to support our subscriber base. If we are unable to reach economical agreements with third-party satellite providers to support our global HTS service and its technology or if transponder capacity is unavailable to meet growing demand in a given region, our ability to provide airtime services will be at risk and could reduce the attractiveness of our products and services.

Our results of operations are adversely affected by unseasonably cold weather, prolonged winter conditions, disasters or similar events.

Our leisure marine business is highly seasonal, and seasonality can also impact our commercial marine business. Historically, we have generated the majority of our leisure marine product revenues during the first and second quarters of each year, and these revenues typically decline in the third and fourth quarters of each year, compared to the first two quarters. Temporary suspensions of our airtime services typically increase in the fourth and first quarters of each year as boats are placed out of service during winter months. Our leisure marine business is also significantly affected by the weather. Unseasonably cool weather, prolonged winter conditions, hurricanes, unusual amounts of rain, and natural and other disasters may decrease boating, which could reduce our revenues. Specifically, we may encounter a decrease in new airtime activations as well as an increase in the number of cancellations or temporary suspensions of our airtime service.

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We have a single manufacturing facility, and any significant disruption to this facility will impair our ability to deliver our products.

We manufacture all of our products at our manufacturing facility in Middletown, Rhode Island. Some of our production processes are complex, and we may be unable to respond rapidly to the loss of the use of our production facility. For example, we use some specialized equipment that may take time to replace if it is damaged or becomes unusable for any reason. In that event, shipments would be delayed, which could result in customer or dealer dissatisfaction, loss of sales and damage to our reputation.

Acquisitions and strategic relationships may disrupt our operations or adversely affect our results.

We evaluate opportunities to acquire other businesses and pursue other strategic relationships as they arise. The expenses we incur evaluating and pursuing acquisitions and strategic relationships could have a material adverse effect on our results of operations. If we acquire a business, we may be unable to manage it profitably or successfully integrate its operations with our own. Moreover, we may be unable to realize the strategic, financial, operational and other benefits we anticipate, and any acquisition or strategic relationship may increase our operating expenses. Further, our approach to acquisitions and strategic relationships may involve a number of special financial and business risks, such as entry into new and unfamiliar lines of business or markets, which may present challenges or risks that we did not anticipate; entry into new or unfamiliar geographic regions, including exposure to additional tax and regulatory regimes; increased expenses associated with the amortization of acquired intangible assets; increased exposure to fluctuations in foreign currency exchange rates; charges related to any abandoned acquisition; diversion of our management’s time, attention, and resources; loss of key personnel; increased costs to improve or coordinate managerial, operational, financial, and administrative systems, including internal control over financial reporting; dilutive issuances of equity securities; the assumption of legal liabilities; and losses arising from impairment charges associated with goodwill or intangible assets.

Risks related to our dependence on third parties and third-party technology

Our mobile satellite products currently depend on satellite services, gateway teleports and terrestrial networks provided by third parties, and a disruption in those services could adversely affect sales.

Our satellite antenna products include the equipment necessary to utilize satellite services. We do not own the satellites that provide two-way satellite communications or the terrestrial networks that interconnect our facilities with the satellite teleports that communicate with the satellites. Intelsat and Sky Perfect-JSAT currently provide the satellite capacity to support our global high-throughput satellite (HTS) broadband service and our TracNet H-series and TracPhone V-HTS series products. Vodafone provides the 5G/LTE services used by our TracNet H-series terminals to provide cellular service in 150+ countries. We rely on Inmarsat for satellite communications services for our FleetBroadband-compatible and FleetOne-compatible TracPhone products. We also have an arrangement with Iridium for additional satellite communications services that we make available to our customers as a backup option to provide communications redundancy with our primary service offerings.

In addition, we have agreements with various teleports and Internet service providers around the globe to support our global HTS broadband service. The terrestrial fiber links that we use to connect with the Internet and to move our VoIP and data services between our facilities and the various satellite earth stations that support our services are provided to us through numerous service providers, some of which have contractual relationships with our satellite service providers and not directly with us.

We currently offer satellite television products compatible with the DIRECTV and DISH Network services in the United States, the Bell TV service in Canada, the Sky Mexico service in Mexico, the Sky UK service in the United Kingdom, Canal+ service in France and Movistar service in Spain, and other regional satellite TV services in other parts of the world.

We exercise little or no control over these third-party providers of satellite, teleport, and terrestrial network services, which increases our vulnerability to problems with the services they provide. Due to our reliance on these service providers, when problems occur, it may be difficult to identify the source of the problem. Service disruption or outages, regardless of whether they are caused by our service, the equipment or services of our third-party service providers, or our customers’ or their equipment and systems, may result in loss of market acceptance of our service, and any necessary repairs or other remedial actions may cause us to incur significant costs and expenses. Any failure on the part of third-party service providers to achieve or maintain expected performance levels, stability, and security could harm our relationships with our customers, result in claims for credits or damages, damage our reputation, significantly reduce customer demand for our solution and seriously harm our financial condition and operating results.

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If customers become dissatisfied with the pricing, service, availability, programming or other aspects of any of these satellite services, or if any one or more of these services becomes unavailable for any reason, we could suffer a substantial decline in sales of our satellite products or services. There may be no alternative satellite service provider available to us in a particular geographic area, and our modem or other technology may not be compatible with the technology of any alternative service provider that may be available. Even if available, delays caused by switching our technology to another service provider, if available, and qualifying this new service provider could materially harm our customer relationships, business, financial condition, and operating results. In addition, the unexpected failure of a satellite could disrupt the availability of programming and services, which could reduce the demand for, or customer satisfaction with, our products and services.

We depend on cloud-based data services operated by third parties, and any disruption in the operation of these services could harm our business.

Some of our content services and business records are hosted by various cloud-based data services operated by third parties. Any failure or downtime in one of these services could affect a significant percentage of our customers. Although we control and have access to our servers and the components of our network that are located in our internal facilities and certain of our external data facilities, we do not control the operation of external facilities. The providers of our data management services have no obligation to renew their agreements with us on commercially reasonable terms, or at all. If we are unable to renew these agreements on commercially reasonable terms, or if one or more of our data management service providers is acquired, closes, suffers financial difficulty or is unable to meet our growing capacity needs, we may be required to transfer our data to other services, and we may incur significant costs and service interruptions in connection with doing so, which could harm our reputation with our customers and adversely affect our revenues and results of operations.

Our media and entertainment business relies on licensing arrangements with content providers, and the loss of, or changes in, those arrangements could adversely affect our business.

We distribute premium news, television shows, sports, and movies to commercial customers in the maritime and hotel markets. We license this content from third parties on a non-exclusive basis without long-term license agreements. Any content provider could terminate our arrangements without notice or could adversely modify the terms of the arrangement, including price increases. Further, the licenses we obtain are limited in scope, and any violation of the terms of a license could expose us to liability for copyright infringement. We pay license fees based in part on the revenue we generate from sublicenses, and our licensors generally have the right to audit our records. Failure to pay required license fees could result in termination of our license rights, penalties and damages. The loss of content could adversely affect the attractiveness of our media and entertainment offerings, which could in turn adversely affect our revenues. Any increase in the cost of content could reduce the profitability of these offerings.

Cybersecurity breaches could disrupt our operations, expose us to liability, damage our reputation, and require us to incur significant costs or otherwise adversely affect our financial results.

We are highly dependent on information technology networks and systems, including the Internet and third-party systems, to securely process, transmit and store electronic information, including personal information of our customers. We also retain sensitive data, including intellectual property, proprietary business information, personally identifiable information, credit card information, and usage data of our employees and customers on our computer networks and those of third parties. Although we take certain protective measures and endeavor to modify them as we believe circumstances warrant, invasive technologies and techniques continue to evolve rapidly, and increasingly sophisticated hacking organizations are targeting business systems. As a result, the computer systems, software and networks that we use are vulnerable to disruption, shutdown, unauthorized access, misuse, erasure, alteration, employee error, phishing, computer viruses, ransomware or other malicious code, and other events that could have a material security impact. The protective measures on which we rely may be inadequate to prevent or detect all material cybersecurity breaches or determine the extent of any material breach, and there can be no assurance that material undetected breaches have not already occurred. If any material cybersecurity event were to occur, it could disrupt our operations, distract our management, cause us to lose existing customers and fail to attract new customers, as well as subject us to regulatory actions, litigation, fines, damage to our reputation or competitive position, or orders or decrees requiring us to modify our business practices, any of which could have a material adverse effect on our financial position, results of operations or cash flows.

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Risks related to economic conditions and trade relations

Our revenues, results of operations and financial condition may be adversely impacted by economic turmoil, political instability, declines in consumer and enterprise spending.

Economic and political conditions in the geographic markets we serve have experienced significant turmoil over the last several years, including a potential global recession, slow economic activity, tight credit markets, inflation and deflation concerns, low consumer confidence, limited capital spending, adverse business conditions, war and refugee crises in the Middle East and Europe, terrorist attacks, changes in government priorities, trade wars, restrictions on commercial fishing, a government shutdown, gridlock from a divided Congress, and liquidity concerns. These factors vary in intensity by region. We cannot predict the timing, duration, or ultimate impact of turmoil on our markets or our suppliers. We expect our business would be adversely impacted by any significant turmoil, to varying degrees and for varying amounts of time, in all our geographic markets.

Changes in U.S. trade policy, including changes to existing trade agreements and any resulting changes in international trade relations, may have a material adverse effect on us.

The U.S. may continue to alter its approach to international trade, which may impact existing bilateral or multi-lateral trade agreements and treaties with foreign countries. The U.S. has imposed tariffs on certain foreign goods and may increase tariffs or impose new ones, and certain foreign governments have retaliated and may continue to do so. We derive a majority of our revenues from international sales, which makes us especially vulnerable to increased tariffs. Changes in U.S. trade policy have created ongoing turmoil in international trade relations, and it is unclear what future actions governments will or will not take with respect to tariffs or other international trade agreements and policies. Ongoing or new trade wars or other governmental action related to tariffs or international trade agreements or policies could reduce demand for our products and services, increase our costs, reduce our profitability, adversely impact our supply chain or otherwise have a material adverse effect on our business and results of operations.

Changes in foreign currency exchange rates may negatively affect our financial condition and results of operations.

We face significant exposure to movements in exchange rates for foreign currencies, particularly the pound sterling and the euro. For example, during 2022, the U.S. dollar strengthened against certain foreign currencies, which adversely affected revenues reported in U.S. dollars and decreased the reported value of our assets in foreign countries. We also have intragroup receivables and liabilities, such as loans, that can generate significant foreign currency effects. Changes in exchange rates, particularly the U.S. dollar against the pound sterling, could lead to the recognition of unrealized foreign exchange losses.

Certain of our products and services are sold internationally in U.S. dollars; if the U.S. dollar continues to strengthen, the relative cost of these products and services to customers located in foreign countries would increase, which could adversely affect export sales. In addition, most of our financial obligations must be satisfied in U.S. dollars. Our exposures to changes in foreign currency exchange rates may change over time as our business practices evolve and could result in increased costs or reduced revenue and could adversely affect our cash flow. Changes in the relative values of currencies occur regularly and may have a significant impact on our operating results. We cannot predict with any certainty changes in foreign currency exchange rates or the degree to which we can cost-effectively mitigate this exposure.

Risks related to the sale of our inertial navigation business

We face potential liabilities and disruptions arising from the sale of our inertial navigation business.

On August 9, 2022, we sold our inertial navigation business to EMCORE Corporation. The sale of the inertial navigation business required us to separate and allocate specific assets to the business, including some shared assets. We could face disputes with EMCORE regarding whether or not certain assets were included in the sale. Any such disputes could divert the attention of our management or otherwise have a material adverse effect on our business, financial condition and results of operations. We incurred significant legal, accounting and financial advisory fees negotiating and consummating the sale of the inertial navigation business, and we may incur additional fees to resolve any dispute that may arise over the terms of the transaction or the parties’ compliance with their obligations under the transaction agreements.

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Risks related to our industry

Increasing competition may limit our ability to sell our products and services.

The mobile connectivity market is very competitive, and competition is increasing. We may not be able to compete successfully against current and future competitors, which would impair our ability to sell our products and services. Competition has intensified significantly in recent years, both from companies that seek to compete primarily on price as well as new, emerging non-geostationary satellite orbit (NGSO) services, such as Starlink, OneWeb, Kuiper, Telesat, and others. These companies may continue to implement price reductions and discounts for both products and services, which have required us to reduce our prices or offer discounts in an effort to maintain or increase our market share. Current and future competitors have greater financial resources than we do, enabling them to operate at lower margins to gain market share. We believe increased competition contributed to the decrease in our product sales in the nine months ended September 30, 2023, including unit sales of our VSAT products, and this trend may continue in future periods.

Some of our VSAT competitors have already leveraged partnerships amongst themselves in order to capture larger combined market share. Further, some of the companies that we depend on to supply us with capacity on satellite communications networks may vertically integrate by introducing their own products and services to compete with ours, which might motivate them to stop providing satellite network capacity to us, or to make it available on less favorable terms.

The Starlink LEO service continues to adversely impact our business, particularly within the global leisure segment. A significant number of leisure customers have adopted Starlink systems for both two-way communications as well as streaming, which has impacted both our VSAT Broadband and TracVision businesses. Although our leisure business accounts for less than 20% of our total revenue, competition from Starlink has begun to adversely impact our commercial business as well, particularly our growth in that segment. While we have historically grown the total number of our subscribers in sequential quarters, in the third quarter of 2023 the total number of our subscribers declined one percent as a result of the churn in our leisure business and the slower growth in our commercial business. If this trend continues and we are unable to develop a competitive alternative, it could have a material adverse effect on our revenue, profitability, and cash flow.

In the marine market for satellite TV equipment, we compete primarily with Intellian, Cobham SATCOM and Raymarine (Intellian-made). In the marine market for two-way communications equipment, we compete primarily with Intellian and Cobham SATCOM. In the marine market for high-speed Internet, voice, fax, and data services, we compete primarily with Inmarsat, Marlink, Speedcast, Viasat, and Network Innovations, along with smaller, single-hub regional services. Additionally, we are starting to face competition from new NGSO networks such as SpaceX's Starlink and OneWeb. We also face competition from providers of low-speed data services, which include Inmarsat and Iridium Satellite LLC. In the market for land mobile satellite TV equipment, we compete primarily with King Controls and Winegard Company. In the markets for media content, the KVH Media Group competes primarily with Swank Motion Pictures, Baze Technology, and NewspaperDirect, Inc. Many of our competitors are well-established companies that have substantially greater financial, managerial, technical, marketing, personnel, and other resources than we do, which may help them to compete more effectively against us.

We depend on sole or limited source suppliers, and any disruption in supply could impair our ability to deliver our products on time or at expected cost.

We obtain many key components for our products from third-party suppliers, and in some cases we use a single or a limited number of suppliers. Any interruption in supply could impair our ability to deliver our products until we identify and qualify a new source of supply, which could take several weeks, months or longer and could increase our costs significantly. For example, the global chip shortage and supply chain constraints resulting from the COVID-19 pandemic adversely impacted our ability to deliver products in a timely manner and increased our cost of sales due to rising prices for materials. In the third quarter of 2023, we estimate that raw material costs exceeded our expectations by approximately $0.3 million. We may not be able to pass along any of these cost increases to our customers, and customers may not wait for our products to become available. These disruptions in our supply chain could worsen, which could delay delivery of our products and services and adversely affect our revenue and results of operations. Suppliers might change or discontinue key components, which could require us to modify our product designs. In general, we do not have written long-term supply agreements with our suppliers but instead buy components through purchase orders, which expose us to potential price increases and termination of supply without notice or recourse. We generally do not carry significant inventories of product components, which could magnify the impact of the loss of a supplier. If we must use a new source of supply, we could face unexpected manufacturing difficulties and loss of product performance or reliability. In addition, lead times for certain components can increase significantly due to imbalances in overall market supply and demand. This, in turn, could limit our ability to satisfy demand for our products and could result in the cancellation of customer orders.
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We may source more materials and components from international suppliers, which could disrupt our business.

We may increase sourcing of raw materials, manufactured components and subassemblies from international suppliers. Increased reliance on foreign manufacturing and/or raw material supply could lengthen our supply chain and increased the risk that a disruption in that supply chain could have a material adverse effect on our operations and financial performance.

Changes in the competitive environment, customer demand, supply chain issues, and the transition to new products may require inventory write-downs.

From time to time, we have recorded significant inventory charges and/or inventory write-offs as a result of substantial declines in customer demand. For example, in 2019, we recorded a $2.3 million inventory reserve relating to our TracPhone V-IP products as we decided to no longer promote sales of these products but instead to focus our efforts on migrating customers to our HTS network and products. Market or competitive changes, such as a continuation of the decline in demand for our TracVision products that we experienced in the first nine months of 2023, could lead to future charges for excess or obsolete inventory, especially if we are unable to appropriately adjust the supply of material from our vendors.

Risks related to intellectual property and technological innovation

Our research and development efforts may be unsuccessful. If we are unable to improve our existing products and services and develop new, innovative products and services, our sales and market share may decline.

The market for mobile connectivity products and services is characterized by rapid technological change, frequent new product innovations, changes in customer requirements and expectations, and evolving industry standards. For example, we are starting to face competition from new LEO networks such as SpaceX's Starlink and OneWeb. If we fail to make innovations in our existing products and services and reduce the costs of our products and services, our market share may decline. For example, the introductions of our TracVision TV-series antennas in 2014 occurred later than we had anticipated, which we believe led certain customers to purchase competing products. Products or services using new technologies, or emerging industry standards, could render our products and services obsolete. If our competitors successfully introduce new or enhanced products or services that outperform our products or services, or are perceived as doing so, we may be unable to compete successfully in the markets affected by these changes.

Research and development is inherently complex and uncertain, and our current and anticipated research and development projects may not achieve the results we seek. The financial resources that we can devote to our research and development efforts may be insufficient to achieve our goals. Our efforts may not result in any viable products or may result in products whose performance, features, price or availability may not be attractive to customers or that we cannot manufacture and sell profitably.

Our business may suffer if we cannot protect our proprietary technology.

Our ability to compete depends significantly upon our patents, copyrights, source code, and other proprietary technology. The steps we have taken to protect our technology may be inadequate to prevent others from using what we regard as our technology to compete with us. Our patents will eventually expire and could be challenged, invalidated or circumvented. Customers or others with access to our proprietary or licensed media content could copy that content without permission or otherwise violate the terms of our customer agreements, which would adversely affect our revenues and could impair our relationships with content providers. In addition, the laws of some foreign countries do not protect our proprietary technology to the same extent as the laws of the United States, which could increase the likelihood of misappropriation. Any misappropriation of our technology could seriously harm our competitive position, which could lead to a substantial reduction in net sales. If we resort to legal proceedings to enforce our intellectual property rights, the proceedings could be burdensome, disruptive and expensive. The proceedings could distract the attention of management, and we may not prevail.

Claims by others that we infringe their intellectual property rights could harm our business and financial condition.

Our industry is characterized by the existence of a large number of patents and frequent claims and related litigation regarding patent and other intellectual property rights. We cannot be certain that our products do not and will not infringe issued patents, patents that may be issued in the future, or other intellectual property rights of others.

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Risks related to government regulation

Our international operations complicate our business and require us to comply with multiple regulatory environments.

Historically, sales to customers outside the United States have accounted for a significant portion of our net sales. We derived 67%, 62% and 58% of our revenues from continuing operations in the nine months ended September 30, 2023 and the years ended December 31, 2022 and 2021, respectively, from sales to these foreign customers. We have foreign offices in Denmark, the United Kingdom, Singapore, Japan, Norway and the Philippines, as well as a subsidiary in Brazil that manages local sales. Nonetheless, substantially all of our operations and approximately one-half of our personnel are located in the United States. Our limited international operations may impair our ability to compete successfully in international markets and to meet the service and support needs of our customers in countries where we have little to no infrastructure. Risks associated with our international business activities may increase our costs and require significant management attention. These risks include restrictions on international travel, which may restrict our ability to grow and service our business; tariffs; sanctions or other trade restrictions that preclude or restrict doing business with particular foreign governments, companies or individuals; technical challenges we may face in adapting our products to function with different satellite services and technology in use in various regions around the world; satisfaction of international regulatory requirements and delays and costs associated with procurement of any necessary licenses or permits; the potential unavailability of content licenses covering international waters and foreign locations; increased costs of providing customer support in multiple languages; increased costs of managing operations that are international in scope; potentially adverse tax consequences, including restrictions on the repatriation of earnings; protectionist laws and business practices that favor local competitors, which could slow our growth in international markets; potentially longer sales cycles; potentially longer accounts receivable payment cycles and difficulties in collecting accounts receivable; and economic and political instability in some international markets.

We could incur additional legal compliance costs associated with our international operations and could become subject to legal penalties if we do not comply with certain regulations.

Our international operations subject us to a number of legal requirements, including the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act and the customs, export, trade sanctions and anti-boycott laws of the United States, including those administered by the U.S. Customs and Border Protection, the Bureau of Industry and Security, the Department of Commerce, the Department of State, and the Office of Foreign Assets Control of the Treasury Department, as well as those of other nations. In addition, many of the countries where our customers use our products and services have licensing and regulatory requirements for the importation and use of satellite communications and reception equipment, including the use of such equipment in territorial waters, the transmission of satellite signals on certain radio frequencies, the transmission of VoIP services using such equipment and the reception of certain video programming services. These laws and regulations are continually changing, making compliance complex. We incur significant costs identifying and maintaining compliance with applicable licensing and regulatory requirements. Our training and compliance programs and our other internal control policies may be insufficient to protect us from acts committed by our employees, agents or third-party contractors. Any violation of these requirements by us or our employees, agents or third-party contractors may subject us to significant criminal and civil liability.

We are subject to FCC rules and regulations, and any non-compliance could subject us to FCC enforcement actions, fines, loss of licenses and possibly restrictions on our ability to operate or offer certain of our services

The satellite communications industry in the United States is regulated by the Federal Communications Commission (FCC), and we are subject to FCC regulations relating to privacy, contributions to the Universal Service Fund, or USF, and other requirements. If we do not comply with FCC regulations, we could face enforcement actions, substantial fines, penalties, loss of licenses and possibly restrictions on our ability to operate or offer services. Any enforcement action by the FCC, which may be a public process, could hurt our reputation, impair our ability to sell our services to customers and harm our business and results of operations.

Privacy concerns and domestic or foreign laws and regulations may reduce demand for our services, increase our costs and harm our business.

Our company and our customers can use our services to collect, use and store personal, confidential and sensitive information regarding the content and manner of usage of our services by them, their employees and maritime crews. Federal, state and foreign governments have adopted and are proposing new and more stringent laws and regulations regarding the collection, use, storage and transfer of information, such as the European Union’s General Data Protection Regulation (“GDPR”). The costs of compliance with, and other burdens imposed by, such laws and regulations may limit the use and adoption of our services and reduce overall demand. Non-compliance with these laws and regulations could lead to significant remediation expenses, fines,
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penalties or other liabilities, such as orders or consent decrees that require modifications to our privacy practices, as well as reputational damage or third-party lawsuits seeking damages or other relief. For example, the GDPR imposes a strict data protection compliance regime with penalties of up to the greater of 2%-4% of worldwide revenue or €11-22 million.

Domestic and international legislative and regulatory initiatives may harm our ability, and the ability of our customers, to process, handle, store, use and transmit information, which could reduce demand for our services, increase our costs and force us to change our business practices. These laws and regulations are still evolving, are likely to be in flux and may be subject to uncertain interpretation for the foreseeable future. Our business also could be harmed if legislation or regulations are adopted, interpreted or implemented in a manner that is inconsistent from country to country or inconsistent with our current policies and practices or those of our customers.

Risks related to owning our common stock

The market price of our common stock may be volatile.

Our stock price has historically been volatile. During the period from January 1, 2018 to September 30, 2023, the trading price of our common stock ranged from $5.08 to $15.29. Many factors may cause our stock price to fluctuate, including variations in quarterly results; the introduction of new products and services by us or our competitors; changes in estimates of our performance or recommendations by securities analysts; the hiring or departure of key personnel; acquisitions or strategic alliances involving us or our competitors; market conditions in our industry; and the global macroeconomic and geopolitical environment. Broad market fluctuations may adversely affect our stock price. When the market price of a company’s stock drops significantly, stockholders often institute securities litigation against that company. Any such litigation could cause us to incur significant expenses defending against the claim, divert the time and attention of our management and result in significant damages.

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ITEM 6.    EXHIBITS
Exhibits:
 
Exhibit
No.		DescriptionFiled with
this Form 10-Q		Incorporated by Reference
FormFiling DateExhibit No.
Amended and Restated Certificate of Incorporation, as amended10-QAugust 6, 20103.1
Certificate of Designations of Series A Junior Participating Cumulative Preferred Stock of KVH Industries, Inc. classifying and designating the Series A Junior Participating Cumulative Preferred Stock8-AAugust 19, 20223.1
Amended and Restated Bylaws10-QNovember 1, 20173.2
Specimen certificate for the common stock10-KMarch 2, 20184.1
Rule 13a-14(a)/15d-14(a) certification of principal executive officerX
Rule 13a-14(a)/15d-14(a) certification of principal financial officerX
Section 1350 certification of principal executive officer and principal financial officerX
101 
The following financial information from KVH Industries, Inc.'s Quarterly Report on Form 10-Q for the quarter ended September 30, 2023, formatted in Inline XBRL (Extensible Business Reporting Language): (i) the Consolidated Balance Sheets (unaudited), (ii) the Consolidated Statements of Operations (unaudited), (iii) the Consolidated Statements of Comprehensive (Loss) Income (unaudited), (iv) the Consolidated Statements of Stockholders' Equity (unaudited), (v) the Consolidated Statements of Cash Flows (unaudited), and (vi) the Notes to Consolidated Interim Financial Statements (unaudited).
X
104 
Cover Page Interactive Data File (embedded within the Inline XBRL document)
X
43

SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: November 9, 2023
KVH Industries, Inc.
By:/s/ ROGER A. KUEBEL
Roger A. Kuebel
(Duly Authorized Officer and Chief Financial
Officer)
44

Exhibit 31.1
Certification of Principal Executive Officer
Pursuant to Rule 13a-14 or 15d-14 under the Securities Exchange Act of 1934 as Adopted Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
I, Brent C. Bruun, certify that:
1.I have reviewed this quarterly report on Form 10-Q of KVH Industries, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: November 9, 2023
/s/ Brent C. Bruun
Brent C. Bruun
President, Chief Executive Officer and Director




Exhibit 31.2
Certification of Principal Financial Officer
Pursuant to Rule 13a-14 or 15d-14 under the Securities Exchange Act of 1934 as Adopted Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
I, Roger A. Kuebel, certify that:
1.I have reviewed this quarterly report on Form 10-Q of KVH Industries, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: November 9, 2023
/s/ Roger A. Kuebel
Roger A. Kuebel
Chief Financial Officer




Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. §1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of KVH Industries, Inc. (the “Company”) for the quarter ended September 30, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned President, Chief Executive Officer and Director, and Chief Financial Officer of the Company, certifies, to his best knowledge and belief, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Act of 1934; and
2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ Brent C. Bruun/s/ Roger A. Kuebel
Brent C. BruunRoger A. Kuebel
President, Chief Executive Officer and Director
Chief Financial Officer
Date:
November 9, 2023
Date:
November 9, 2023



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Cover Page - shares
 9 Months Ended
Sep. 30, 2023
Oct. 30, 2023
Cover [Abstract]    
Document Type 10-Q  
Document Quarterly Report true  
Document Period End Date Sep. 30, 2023  
Document Transition Report false  
Entity File Number 0-28082  
Entity Registrant Name KVH Industries, Inc.  
Entity Incorporation, State or Country Code DE  
Entity Tax Identification Number 05-0420589  
Entity Address, Address Line One 50 Enterprise Center  
Entity Address, City or Town Middletown  
Entity Address, State or Province RI  
Entity Address, Postal Zip Code 02842  
City Area Code 401  
Local Phone Number 847-3327  
Title of 12(b) Security Common Stock, par value $0.01 per share  
Trading Symbol KVHI  
Security Exchange Name NASDAQ  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Accelerated Filer  
Entity Small Business true  
Entity Emerging Growth Company false  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding   19,610,790
Entity Central Index Key 0001007587  
Amendment Flag false  
Document Fiscal Year Focus 2023  
Document Fiscal Period Focus Q3  
Current Fiscal Year End Date --12-31  
v3.23.3
Consolidated Balance Sheets - USD ($)
$ in Thousands
Sep. 30, 2023
Dec. 31, 2022
Current assets:    
Cash and cash equivalents $ 11,484 $ 21,056
Marketable securities 57,710 55,680
Accounts receivable, net of allowance for credit losses of $1,010 and $1,268 as of September 30, 2023 and December 31, 2022, respectively 28,190 27,427
Inventories 26,423 22,730
Prepaid expenses and other current assets 4,617 3,067
Current contract assets 1,130 1,243
Total current assets 129,554 131,203
Property and equipment, net 49,407 53,118
Intangible assets, net 0 404
Goodwill 0 5,308
Right of use assets 1,191 2,168
Other non-current assets 3,985 5,037
Non-current contract assets 2,557 3,033
Deferred income tax asset 258 259
Total assets 186,952 200,530
Current liabilities:    
Accounts payable 3,644 20,449
Accrued compensation and employee-related expenses 4,936 7,621
Accrued other 11,609 4,234
Accrued product warranty costs 642 1,287
Contract liabilities 3,268 3,108
Current operating lease liability 921 1,532
Liability for uncertain tax positions 693 637
Total current liabilities 25,713 38,868
Long-term operating lease liability 272 636
Long-term contract liabilities 3,905 4,315
Deferred income tax liability 55 55
Total liabilities 29,945 43,874
Commitments and contingencies (Notes 2, 10, and 15)
Stockholders’ equity:    
Preferred stock, $0.01 par value. Authorized 1,000,000 shares; none issued 0 0
Common stock, $0.01 par value. Authorized 30,000,000 shares; 21,066,899 and 20,631,152 shares issued at September 30, 2023 and December 31, 2022, respectively; and 19,610,790 and 19,198,458 shares outstanding at September 30, 2023 and December 31, 2022, respectively 211 206
Additional paid-in capital 164,505 160,475
Retained earnings 8,603 11,936
Accumulated other comprehensive loss (4,222) (4,110)
Stockholders equity before treasury stock adjustment 169,097 168,507
Less: treasury stock at cost, common stock, 1,456,109 and 1,432,694 shares as of September 30, 2023 and December 31, 2022, respectively. (12,090) (11,851)
Total stockholders’ equity 157,007 156,656
Total liabilities and stockholders’ equity $ 186,952 $ 200,530
v3.23.3
Consolidated Balance Sheets (Parenthetical) - USD ($)
$ in Thousands
Sep. 30, 2023
Dec. 31, 2022
Statement of Financial Position [Abstract]    
Accounts receivable, allowance for doubtful accounts $ 1,010 $ 1,268
Preferred stock, par value (in USD per share) $ 0.01 $ 0.01
Preferred stock, shares authorized (in shares) 1,000,000 1,000,000
Preferred stock, shares issued (in shares) 0 0
Common stock, par value (in USD per share) $ 0.01 $ 0.01
Common stock, shares authorized (in shares) 30,000,000 30,000,000
Common stock, shares issued (in shares) 21,066,899 20,631,152
Common stock, shares outstanding (in shares) 19,610,790 19,198,458
Treasury stock at cost, outstanding (in shares) 1,456,109 1,432,694
v3.23.3
Consolidated Statements of Operations - USD ($)
shares in Thousands, $ in Thousands
 3 Months Ended 9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Sep. 30, 2023
Sep. 30, 2022
Sales:        
Net sales $ 33,549 $ 35,169 $ 101,409 $ 102,873
Costs and expenses:        
Research and development 2,398 2,745 7,379 8,380
Sales, marketing and support 4,854 5,710 15,708 18,355
General and administrative 4,367 5,559 13,139 19,532
Goodwill impairment charge 5,333 0 5,333 0
Long-lived assets impairment charge 657 0 657 0
Total costs and expenses 38,576 36,140 106,660 109,135
Loss from operations (5,027) (971) (5,251) (6,262)
Interest income 997 389 2,660 798
Interest expense 0 1 0 3
Other (expense) income, net (121) 569 (583) 1,561
Loss from continuing operations before income tax expense (4,151) (14) (3,174) (3,906)
Income tax expense from continuing operations 95 81 159 645
Net loss from continuing operations (4,246) (95) (3,333) (4,551)
Net income from discontinued operations, net of tax 0 29,741 0 28,061
Net (loss) income $ (4,246) $ 29,646 $ (3,333) $ 23,510
Net loss from continuing operations per common share        
Basic (in shares) $ (0.22) $ (0.01) $ (0.17) $ (0.25)
Diluted (in shares) (0.22) (0.01) (0.17) (0.25)
Net income from discontinued operations per common share        
Basic (in shares) 0.00 1.59 0.00 1.51
Diluted (in shares) 0.00 1.59 0.00 1.51
Net (loss) income per common share        
Basic (in USD per share) (0.22) 1.58 (0.17) 1.27
Diluted (in USD per share) $ (0.22) $ 1.58 $ (0.17) $ 1.27
Weighted average number of common shares outstanding:        
Basic (in shares) 19,231 18,706 19,090 18,574
Diluted (in shares) 19,231 18,706 19,090 18,574
Product        
Sales:        
Net sales $ 4,152 $ 6,625 $ 14,526 $ 19,808
Costs and expenses:        
Costs of sales 4,729 6,747 16,596 17,363
Service        
Sales:        
Net sales 29,397 28,544 86,883 83,065
Costs and expenses:        
Costs of sales $ 16,238 $ 15,379 $ 47,848 $ 45,505
v3.23.3
Consolidated Statements of Comprehensive (Loss) Income - USD ($)
$ in Thousands
 3 Months Ended 9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Sep. 30, 2023
Sep. 30, 2022
Statement of Comprehensive Income [Abstract]        
Net (loss) income $ (4,246) $ 29,646 $ (3,333) $ 23,510
Other comprehensive loss, net of tax:        
Unrealized gain on available-for-sale securities 0 0 12 0
Foreign currency translation adjustment (267) (646) (124) (1,258)
Other comprehensive loss, net of tax [1] (267) (646) (112) (1,258)
Total comprehensive (loss) income $ (4,513) $ 29,000 $ (3,445) $ 22,252
[1] Tax impact was nominal for all periods.
v3.23.3
Consolidated Statements of Stockholders' Equity - USD ($)
$ in Thousands
Total
Common Stock
Additional Paid-in Capital
Retained Earnings
Accumulated Other Comprehensive Loss
Treasury Stock
Beginning balance (in shares) at Dec. 31, 2021   20,343,000        
Beginning balance at Dec. 31, 2021 $ 128,977 $ 203 $ 156,199 $ (12,165) $ (3,409) $ (11,851)
Beginning balance, treasury stock (in shares) at Dec. 31, 2021           (1,433,000)
Increase (Decrease) in Stockholders' Equity [Roll Forward]            
Net (loss) income 23,510     23,510    
Other comprehensive loss (1,258) [1]       (1,258)  
Stock-based compensation 2,695   2,695      
Issuance of common stock under employee stock purchase plan (in shares)   22,000        
Issuance of common stock under employee stock purchase plan 193   193      
Exercise of stock options and issuance of restricted stock awards, net of forfeitures (in shares)   241,000        
Exercise of stock options and issuance of restricted stock awards, net of forfeitures 602 $ 3 599      
Taxes accrued for net share settlement of options (131)   (131)      
Ending balance (in shares) at Sep. 30, 2022   20,606,000        
Ending balance at Sep. 30, 2022 154,588 $ 206 159,555 11,345 (4,667) $ (11,851)
Ending balance, treasury stock (in shares) at Sep. 30, 2022           (1,433,000)
Beginning balance (in shares) at Dec. 31, 2021   20,343,000        
Beginning balance at Dec. 31, 2021 $ 128,977 $ 203 156,199 (12,165) (3,409) $ (11,851)
Beginning balance, treasury stock (in shares) at Dec. 31, 2021           (1,433,000)
Increase (Decrease) in Stockholders' Equity [Roll Forward]            
Acquisition of treasury stock (in shares) 0          
Ending balance (in shares) at Dec. 31, 2022 19,198,458 20,631,000        
Ending balance at Dec. 31, 2022 $ 156,656 $ 206 160,475 11,936 (4,110) $ (11,851)
Ending balance, treasury stock (in shares) at Dec. 31, 2022 (1,432,694)         (1,433,000)
Beginning balance (in shares) at Jun. 30, 2022   20,503,000        
Beginning balance at Jun. 30, 2022 $ 124,028 $ 205 157,996 (18,301) (4,021) $ (11,851)
Beginning balance, treasury stock (in shares) at Jun. 30, 2022           (1,433,000)
Increase (Decrease) in Stockholders' Equity [Roll Forward]            
Net (loss) income 29,646     29,646    
Other comprehensive loss (646) [1]       (646)  
Stock-based compensation 1,109   1,109      
Exercise of stock options and issuance of restricted stock awards, net of forfeitures (in shares)   103,000        
Exercise of stock options and issuance of restricted stock awards, net of forfeitures 451 $ 1 450      
Ending balance (in shares) at Sep. 30, 2022   20,606,000        
Ending balance at Sep. 30, 2022 $ 154,588 $ 206 159,555 11,345 (4,667) $ (11,851)
Ending balance, treasury stock (in shares) at Sep. 30, 2022           (1,433,000)
Beginning balance (in shares) at Dec. 31, 2022 19,198,458 20,631,000        
Beginning balance at Dec. 31, 2022 $ 156,656 $ 206 160,475 11,936 (4,110) $ (11,851)
Beginning balance, treasury stock (in shares) at Dec. 31, 2022 (1,432,694)         (1,433,000)
Increase (Decrease) in Stockholders' Equity [Roll Forward]            
Net (loss) income $ (3,333)     (3,333)    
Other comprehensive loss (112) [1]       (112)  
Stock-based compensation 1,433   1,433      
Issuance of common stock under employee stock purchase plan (in shares)   17,000        
Issuance of common stock under employee stock purchase plan 123   123      
Acquisition of treasury stock (in shares)           (23,000)
Acquisition of treasury stock (239)         $ (239)
Exercise of stock options and issuance of restricted stock awards, net of forfeitures (in shares)   419,000        
Exercise of stock options and issuance of restricted stock awards, net of forfeitures $ 2,479 $ 5 2,474      
Ending balance (in shares) at Sep. 30, 2023 19,610,790 21,067,000        
Ending balance at Sep. 30, 2023 $ 157,007 $ 211 164,505 8,603 (4,222) $ (12,090)
Ending balance, treasury stock (in shares) at Sep. 30, 2023 (1,456,109)         (1,456,000)
Beginning balance (in shares) at Jun. 30, 2023   20,969,000        
Beginning balance at Jun. 30, 2023 $ 160,704 $ 210 163,690 12,849 (3,955) $ (12,090)
Beginning balance, treasury stock (in shares) at Jun. 30, 2023           (1,456,000)
Increase (Decrease) in Stockholders' Equity [Roll Forward]            
Net (loss) income (4,246)     (4,246)    
Other comprehensive loss (267) [1]       (267)  
Stock-based compensation 559   559      
Issuance of common stock under employee stock purchase plan (in shares)   17,000        
Issuance of common stock under employee stock purchase plan 123   123      
Exercise of stock options and issuance of restricted stock awards, net of forfeitures (in shares)   81,000        
Exercise of stock options and issuance of restricted stock awards, net of forfeitures $ 134 $ 1 133      
Ending balance (in shares) at Sep. 30, 2023 19,610,790 21,067,000        
Ending balance at Sep. 30, 2023 $ 157,007 $ 211 $ 164,505 $ 8,603 $ (4,222) $ (12,090)
Ending balance, treasury stock (in shares) at Sep. 30, 2023 (1,456,109)         (1,456,000)
[1] Tax impact was nominal for all periods.
v3.23.3
Consolidated Statements of Cash Flows - USD ($)
$ in Thousands
 9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Cash flows from operating activities:    
Net (loss) income $ (3,333) $ 23,510
Adjustments to reconcile net loss to net cash used in operating activities:    
Provision for credit losses (168) 459
Depreciation and amortization 10,119 10,756
Long-lived assets impairment charge 5,990 0
Deferred income taxes 1 (31)
Loss on disposals of fixed assets 511 362
Compensation expense related to stock-based awards and employee stock purchase plan 1,433 2,695
Unrealized currency translation gain (150) (808)
Changes in operating assets and liabilities:    
Accounts receivable (593) (117)
Inventories (3,693) (9,643)
Prepaid expenses, other current assets, and current contract assets (1,430) (1,543)
Other non-current assets and non-current contract assets 1,530 1,574
Accounts payable (16,758) 612
Contract liabilities and long-term contract liabilities (255) 203
Accrued compensation, product warranty and other 4,119 1,993
Net cash used in operating activities (2,677) (1,467)
Cash flows from investing activities:    
Capital expenditures (7,170) (11,000)
Cash paid for acquisition of intangible asset (35) (42)
Purchases of marketable securities (17,441) (55,203)
Maturities and sales of marketable securities 15,422 13,164
Net cash (used in) provided by investing activities (9,224) 4,297
Cash flows from financing activities:    
Proceeds from stock options exercised and employee stock purchase plan 2,604 796
Purchase of treasury stock (239) 0
Payment of finance lease (22) (198)
Net cash provided by financing activities 2,343 598
Effect of exchange rate changes on cash and cash equivalents (14) (402)
Net (decrease) increase in cash and cash equivalents (9,572) 3,026
Cash and cash equivalents at beginning of period 21,056 11,376
Cash and cash equivalents at end of period 11,484 14,402
Supplemental disclosure of non-cash investing and financing activities:    
Changes in accrued other and accounts payable related to property and equipment additions 3 6
Taxes accrued for net share settlement of options 0 131
KVH Media Group    
Adjustments to reconcile net loss to net cash used in operating activities:    
Gain on sale of KVH Media Group Entertainment Limited 0 (631)
Cash flows from investing activities:    
Proceeds from the sale of KVH Media Group Entertainment Limited, net of cash sold 0 2,378
Intertial Navigation    
Adjustments to reconcile net loss to net cash used in operating activities:    
Gain on sale of KVH Media Group Entertainment Limited 0 (30,858)
Cash flows from investing activities:    
Proceeds from the sale of KVH Media Group Entertainment Limited, net of cash sold $ 0 $ 55,000
v3.23.3
Description of Business
 9 Months Ended
Sep. 30, 2023
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Description of Business Description of Business
KVH Industries, Inc. (together with its subsidiaries, the Company or KVH) designs, develops, manufactures and markets mobile connectivity products and services for the marine and land markets.

KVH’s satellite-only and hybrid products enable marine customers to receive data, Voice over Internet Protocol (VoIP), and value-added services via satellite, cellular, and shore-based Wi-Fi networks onboard commercial, leisure, and military/government vessels. In addition, the Company’s in-motion television terminals permit customers to receive live digital television via regional satellite services in marine vessels, recreational vehicles, buses and automobiles. KVH sells its products through an extensive international network of dealers and distributors. KVH also sells and leases products to service providers and end users.

KVH’s service sales primarily represent revenue earned from satellite Internet airtime services. KVH provides, for monthly fixed and per-usage fees, satellite connectivity encompassing broadband Internet and VoIP services, to its TracNet H-series and TracPhone V-HTS series customers via KVH’s global high-throughput satellite (HTS) network. Revenue from our cellular airtime service increasingly supplements KVH’s satellite-only airtime revenue following the July 2022 launch of the KVH ONE hybrid network and TracNet H-series terminals. This product and service combination integrates global satellite service with KVH-provided cellular service in more than 150 countries, along with shore-based Wi-Fi access. The May 2023 introduction of the KVH ONE OpenNet Program expanded access to KVH's global HTS network and airtime services to non-KVH terminals for the first time.

AgilePlans, KVH’s connectivity as a service offering, is a monthly subscription model that provides global connectivity to commercial maritime customers. The subscription includes the choice of satellite-only and hybrid terminals, airtime data service, VoIP, daily news, subsidized shipping and installation, and global support for a monthly fee with no minimum contract commitment. KVH offers AgilePlans subscribers a variety of airtime data plans with varying data speeds and fixed data usage levels with per megabyte overage charges. These airtime plans are similar to those the Company offers to customers who elect to purchase or lease a TracNet H-series or TracPhone V-HTS series terminal.

The Company recognizes the monthly AgilePlans subscription fee as service revenue over the service delivery period. The Company retains ownership of the hardware it provides to AgilePlans customers, who must return the hardware to KVH if they decide to terminate the service. Because KVH does not sell the hardware under AgilePlans, the Company does not recognize any product revenue when the hardware is deployed to an AgilePlans customer. KVH records the cost of the hardware used by AgilePlans customers as revenue-generating assets and depreciates the cost over an estimated useful life of five years. Since the Company is retaining ownership of the hardware, it does not accrue any warranty costs for AgilePlans hardware; however, any maintenance costs on the hardware are expensed in the period these costs are incurred.

Service sales also include the distribution of commercially licensed entertainment, including news, sports, and movies to commercial customers in the maritime and hotel markets through the KVH Media Group, along with supplemental value-added cybersecurity, email, and crew internet services. In addition, KVH earns monthly usage fees from third-party satellite connectivity services, including VoIP, data and Internet services, provided to its Inmarsat and Iridium customers who choose to activate their subscriptions with KVH. Service sales also include sales from product repairs and extended warranty sales.

KVH's marine leisure business is highly seasonal, and seasonality can also impact the Company's commercial marine business, although typically to a lesser degree. Historically, the Company has generated the majority of its marine leisure product revenues during the first and second quarters of each year, and these revenues typically decline in the third and fourth quarters of each year, compared to the first two quarters. Temporary suspensions of the Company's airtime services typically increase in the fourth and first quarters of each year as boats are placed out of service during the winter months.
On August 9, 2022, the Company sold its inertial navigation business to EMCORE Corporation for net proceeds of $54,904, less specified deductions. On August 9, 2022, the Company also entered into a Transition Services Agreement with EMCORE, pursuant to which the Company agreed to provide certain transition services to support the continued operation of the inertial navigation business for six months following the sale with two extension options of three months each. The fee comprised both fixed monthly fees of approximately $100 as well as variable amounts for certain additional services with escalation increases on the fixed and variable rates for each extension option. The Company did not have any continuing involvement in these operations other than the transition services, which were recorded as an offset to general and administrative expenses in continuing operations. As of September 30, 2023, the Company is no longer providing transition services. For the three and nine months ended September 30, 2023, the Company recognized an offset to general and administrative expenses associated with the Transition Services Agreement of $(13) and $710, respectively. The Company determined that the sale met the requirements for reporting as discontinued operations in accordance with Accounting Standards Codification (ASC) 205-20. Please see Note 16 for the discontinued operations disclosures. As a result of the sale of its inertial navigation business, the Company operates as one reportable segment.
v3.23.3
Summary of Significant Accounting Policies
 9 Months Ended
Sep. 30, 2023
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies Summary of Significant Accounting Policies
Basis of Presentation

The accompanying consolidated interim financial statements of KVH Industries, Inc. and its wholly owned subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States of America. The Company has evaluated all subsequent events through the date of this filing. All significant intercompany accounts and transactions have been eliminated in consolidation.

The 2022 consolidated interim financial statements reflect the sale of the inertial navigation business as discontinued operations. See Notes 1 and 16 for further information on the sale of the inertial navigation business.

The consolidated interim financial statements have not been audited by the Company’s independent registered public accounting firm and include all adjustments (consisting of only normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation of the financial condition, results of operations, and cash flows for the periods presented. These consolidated interim financial statements do not include all disclosures associated with annual financial statements and accordingly should be read in conjunction with the Company’s consolidated financial statements and related notes included in the Company’s annual report on Form 10-K for the year ended December 31, 2022 filed on March 16, 2023 with the Securities and Exchange Commission. The results for the three and nine months ended September 30, 2023 are not necessarily indicative of operating results for the remainder of the year.

Significant Estimates and Assumptions and Other Significant Non-Recurring Transactions

The preparation of interim financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the interim financial statements and the reported amounts of sales and expenses during the reporting periods. As described in the Company’s annual report on Form 10-K, the estimates and assumptions used by management affect the Company’s revenue recognition, valuation of accounts receivable, valuation of inventory, expected future cash flows including growth rates, discount rates, terminal values and other assumptions and estimates used to evaluate the recoverability of long-lived assets and goodwill, estimated fair values of long-lived assets, including goodwill, amortization methods and periods, certain accrued expenses and other related charges, stock-based compensation, contingent liabilities, forfeitures and key valuation assumptions for its share-based awards, estimated fulfillment costs for warranty obligations, tax reserves and recoverability of the Company’s net deferred tax assets and related valuation allowance, and the valuation of right-of-use assets and lease liabilities.

Although the Company regularly assesses these estimates, actual results could differ materially from these estimates. Changes in estimates are recorded in the period in which they become known. The Company bases its estimates on historical experience and various other assumptions that it believes to be reasonable under the circumstances.

Foreign Currency Translation
The financial statements of the Company’s foreign subsidiaries located in Denmark and Singapore are maintained using the United States dollar as the functional currency. Exchange rates in effect on the date of the transaction are used to record monetary assets and liabilities. Revenue and other expense elements are recorded at rates that approximate the rates in effect on the transaction dates. Foreign currency exchange gains and losses are recognized within “other (expense) income, net” in the accompanying consolidated statements of operations. The Company recorded a total of net foreign currency exchange gains (losses), which are comprised of both realized and unrealized foreign currency exchange gains and losses, in its accompanying consolidated statements of operations of $92 and $450 for the three months ended September 30, 2023 and 2022, respectively, and $(18) and $1,009 for the nine months ended September 30, 2023 and 2022, respectively.

The financial statements of the Company’s foreign subsidiaries located in the United Kingdom, Brazil, Norway, Cyprus, India and Japan use the foreign subsidiaries’ respective local currencies as the functional currency. The Company translates the assets and liabilities of these foreign subsidiaries at the exchange rates in effect at the end of each reporting period. Net sales, costs and expenses are translated using average exchange rates in effect during the period. Gains and losses from foreign currency translation are credited or charged to accumulated other comprehensive loss included in stockholders' equity in the accompanying consolidated balance sheets.

CEO Executive Employment Agreement

In May 2022, the Company entered into an executive employment agreement with Brent C. Bruun in order to retain his services and provide him with certain benefits in the event that the Company terminates his employment without cause (as defined in the agreement) or Mr. Bruun terminates his employment for good reason (as defined in the agreement) (either such termination, a “Qualifying Termination”), including following a change in control. The agreement provided that, if Mr. Bruun continued to serve as an employee through December 31, 2022 (the “Retention Date”), the Company would pay him a retention bonus equal to 75% of his base salary on the agreement date, and the Company would accelerate the vesting of his equity awards that would otherwise have vested in the twelve months after the Retention Date.

On October 11, 2022, the Company entered into an amendment to the employment agreement with Mr. Bruun that, among other things, increased his annual base salary to $448 per year, retroactive to July 1, 2022, increased his target annual incentive compensation for the second half of 2022 to 80% of his base salary (without changing his target annual incentive compensation for the first half of 2022), extended his Retention Date from December 31, 2022 to December 31, 2023, which effectively extended the period during which Mr. Bruun must remain employed by the Company in order to earn his retention bonus, and modified the amount of the retention bonus from 75% of his base salary in effect on May 2, 2022 to 75% of the highest base salary in effect for Mr. Bruun on or before the date he becomes entitled to receive the retention bonus or the “Partial Retention Bonus” (as defined in the employment agreement). If a Qualifying Termination occurs before December 31, 2023, Mr. Bruun will receive a pro rata portion of the retention bonus. If in connection with such a termination he becomes entitled to receive the change in control severance payments and benefits, he will also become entitled to receive the full retention bonus, and the Retention Date will be the later of the date of such change in control or such termination of employment. The amendment did not modify the terms of the employment agreement relating to acceleration of vesting of certain equity awards if Mr. Bruun remains employed by the Company through December 31, 2022.

As of September 30, 2023, the Company has accrued approximately $286 for the retention bonus payable to Mr. Bruun.

Contemporaneously with the amendment to Mr. Bruun’s employment agreement, the Compensation Committee also granted Mr. Bruun a restricted stock award and a non-statutory stock option, which together had an aggregate grant date fair value of approximately $100. The restricted stock award and the non-statutory stock option have terms that are materially consistent with the previously disclosed terms of similar grants to the Company’s executive officers.
v3.23.3
Recently Issued Accounting Standards and Accounting Standards Not yet Adopted
 9 Months Ended
Sep. 30, 2023
Significant Accounting Policies [Abstract]  
Recently Issued Accounting Standards and Accounting Standards Not yet Adopted Recently Issued Accounting Standards and Accounting Standards Not yet AdoptedThere are no recent accounting pronouncements issued by the FASB, but not yet effective, that the Company expects would have a material impact on the Company's financial statements.
v3.23.3
Marketable Securities
 9 Months Ended
Sep. 30, 2023
Marketable Securities [Abstract]  
Marketable Securities Marketable Securities
Marketable securities as of September 30, 2023 and December 31, 2022 consisted of the following:
September 30, 2023Amortized
Cost		Gross
Unrealized
Gains		Gross
Unrealized
Losses		Fair
Value
Money market mutual funds$57,710 $— $— $57,710 
United States treasuries— — — — 
Total marketable securities designated as available-for-sale$57,710 $— $— $57,710 
 
December 31, 2022Amortized
Cost		Gross
Unrealized
Gains		Gross
Unrealized
Losses		Fair
Value
Money market mutual funds$30,977 $— $— $30,977 
United States treasuries24,715 — (12)24,703 
Total marketable securities designated as available-for-sale$55,692 $— $(12)$55,680 

Interest income from marketable securities was $744 and $193 during the three months ended September 30, 2023 and 2022, respectively, and $2,019 and $203 during the nine months ended September 30, 2023 and 2022, respectively.
v3.23.3
Stockholder's Equity
 9 Months Ended
Sep. 30, 2023
Share-Based Payment Arrangement, Noncash Expense [Abstract]  
Stockholder's Equity Stockholder's Equity
(a) Stock Equity and Incentive Plan
The Company recognizes stock-based compensation in accordance with the provisions of ASC Topic 718, Compensation-Stock Compensation. On June 8, 2022, at the Company's 2022 Annual Meeting of Stockholders, the stockholders of the Company approved an amendment and restatement of the Company’s current equity compensation plan to increase the number of shares of common stock reserved for issuance under the plan by 1,280 shares, from 4,800 shares to 6,080 shares (excluding rollover shares). Stock-based compensation expense was $558 and $1,103, excluding $1 and $6 of compensation charges related to our Amended and Restated 1996 Employee Stock Purchase Plan, or the ESPP, for the three months ended September 30, 2023 and 2022, respectively, and $1,408 and $2,663, excluding $25 and $32 of compensation shares related to the ESPP, for the nine months ended September 30, 2023 and 2022, respectively. As of September 30, 2023, there was $2,272 of total unrecognized compensation expense related to stock options, which is expected to be recognized over a weighted-average period of 2.66 years. As of September 30, 2023, there was $2,953 of total unrecognized compensation expense related to restricted stock awards, which is expected to be recognized over a weighted-average period of 2.52 years.

Stock Options

During the three months ended September 30, 2023, the Company issued 14 shares of common stock upon the exercise of stock options and received $113 as payment for the exercise price. No shares were surrendered to the Company to satisfy minimum tax withholding obligations. Additionally, during the three months ended September 30, 2023, no stock options were granted and 133 stock options expired, were canceled or were forfeited.

During the nine months ended September 30, 2023, the Company issued 274 shares of common stock upon the exercise of stock options and received $2,480 as payment for the exercise price. No shares were surrendered to the Company to satisfy minimum tax withholding obligations. Additionally, during the nine months ended September 30, 2023, 317 stock options were granted and 564 stock options expired, were canceled or were forfeited. During the nine months ended September 30, 2022, 398 stock options were granted. The Company has historically estimated the fair value of each option grant on the date of grant using the Black-Scholes option-pricing model. The weighted average assumptions utilized to determine the fair value of options granted during the nine months ended September 30, 2023 and 2022 are as follows:
Nine Months Ended September 30,
 20232022
Risk-free interest rate4.49 %2.97 %
Expected volatility43.93 %43.16 %
Expected life (in years)4.304.24
Dividend yield0 %0 %

As of September 30, 2023, there were 1,230 options outstanding with a weighted average exercise price of $9.57 per share and 510 options exercisable with a weighted average exercise price of $9.56 per share.

Restricted Stock

During the three months ended September 30, 2023, 66 shares of restricted stock were granted with a weighted average grant date fair value of 8.75 per share and no shares of restricted stock were forfeited. Additionally, during the three months ended September 30, 2023, 7 shares of restricted stock vested, of which no shares of common stock were surrendered to the Company as payment by employees in lieu of cash to satisfy minimum tax withholding obligations in connection with the vesting of restricted stock.

During the nine months ended September 30, 2023, 217 shares of restricted stock were granted with a weighted average grant date fair value of $9.49 per share and 72 shares of restricted stock were forfeited. Additionally, during the nine months ended September 30, 2023, 101 shares of restricted stock vested, of which no shares of common stock were surrendered to the Company as payment by employees in lieu of cash to satisfy minimum tax withholding obligations in connection with the vesting of restricted stock.

As of September 30, 2023, the Company had no unvested outstanding options and no outstanding shares of restricted stock that were subject to performance-based or market-based vesting conditions.

Common Stock Repurchase

In the first quarter of 2023, the Company’s Board of Directors authorized the repurchase of a portion of executive common stock. The Company repurchased 23 shares of common stock held by executives at the Company to satisfy minimum tax withholding obligations in lieu of cash payment. No shares of common stock were repurchased during the twelve months ended December 31, 2022.

(b) Employee Stock Purchase Plan

The Company's ESPP affords eligible employees the right to purchase common stock, via payroll deductions, through various offering periods at a purchase price equal to 85% of the fair market value of the common stock on the first or last day of the offering period, whichever is lower. During the three months ended September 30, 2023 and 2022, 17 and 0 shares were issued under the ESPP plan, respectively. During the nine months ended September 30, 2023 and 2022, 17 and 22 shares were issued under the ESPP plan, respectively. The Company recorded compensation charges related to the ESPP of $1 and $6 for the three months ended September 30, 2023 and 2022, respectively, and $25 and $32 for the nine months ended September 30, 2023 and 2022, respectively.
(c) Stock-Based Compensation Expense
The following table presents stock-based compensation expense, including expense for the ESPP, in the Company's consolidated statements of operations for the three and nine months ended September 30, 2023 and 2022:

Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Cost of product sales$9 $333 $25 $468 
Cost of service sales6 3 15 8 
Research and development162 371 399 702 
Sales, marketing and support63 14 160 225 
General and administrative319 388 834 1,292 
$559 $1,109 $1,433 $2,695 

(d) Accumulated Other Comprehensive Loss (AOCL)

Comprehensive income (loss) includes net income (loss), unrealized gains and losses from foreign currency translation, and unrealized gains and losses on available for sale marketable securities. The components of the Company’s comprehensive income (loss) and the effect on earnings for the periods presented are detailed in the accompanying consolidated statements of comprehensive (loss) income.

The balances for the three months ended September 30, 2023 and 2022 are as follows:
Foreign Currency TranslationTotal Accumulated Other Comprehensive Loss
Balance, June 30, 2023$(3,955)$(3,955)
Other comprehensive loss(267)(267)
Net other comprehensive loss(267)(267)
Balance, September 30, 2023$(4,222)$(4,222)

Foreign Currency TranslationTotal Accumulated Other Comprehensive Loss
Balance, June 30, 2022$(4,021)$(4,021)
Other comprehensive loss(646)(646)
Net other comprehensive loss(646)(646)
Balance, September 30, 2022$(4,667)$(4,667)

The balances for the nine months ended September 30, 2023 and 2022 are as follows:
Foreign Currency TranslationUnrealized (Loss) Gain on Available for Sale Marketable SecuritiesTotal Accumulated Other Comprehensive Loss
Balance, December 31, 2022$(4,098)$(12)$(4,110)
Other comprehensive (loss) income(124)12 (112)
Net other comprehensive (loss) income(124)12 (112)
Balance, September 30, 2023$(4,222)$— $(4,222)
Foreign Currency TranslationTotal Accumulated Other Comprehensive Loss
Balance, December 31, 2021$(3,409)$(3,409)
Other comprehensive loss(1,258)(1,258)
Net other comprehensive loss(1,258)(1,258)
Balance, September 30, 2022$(4,667)$(4,667)
v3.23.3
Net (Loss) Income from Continuing Operations per Common Share
 9 Months Ended
Sep. 30, 2023
Earnings Per Share [Abstract]  
Net (Loss) Income from Continuing Operations per Common Share Net (Loss) Income from Continuing Operations per Common Share
    Basic net (loss) income per share is calculated based on the weighted average number of common shares outstanding during the period. Diluted net income per share incorporates the dilutive effect of common stock equivalent options, warrants and other convertible securities, if any, as determined with the treasury stock accounting method. For the three and nine months ended September 30, 2023, since there was a net loss from continuing operations, the Company excluded 1,572 and 1,053 shares, respectively, underlying outstanding stock options and non-vested restricted shares from its diluted loss per share calculation, as inclusion of these convertible securities would have reduced the net loss per share. For the three and nine months ended September 30, 2022, since there was a net loss from continuing operations, the Company excluded 1,572 and 1,763 shares, respectively, underlying outstanding stock options and non-vested restricted shares from its diluted loss per share calculation, as inclusion of these convertible securities would have reduced the net loss per share.

A reconciliation of the basic and diluted weighted average common shares outstanding is as follows:
 
Three Months EndedNine Months Ended
 September 30,September 30,
 2023202220232022
Weighted average common shares outstanding—basic19,231 18,706 19,090 18,574 
Dilutive common shares issuable in connection with stock plans— — — — 
Weighted average common shares outstanding—diluted19,231 18,706 19,090 18,574 
v3.23.3
Inventories
 9 Months Ended
Sep. 30, 2023
Inventory Disclosure [Abstract]  
Inventories Inventories
Inventories are stated at the lower of cost or net realizable value using the first-in first-out costing method. Inventories as of September 30, 2023 and December 31, 2022 include the costs of material, labor, and factory overhead. Components of inventories consist of the following:
September 30,
2023		December 31,
2022
Raw materials$15,325 $14,203 
Work in process4,083 4,164 
Finished goods7,015 4,363 
$26,423 $22,730 
v3.23.3
Property and Equipment
 9 Months Ended
Sep. 30, 2023
Property, Plant and Equipment [Abstract]  
Property and Equipment Property and Equipment
Property and equipment, net, as of September 30, 2023 and December 31, 2022 consist of the following:
September 30,
2023		December 31,
2022
Land$2,833 $2,833 
Building and improvements18,839 18,869 
Leasehold improvements439 513 
Machinery and equipment5,927 5,948 
Revenue-generating assets75,440 72,527 
Office and computer equipment13,613 14,652 
Motor vehicles31 31 
117,122 115,373 
Less accumulated depreciation(67,715)(62,255)
$49,407 $53,118 

Depreciation expense was $3,180 and $3,283 for the three months ended September 30, 2023 and 2022, respectively and $9,952 and $9,591 for the nine months ended September 30, 2023 and 2022, respectively.

Certain revenue-generating hardware assets are utilized by the Company in the delivery of the Company's airtime services, media and other content.
As part of the Company's impairment testing, an internally developed software asset was deemed the primary asset of the asset group known as KVH Media Group. The $383 net asset value was determined to be fully impaired as a result of the review. The movement associated with the impairment is reflected as a component of the office and computer equipment. Please see Note 12 for additional details surrounding the impairment.
v3.23.3
Product Warranty
 9 Months Ended
Sep. 30, 2023
Product Warranties Disclosures [Abstract]  
Product Warranty Product Warranty
The Company’s products carry standard limited warranties that range from one to two years and vary by product. The warranty period begins on the date of retail purchase or lease by the original purchaser. The Company accrues estimated product warranty costs at the time of sale and any additional amounts are recorded when such costs are probable and can be reasonably estimated. Factors that affect the Company’s warranty liability include the number of units sold or leased, historical and anticipated rates of warranty repairs and the cost per repair. Warranty and related costs are reflected within sales, marketing and support in the accompanying consolidated statements of operations. As of September 30, 2023 and December 31, 2022, the Company had accrued product warranty costs of $642 and $1,287, respectively.

The following table summarizes product warranty activity during 2023 and 2022:
 
Nine Months Ended
 September 30,
 20232022
Beginning balance$1,287 $1,084 
Charges to expense521 964 
Costs incurred(1,166)(764)
Ending balance$642 $1,284 
v3.23.3
Legal Matters
 9 Months Ended
Sep. 30, 2023
Commitments and Contingencies Disclosure [Abstract]  
Legal Matters Legal Matters
    
    In the ordinary course of business, the Company is a party to inquiries, legal proceedings and claims including, from time to time, disagreements with vendors and customers. The Company is not a party to any lawsuit or proceeding that, in management's opinion, is likely to materially harm the Company's business, results of operations, financial condition, or cash flows.
v3.23.3
Fair Value Measurements
 9 Months Ended
Sep. 30, 2023
Fair Value Disclosures [Abstract]  
Fair Value Measurements Fair Value Measurements
ASC Topic 820, Fair Value Measurements and Disclosures (ASC 820), provides a framework for measuring fair value and requires expanded disclosures regarding fair value measurements. ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:

Level 1:    Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. The Company’s Level 1 assets are investments in money market mutual funds and United States treasuries.

Level 2:    Quoted prices for similar assets or liabilities in active markets; or observable prices that are based on observable market data, based on directly or indirectly market-corroborated inputs. The Company has no Level 2 assets or liabilities.

Level 3:    Unobservable inputs that are supported by little or no market activity, and are developed based on the best information available given the circumstances. The Company has no Level 3 assets.

Assets and liabilities measured at fair value are based on the valuation techniques identified in the table below.

The following tables present financial assets and liabilities at September 30, 2023 and December 31, 2022 for which the Company measures fair value on a recurring basis, by level, within the fair value hierarchy:

September 30, 2023TotalLevel 1Level 2Level 3Valuation
Technique
Assets
Money market mutual funds$57,710 $57,710 $— $— (a)
December 31, 2022TotalLevel 1Level 2Level 3Valuation
Technique
Assets
Money market mutual funds$30,977 $30,977 $— $— (a)
United States treasuries$24,703 $24,703 $— $— (a)
(a)Market approach—prices and other relevant information generated by market transactions involving identical or comparable assets.
The carrying amount of certain financial instruments approximates fair value due to their short-term, highly liquid nature. These instruments include cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses. The carrying amount of the Company's operating and financing lease liabilities approximates fair value based on currently available quoted rates of similarly structured borrowings.

Assets Measured and Recorded at Fair Value on a Nonrecurring Basis

The Company's non-financial assets, such as goodwill, intangible assets, and other long-lived assets resulting from business combinations, are measured at fair value using income approach valuation methodologies at the date of acquisition and subsequently re-measured if indications of impairment exist. During the nine months ended September 30, 2023, the Company recorded an impairment charge of $5,990 to goodwill and long-lived assets. There were no other impairments of the Company's non-financial assets noted during the nine months ended September 30, 2023. Please see Note 12 for further discussion. The Company does not have any liabilities that are recorded at fair value on a non-recurring basis.
v3.23.3
Goodwill and Intangible Assets
 9 Months Ended
Sep. 30, 2023
Goodwill and Intangible Assets Disclosure [Abstract]  
Goodwill and Intangible Assets Goodwill and Other Long-Lived Assets
The Company performs a goodwill impairment test at least annually, or more frequently if certain events occur, or circumstances change, that indicate it is more likely than not that the fair value of a reporting unit is less than its carrying amount. A goodwill impairment loss is recognized for the amount that the carrying amount of a reporting unit, including goodwill, exceeds its fair value, limited to the total amount of goodwill allocated to that reporting unit. The Company’s two reporting units are: Mobile Broadband (MBB) and KVH Media Group (Media).

Other long-lived assets, which include intangible assets with finite lives, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable. Recoverability of other long-lived assets is measured by a comparison of the carrying amount of an asset group to its future undiscounted cash flows. If these comparisons indicate that an asset group is not recoverable, the Company will recognize an impairment loss for the amount by which the carrying value of the asset group exceeds its related estimated fair value. The Company has determined that the assets within each of the Company's reporting units (MBB and Media) are highly interrelated and interdependent on each other to generate revenues, and thus independent cash flows are not identifiable at a level lower than that of these reporting units. Accordingly, the Company's asset groups were determined to be its reporting units (MBB and Media).

In the third quarter of 2023, the Company experienced a sustained decrease in its stock price, which was identified by the Company as an indicator of impairment. Consequently, the Company performed a quantitative assessment of impairment of goodwill and other long-lived assets for the MBB and Media reporting units and asset groups. These assessments require considerable judgment and are largely based on assumptions and estimates developed by management including estimation of future cash flows, estimation of long-term growth rates, determination of the period over which future cash flows will occur, determination of a weighted average cost of capital, and consideration of market, industry, and other factors.

In performing the quantitative impairment assessment for goodwill, the Company determined the fair value of its reporting units by discounting its estimated future cash flows using an appropriate weighted average cost of capital. As of September 30, 2023, the estimated fair values of the MBB and Media reporting units were lower than their carrying values. After recognition of a long-lived asset impairment charge (as discussed below), the Company recognized a goodwill impairment charge of $5,333, which represented the total goodwill for both reporting units, in the consolidated statements of operations for the three and nine months ended September 30, 2023.

In performing the quantitative impairment assessment for other long-lived assets, the Company used undiscounted cash flows expected to be generated over the estimated remaining useful life of the primary asset of each asset group, to determine whether the carrying amounts of each asset group are recoverable. As of September 30, 2023, the Company’s analysis indicated that the carrying amount of the MBB asset group is recoverable, and therefore no impairment charge was recognized. As of September 30, 2023, the Company’s analysis indicated that the carrying amount of the Media asset group is not recoverable and that such carrying amount exceeded its fair value. Accordingly, the Company recognized a long-lived assets impairment charge of $657 in the consolidated statements of operations for the three and nine months ended September 30, 2023.

Goodwill

The following table sets forth the changes in the carrying amount of goodwill for the nine months ended September 30, 2023:

Amounts
Balance at December 31, 2022
$5,308 
Impairment(5,333)
Foreign currency translation adjustment25 
Balance at September 30, 2023
$— 
Intangible Assets

The changes in the carrying amount of intangible assets during the nine months ended September 30, 2023 are as follows:
Amounts
Balance at December 31, 2022
$404 
Amortization expense(167)
Intangible assets acquired in asset acquisition35 
Impairment(274)
Foreign currency translation adjustment2 
Balance at September 30, 2023
$— 

Intangible assets arose from the acquisition of KVH Media Group (acquired as Headland Media Limited) in May 2013. These intangible assets were being amortized on a straight-line basis over the estimated useful life of 10 years for acquired subscriber relationships. The intangible assets were recorded in pounds sterling and fluctuations in exchange rates cause these amounts to increase or decrease from time to time.

Acquired intangible assets are subject to amortization. The following table summarizes acquired intangible assets at September 30, 2023 and December 31, 2022, respectively:
Gross Carrying AmountAccumulated AmortizationNet Carrying Value
September 30, 2023
Subscriber relationships$— $— $— 
Distribution rights— — — 
Internally developed software— — — 
Proprietary content— — — 
Intellectual property2,284 2,284 — 
$2,284 $2,284 $— 
December 31, 2022
Subscriber relationships$7,649 $7,245 $404 
Distribution rights315 315 — 
Internally developed software446 446 — 
Proprietary content153 153 — 
Intellectual property2,284 2,284 — 
$10,847 $10,443 $404 

Amortization expense related to intangible assets was $19 and $90 for the three months ended September 30, 2023 and 2022, respectively, and $167 and $409 for the nine months ended September 30, 2023 and 2022, respectively. Amortization expense was categorized as general and administrative expense.
v3.23.3
Revenue from Contracts with Customers
 9 Months Ended
Sep. 30, 2023
Revenue from Contract with Customer [Abstract]  
Revenue from Contracts with Customers Revenue from Contracts with CustomersIn accordance with ASC 606, revenue is recognized when a customer obtains control of promised products and services. The amount of revenue recognized reflects the consideration which the Company expects to be entitled to receive in exchange for these products and services.
Disaggregation of Revenue for Continuing Operations

The following table summarizes net sales from contracts with customers for the three and nine months ended September 30, 2023 and 2022:

Three Months EndedNine Months Ended
September 30,September 30,
2023202220232022
Product, transferred at point in time$3,531 $5,974 $12,578 $18,057 
Product, transferred over time621 651 1,948 1,751 
Service 29,397 28,544 86,883 83,065 
 Total net sales$33,549 $35,169 $101,409 $102,873 
Revenue recognized during the three months ended September 30, 2023 and 2022 from amounts included in contract liabilities at the beginning of the period was $533 and $572, respectively. Revenue recognized during the nine months ended September 30, 2023 and 2022 from amounts included in contract liabilities at the beginning of the period was $1,826 and $1,645, respectively.

For product sales, the delivery of the Company’s performance obligations is generally transferred to the customer, and associated revenue is recognized, at a point in time, with the exception of certain VSAT contracts which are transferred to customers over time. For service sales, the delivery of the Company’s performance obligations is transferred to the customer, and associated revenue is recognized, over time. The Company's performance is impacted by the levels of activity in the marine and land mobile markets, among other factors. Performance in any particular period could be impacted by the timing of sales to certain large customers.

The Company primarily manufactures and distributes a comprehensive family of mobile satellite antenna products and services that provide access to the Internet, television, and VoIP services while on the move. Product sales accounted for 12% and 19% of the Company's consolidated net sales for the three months ended September 30, 2023 and 2022, respectively, and 14% and 19% of the Company's consolidated net sales for the nine months ended September 30, 2023 and 2022, respectively. Service sales of VSAT Broadband airtime service accounted for 82% and 76% of the Company's consolidated net sales for the three months ended September 30, 2023 and 2022, respectively, and 80% and 74% of the Company's consolidated net sales for the nine months ended September 30, 2023 and 2022, respectively. The balance of service sales is comprised of distribution of commercially licensed entertainment and news, product repairs, and extended warranty sales.

No other single product class accounts for 10% or more of the Company's consolidated net sales.

The Company operates in a number of major geographic areas, including internationally. Revenues from international locations primarily include Singapore, Canada, South America countries, European Union countries and other European countries, and countries in Africa, the Middle East and Asia/Pacific, including India. Revenues are based upon customer location and revenues from international locations represented 69% and 62% of consolidated net sales for the three months ended September 30, 2023 and 2022, respectively, and 67% and 61% of consolidated net sales for the nine months ended September 30, 2023 and 2022, respectively. Sales to Singapore customers represented 18% and 17% of the Company's consolidated net sales for the three months ended September 30, 2023 and 2022, respectively. No other individual foreign country represented 10% or more of the Company's consolidated net sales for the three months ended September 30, 2023 or 2022. Sales to Singapore customers represented 18% and 16% of the Company's consolidated net sales for the nine months ended September 30, 2023 and 2022, respectively. No other individual foreign country represented 10% or more of the Company's consolidated net sales for the nine months ended September 30, 2023 or 2022.

As of September 30, 2023 and December 31, 2022, the long-lived tangible assets related to the Company’s international subsidiaries were less than 10% of the Company’s long-lived tangible assets.
Business and Credit Concentrations

Concentrations of risk with respect to trade accounts receivable are generally limited due to the large number of customers and their dispersion across several geographic areas. Although the Company does not foresee that credit risk associated with these receivables will deviate from historical experience, repayment is dependent upon the financial stability of those individual customers. The Company establishes allowances for credit losses and evaluates, on a monthly basis, the adequacy of those reserves based upon expected losses, historical experience and its expectation for future collectability concerns.

No single customer accounted for 10% or more of consolidated net sales for the nine months ended September 30, 2023 or 2022. Two customers accounted for approximately 18% and 11% of accounts receivable at September 30, 2023, respectively. Two customers accounted for approximately 16% and 12%, respectively, of accounts receivable at December 31, 2022. One customer accounted for 64% and 66% of long-term accounts receivable included in other non-current assets on the consolidated balance sheets related to sales-type leases at September 30, 2023 and December 31, 2022, respectively.

Certain components from third parties used in the Company’s products are procured from single sources of supply. The failure of a supplier, including a subcontractor, to deliver on schedule could delay or interrupt the Company’s delivery of products and thereby materially adversely affect the Company’s revenues and operating results.

Customer Contract Balances

The following table provides the balance sheet location and amounts of contract assets, or unbilled accounts receivable, and contract liabilities, or deferred revenue, from contracts with customers as of September 30, 2023 and December 31, 2022:

Contract Balance TypeBalance Sheet LocationSeptember 30, 2023December 31, 2022
Current portion of deferred costsCurrent contract assets$1,130 $1,243 
Non-current portion of deferred costsNon-current contract assets2,557 3,033 
Current portion of deferred revenuesContract liabilities*1,668 1,743 
Non-current portion of deferred revenuesLong-term contract liabilities3,905 4,315 

*Management notes that the remaining “Contract liabilities” balance not included in the above table (which as of September 30, 2023 and December 31, 2022 is $1,600 and $1,365, respectively) relates to deferred income unaffiliated with the Company’s primary revenue streams, the majority of which relates to our content subscription business. These values are therefore excluded from the contract assets and contract liabilities from contracts with customers.

There were no material changes to contract asset balances for the nine months ended September 30, 2023 as a result of changes in estimates or impairments. The change in the contract liability balance from December 31, 2022 to September 30, 2023 was primarily due to the increase in upfront support billings received in the first nine months of 2023 in comparison to revenues recognized in the prior period from historical support billings.
v3.23.3
Income Taxes
 9 Months Ended
Sep. 30, 2023
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The Company’s effective tax rate from continuing operations for the three and nine months ended September 30, 2023 was (2.3)% and (5.0)%, respectively, compared with (578.6)% and (16.5)% for the corresponding periods in the prior year. The effective income tax rate is based on estimated income for the year, the estimated composition of the income in different jurisdictions and discrete adjustments, if any, in the applicable periods, including retroactive changes in tax legislation, settlements of tax audits or assessments, and the resolution or identification of tax position uncertainties.

For the three and nine months ended September 30, 2023 and 2022, the effective tax rates from continuing operations differed from the statutory tax rate primarily due to the Company maintaining a valuation allowance reserve on its U.S. deferred tax assets, discrete tax adjustments and the composition of income from foreign jurisdictions taxed at lower rates.

As of September 30, 2023 and December 31, 2022, the Company had reserves for uncertain tax positions of $693 and $637, respectively. There were no material changes during the nine months ended September 30, 2023 to the Company’s reserve for uncertain tax positions. The Company estimates that it is reasonably possible that the balance of unrecognized tax
benefits as of September 30, 2023 may decrease $38 in the next twelve months as a result of a lapse of statutes of limitations and settlements with taxing authorities.

The Company’s tax jurisdictions include the United States, the United Kingdom, Denmark, Cyprus, Norway, Brazil, Singapore, Japan and India. In general, the statute of limitations with respect to the Company's United States federal income taxes has expired for years prior to 2019, and the relevant state and foreign statutes vary. However, preceding years remain open to examination by United States federal and state and foreign taxing authorities to the extent of future utilization of net operating losses and research and development tax credits generated in each preceding year.
v3.23.3
Leases
 9 Months Ended
Sep. 30, 2023
Leases [Abstract]  
Leases Leases
Lessee

The Company has operating leases for office facilities, equipment, and satellite service capacity and related equipment. Lease expense from continuing operations was $417 and $507 for the three months ended September 30, 2023 and 2022, respectively, and was $1,291 and $1,588 for the nine months ended September 30, 2023 and 2022, respectively. Short-term operating lease costs were $15 and $41 for the three months ended September 30, 2023 and 2022, respectively, and were $55 and $139 for the nine months ended September 30, 2023 and 2022, respectively. Maturities of lease liabilities as of September 30, 2023 under operating leases having an initial or remaining non-cancelable term of one year or more are as follows:

Remainder of 2023$400 
2024629 
202593 
202647 
2027 and thereafter79 
Total minimum lease payments$1,248 
Less amount representing interest$(55)
Present value of net minimum operating lease payments$1,193 
Less current installments of obligation under current-operating lease liabilities$921 
Obligations under long-term operating lease liabilities, excluding current installments$272 
Weighted-average remaining lease term - operating leases (years)1.53
Weighted-average discount rate - operating leases5.50 %

Lessor

The Company enters into leases with certain customers primarily for the TracPhone VSAT systems. These leases are classified as sales-type leases because title to the equipment transfers to the customer at the end of the lease term. The Company records the leases at a price typically equivalent to normal selling price and in excess of the cost or carrying amount. Upon delivery, the Company records the net present value of all payments under these leases as product revenue, and the related costs of the product are charged to cost of sales. Interest income is recognized throughout the lease term (typically three to five years) using an implicit interest rate. The sales-type leases do not have unguaranteed residual assets.

The current portion of the net investment in these leases was $3,739 as of September 30, 2023 and the non-current portion of the net investment in these leases was $3,984 as of September 30, 2023. The current portion of the net investment in the leases is included in accounts receivable, net of allowance for doubtful accounts on the accompanying consolidated balance sheets and the non-current portion of the net investment in these leases is included in other non-current assets on the accompanying consolidated balance sheets. Interest income from sales-type leases was $159 and $191 during the three months ended September 30, 2023 and 2022, respectively, and was $501 and $591 during the nine months ended September 30, 2023 and 2022, respectively.
The future undiscounted cash flows from these leases as of September 30, 2023 are:
Remainder of 2023$1,547 
20243,346 
20252,016 
20261,033 
2027514 
202898
Total undiscounted cash flows$8,554 
Present value of lease payments$7,723 
Difference between undiscounted cash flows and discounted cash flows $831 

In 2021, the Company began entering into three-year leases for its TracPhone VSAT systems, in which ownership of the hardware does not transfer to the lessee by the end of the lease term. As a result, and in light of other factors indicated in ASC 842, these leases are classified as operating leases.

As of September 30, 2023, the gross costs and accumulated depreciation associated with these operating leases are included in revenue generating assets and amounted to $1,880 and $798, respectively. They are depreciated on a straight-line basis over a five-year estimated useful life. Depreciation expense for these assets was $94 and $282 for the three and nine months ended September 30, 2023, respectively.

Lease revenue recognized was $138 and $415 for the three and nine months ended September 30, 2023, respectively, in service sales in the consolidated statements of operations.

As of September 30, 2023, minimum future lease payments to be recognized on the operating leases are as follows:
Remainder of 2023$138 
2024343 
202525 
Total $506 
Leases Leases
Lessee

The Company has operating leases for office facilities, equipment, and satellite service capacity and related equipment. Lease expense from continuing operations was $417 and $507 for the three months ended September 30, 2023 and 2022, respectively, and was $1,291 and $1,588 for the nine months ended September 30, 2023 and 2022, respectively. Short-term operating lease costs were $15 and $41 for the three months ended September 30, 2023 and 2022, respectively, and were $55 and $139 for the nine months ended September 30, 2023 and 2022, respectively. Maturities of lease liabilities as of September 30, 2023 under operating leases having an initial or remaining non-cancelable term of one year or more are as follows:

Remainder of 2023$400 
2024629 
202593 
202647 
2027 and thereafter79 
Total minimum lease payments$1,248 
Less amount representing interest$(55)
Present value of net minimum operating lease payments$1,193 
Less current installments of obligation under current-operating lease liabilities$921 
Obligations under long-term operating lease liabilities, excluding current installments$272 
Weighted-average remaining lease term - operating leases (years)1.53
Weighted-average discount rate - operating leases5.50 %

Lessor

The Company enters into leases with certain customers primarily for the TracPhone VSAT systems. These leases are classified as sales-type leases because title to the equipment transfers to the customer at the end of the lease term. The Company records the leases at a price typically equivalent to normal selling price and in excess of the cost or carrying amount. Upon delivery, the Company records the net present value of all payments under these leases as product revenue, and the related costs of the product are charged to cost of sales. Interest income is recognized throughout the lease term (typically three to five years) using an implicit interest rate. The sales-type leases do not have unguaranteed residual assets.

The current portion of the net investment in these leases was $3,739 as of September 30, 2023 and the non-current portion of the net investment in these leases was $3,984 as of September 30, 2023. The current portion of the net investment in the leases is included in accounts receivable, net of allowance for doubtful accounts on the accompanying consolidated balance sheets and the non-current portion of the net investment in these leases is included in other non-current assets on the accompanying consolidated balance sheets. Interest income from sales-type leases was $159 and $191 during the three months ended September 30, 2023 and 2022, respectively, and was $501 and $591 during the nine months ended September 30, 2023 and 2022, respectively.
The future undiscounted cash flows from these leases as of September 30, 2023 are:
Remainder of 2023$1,547 
20243,346 
20252,016 
20261,033 
2027514 
202898
Total undiscounted cash flows$8,554 
Present value of lease payments$7,723 
Difference between undiscounted cash flows and discounted cash flows $831 

In 2021, the Company began entering into three-year leases for its TracPhone VSAT systems, in which ownership of the hardware does not transfer to the lessee by the end of the lease term. As a result, and in light of other factors indicated in ASC 842, these leases are classified as operating leases.

As of September 30, 2023, the gross costs and accumulated depreciation associated with these operating leases are included in revenue generating assets and amounted to $1,880 and $798, respectively. They are depreciated on a straight-line basis over a five-year estimated useful life. Depreciation expense for these assets was $94 and $282 for the three and nine months ended September 30, 2023, respectively.

Lease revenue recognized was $138 and $415 for the three and nine months ended September 30, 2023, respectively, in service sales in the consolidated statements of operations.

As of September 30, 2023, minimum future lease payments to be recognized on the operating leases are as follows:
Remainder of 2023$138 
2024343 
202525 
Total $506 
Leases Leases
Lessee

The Company has operating leases for office facilities, equipment, and satellite service capacity and related equipment. Lease expense from continuing operations was $417 and $507 for the three months ended September 30, 2023 and 2022, respectively, and was $1,291 and $1,588 for the nine months ended September 30, 2023 and 2022, respectively. Short-term operating lease costs were $15 and $41 for the three months ended September 30, 2023 and 2022, respectively, and were $55 and $139 for the nine months ended September 30, 2023 and 2022, respectively. Maturities of lease liabilities as of September 30, 2023 under operating leases having an initial or remaining non-cancelable term of one year or more are as follows:

Remainder of 2023$400 
2024629 
202593 
202647 
2027 and thereafter79 
Total minimum lease payments$1,248 
Less amount representing interest$(55)
Present value of net minimum operating lease payments$1,193 
Less current installments of obligation under current-operating lease liabilities$921 
Obligations under long-term operating lease liabilities, excluding current installments$272 
Weighted-average remaining lease term - operating leases (years)1.53
Weighted-average discount rate - operating leases5.50 %

Lessor

The Company enters into leases with certain customers primarily for the TracPhone VSAT systems. These leases are classified as sales-type leases because title to the equipment transfers to the customer at the end of the lease term. The Company records the leases at a price typically equivalent to normal selling price and in excess of the cost or carrying amount. Upon delivery, the Company records the net present value of all payments under these leases as product revenue, and the related costs of the product are charged to cost of sales. Interest income is recognized throughout the lease term (typically three to five years) using an implicit interest rate. The sales-type leases do not have unguaranteed residual assets.

The current portion of the net investment in these leases was $3,739 as of September 30, 2023 and the non-current portion of the net investment in these leases was $3,984 as of September 30, 2023. The current portion of the net investment in the leases is included in accounts receivable, net of allowance for doubtful accounts on the accompanying consolidated balance sheets and the non-current portion of the net investment in these leases is included in other non-current assets on the accompanying consolidated balance sheets. Interest income from sales-type leases was $159 and $191 during the three months ended September 30, 2023 and 2022, respectively, and was $501 and $591 during the nine months ended September 30, 2023 and 2022, respectively.
The future undiscounted cash flows from these leases as of September 30, 2023 are:
Remainder of 2023$1,547 
20243,346 
20252,016 
20261,033 
2027514 
202898
Total undiscounted cash flows$8,554 
Present value of lease payments$7,723 
Difference between undiscounted cash flows and discounted cash flows $831 

In 2021, the Company began entering into three-year leases for its TracPhone VSAT systems, in which ownership of the hardware does not transfer to the lessee by the end of the lease term. As a result, and in light of other factors indicated in ASC 842, these leases are classified as operating leases.

As of September 30, 2023, the gross costs and accumulated depreciation associated with these operating leases are included in revenue generating assets and amounted to $1,880 and $798, respectively. They are depreciated on a straight-line basis over a five-year estimated useful life. Depreciation expense for these assets was $94 and $282 for the three and nine months ended September 30, 2023, respectively.

Lease revenue recognized was $138 and $415 for the three and nine months ended September 30, 2023, respectively, in service sales in the consolidated statements of operations.

As of September 30, 2023, minimum future lease payments to be recognized on the operating leases are as follows:
Remainder of 2023$138 
2024343 
202525 
Total $506 
v3.23.3
Discontinued Operations
 9 Months Ended
Sep. 30, 2023
Discontinued Operations and Disposal Groups [Abstract]  
Discontinued Operations Discontinued Operations
During the third quarter of 2022, the Company sold its inertial navigation business. The Company determined that the sale met the requirements for reporting as discontinued operations in accordance with Accounting Standards Codification (ASC) 205-20. There were no assets or liabilities of the inertial navigation business as of December 31, 2022 or September 30, 2023. Please see Note 1 for further discussion.

The following table presents a reconciliation of the major financial line items constituting the results for discontinued operations to the net income from discontinued operations, net of tax, presented separately in the Company's consolidated statement of operations for the three and nine months ended 2022:

Three Months EndedNine Months Ended
September 30,September 30,
20222022
Sales:
Product$1,276 $16,042 
Service218 679 
Net sales1,494 16,721 
Costs and expenses:
Costs of product sales1,504 12,732 
Costs of service sales169 457 
Research and development374 3,147 
Sales, marketing and support348 3,035 
Other income, net12 81 
Loss from discontinued operations before income tax expense(889)(2,569)
Gain on sale of discontinued operations before tax expense30,858 30,858 
Total income from discontinued operations before tax expense$29,969 $28,289 
Income tax expense on discontinued operations228 228 
Net income from discontinued operations, net of tax$29,741 $28,061 
Net income from discontinued operations per common share
Basic$1.59 $1.51 
Diluted$1.59 $1.51 
Weighted average number of common shares outstanding:
Basic18,706 18,574 
Diluted18,706 18,574 

The following table presents supplemental cash flow information of the discontinued operations:
Three Months EndedNine Months Ended
September 30,September 30,
20222022
Cash used in operating activities - discontinued operations$(252)$(3,853)
Cash used in investing activities - discontinued operations$(220)$(307)
The following table presents non-cash expenses from discontinued operations:

Three Months EndedNine Months Ended
September 30,September 30,
20222022
Depreciation$91 $622 
Compensation expense related to stock-based awards and employee stock purchase plan$237 $475 
v3.23.3
Summary of Significant Accounting Policies (Policies)
 9 Months Ended
Sep. 30, 2023
Accounting Policies [Abstract]  
Basis of Presentation
Basis of Presentation

The accompanying consolidated interim financial statements of KVH Industries, Inc. and its wholly owned subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States of America. The Company has evaluated all subsequent events through the date of this filing. All significant intercompany accounts and transactions have been eliminated in consolidation.

The 2022 consolidated interim financial statements reflect the sale of the inertial navigation business as discontinued operations. See Notes 1 and 16 for further information on the sale of the inertial navigation business.

The consolidated interim financial statements have not been audited by the Company’s independent registered public accounting firm and include all adjustments (consisting of only normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation of the financial condition, results of operations, and cash flows for the periods presented. These consolidated interim financial statements do not include all disclosures associated with annual financial statements and accordingly should be read in conjunction with the Company’s consolidated financial statements and related notes included in the Company’s annual report on Form 10-K for the year ended December 31, 2022 filed on March 16, 2023 with the Securities and Exchange Commission. The results for the three and nine months ended September 30, 2023 are not necessarily indicative of operating results for the remainder of the year.
Significant Estimates and Assumptions and Other Significant Non-Recurring Transactions
Significant Estimates and Assumptions and Other Significant Non-Recurring Transactions

The preparation of interim financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the interim financial statements and the reported amounts of sales and expenses during the reporting periods. As described in the Company’s annual report on Form 10-K, the estimates and assumptions used by management affect the Company’s revenue recognition, valuation of accounts receivable, valuation of inventory, expected future cash flows including growth rates, discount rates, terminal values and other assumptions and estimates used to evaluate the recoverability of long-lived assets and goodwill, estimated fair values of long-lived assets, including goodwill, amortization methods and periods, certain accrued expenses and other related charges, stock-based compensation, contingent liabilities, forfeitures and key valuation assumptions for its share-based awards, estimated fulfillment costs for warranty obligations, tax reserves and recoverability of the Company’s net deferred tax assets and related valuation allowance, and the valuation of right-of-use assets and lease liabilities.
Accounting Standards Issued and Not Yet Adopted Recently Issued Accounting Standards and Accounting Standards Not yet AdoptedThere are no recent accounting pronouncements issued by the FASB, but not yet effective, that the Company expects would have a material impact on the Company's financial statements.
Stock Equity and Incentive Plan The Company recognizes stock-based compensation in accordance with the provisions of ASC Topic 718, Compensation-Stock Compensation.
Fair Value Measurement
ASC Topic 820, Fair Value Measurements and Disclosures (ASC 820), provides a framework for measuring fair value and requires expanded disclosures regarding fair value measurements. ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:

Level 1:    Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. The Company’s Level 1 assets are investments in money market mutual funds and United States treasuries.

Level 2:    Quoted prices for similar assets or liabilities in active markets; or observable prices that are based on observable market data, based on directly or indirectly market-corroborated inputs. The Company has no Level 2 assets or liabilities.

Level 3:    Unobservable inputs that are supported by little or no market activity, and are developed based on the best information available given the circumstances. The Company has no Level 3 assets.
Assets and liabilities measured at fair value are based on the valuation techniques identified in the table below.
v3.23.3
Marketable Securities (Tables)
 9 Months Ended
Sep. 30, 2023
Marketable Securities [Abstract]  
Marketable Securities
Marketable securities as of September 30, 2023 and December 31, 2022 consisted of the following:
September 30, 2023Amortized
Cost		Gross
Unrealized
Gains		Gross
Unrealized
Losses		Fair
Value
Money market mutual funds$57,710 $— $— $57,710 
United States treasuries— — — — 
Total marketable securities designated as available-for-sale$57,710 $— $— $57,710 
 
December 31, 2022Amortized
Cost		Gross
Unrealized
Gains		Gross
Unrealized
Losses		Fair
Value
Money market mutual funds$30,977 $— $— $30,977 
United States treasuries24,715 — (12)24,703 
Total marketable securities designated as available-for-sale$55,692 $— $(12)$55,680 
v3.23.3
Stockholder's Equity (Tables)
 9 Months Ended
Sep. 30, 2023
Share-Based Payment Arrangement, Noncash Expense [Abstract]  
Schedule of share-based payment award, stock options, valuation assumptions The weighted average assumptions utilized to determine the fair value of options granted during the nine months ended September 30, 2023 and 2022 are as follows:
Nine Months Ended September 30,
 20232022
Risk-free interest rate4.49 %2.97 %
Expected volatility43.93 %43.16 %
Expected life (in years)4.304.24
Dividend yield0 %0 %
Schedule of share-based compensation, employee stock purchase plan
The following table presents stock-based compensation expense, including expense for the ESPP, in the Company's consolidated statements of operations for the three and nine months ended September 30, 2023 and 2022:

Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Cost of product sales$9 $333 $25 $468 
Cost of service sales6 3 15 8 
Research and development162 371 399 702 
Sales, marketing and support63 14 160 225 
General and administrative319 388 834 1,292 
$559 $1,109 $1,433 $2,695 
Schedule of accumulated other comprehensive income (loss)
The balances for the three months ended September 30, 2023 and 2022 are as follows:
Foreign Currency TranslationTotal Accumulated Other Comprehensive Loss
Balance, June 30, 2023$(3,955)$(3,955)
Other comprehensive loss(267)(267)
Net other comprehensive loss(267)(267)
Balance, September 30, 2023$(4,222)$(4,222)

Foreign Currency TranslationTotal Accumulated Other Comprehensive Loss
Balance, June 30, 2022$(4,021)$(4,021)
Other comprehensive loss(646)(646)
Net other comprehensive loss(646)(646)
Balance, September 30, 2022$(4,667)$(4,667)

The balances for the nine months ended September 30, 2023 and 2022 are as follows:
Foreign Currency TranslationUnrealized (Loss) Gain on Available for Sale Marketable SecuritiesTotal Accumulated Other Comprehensive Loss
Balance, December 31, 2022$(4,098)$(12)$(4,110)
Other comprehensive (loss) income(124)12 (112)
Net other comprehensive (loss) income(124)12 (112)
Balance, September 30, 2023$(4,222)$— $(4,222)
Foreign Currency TranslationTotal Accumulated Other Comprehensive Loss
Balance, December 31, 2021$(3,409)$(3,409)
Other comprehensive loss(1,258)(1,258)
Net other comprehensive loss(1,258)(1,258)
Balance, September 30, 2022$(4,667)$(4,667)
v3.23.3
Net (Loss) Income from Continuing Operations per Common Share (Tables)
 9 Months Ended
Sep. 30, 2023
Earnings Per Share [Abstract]  
Schedule of reconciliation of basic and diluted weighted average common shares outstanding
A reconciliation of the basic and diluted weighted average common shares outstanding is as follows:
 
Three Months EndedNine Months Ended
 September 30,September 30,
 2023202220232022
Weighted average common shares outstanding—basic19,231 18,706 19,090 18,574 
Dilutive common shares issuable in connection with stock plans— — — — 
Weighted average common shares outstanding—diluted19,231 18,706 19,090 18,574 
v3.23.3
Inventories (Tables)
 9 Months Ended
Sep. 30, 2023
Inventory Disclosure [Abstract]  
Components of inventories Components of inventories consist of the following:
September 30,
2023		December 31,
2022
Raw materials$15,325 $14,203 
Work in process4,083 4,164 
Finished goods7,015 4,363 
$26,423 $22,730 
v3.23.3
Property and Equipment (Tables)
 9 Months Ended
Sep. 30, 2023
Property, Plant and Equipment [Abstract]  
Property and Equipment
Property and equipment, net, as of September 30, 2023 and December 31, 2022 consist of the following:
September 30,
2023		December 31,
2022
Land$2,833 $2,833 
Building and improvements18,839 18,869 
Leasehold improvements439 513 
Machinery and equipment5,927 5,948 
Revenue-generating assets75,440 72,527 
Office and computer equipment13,613 14,652 
Motor vehicles31 31 
117,122 115,373 
Less accumulated depreciation(67,715)(62,255)
$49,407 $53,118 
v3.23.3
Product Warranty (Tables)
 9 Months Ended
Sep. 30, 2023
Product Warranties Disclosures [Abstract]  
Summary of product warranty activity
The following table summarizes product warranty activity during 2023 and 2022:
 
Nine Months Ended
 September 30,
 20232022
Beginning balance$1,287 $1,084 
Charges to expense521 964 
Costs incurred(1,166)(764)
Ending balance$642 $1,284 
v3.23.3
Fair Value Measurements (Tables)
 9 Months Ended
Sep. 30, 2023
Fair Value Disclosures [Abstract]  
Schedule of assets measured at fair value on recurring basis
The following tables present financial assets and liabilities at September 30, 2023 and December 31, 2022 for which the Company measures fair value on a recurring basis, by level, within the fair value hierarchy:

September 30, 2023TotalLevel 1Level 2Level 3Valuation
Technique
Assets
Money market mutual funds$57,710 $57,710 $— $— (a)
December 31, 2022TotalLevel 1Level 2Level 3Valuation
Technique
Assets
Money market mutual funds$30,977 $30,977 $— $— (a)
United States treasuries$24,703 $24,703 $— $— (a)
(a)Market approach—prices and other relevant information generated by market transactions involving identical or comparable assets.
v3.23.3
Goodwill and Intangible Assets (Tables)
 9 Months Ended
Sep. 30, 2023
Goodwill and Intangible Assets Disclosure [Abstract]  
Schedule of goodwill
The following table sets forth the changes in the carrying amount of goodwill for the nine months ended September 30, 2023:

Amounts
Balance at December 31, 2022
$5,308 
Impairment(5,333)
Foreign currency translation adjustment25 
Balance at September 30, 2023
$— 
Schedule of finite-lived intangible assets
The changes in the carrying amount of intangible assets during the nine months ended September 30, 2023 are as follows:
Amounts
Balance at December 31, 2022
$404 
Amortization expense(167)
Intangible assets acquired in asset acquisition35 
Impairment(274)
Foreign currency translation adjustment2 
Balance at September 30, 2023
$— 
Acquired intangible assets are subject to amortization. The following table summarizes acquired intangible assets at September 30, 2023 and December 31, 2022, respectively:
Gross Carrying AmountAccumulated AmortizationNet Carrying Value
September 30, 2023
Subscriber relationships$— $— $— 
Distribution rights— — — 
Internally developed software— — — 
Proprietary content— — — 
Intellectual property2,284 2,284 — 
$2,284 $2,284 $— 
December 31, 2022
Subscriber relationships$7,649 $7,245 $404 
Distribution rights315 315 — 
Internally developed software446 446 — 
Proprietary content153 153 — 
Intellectual property2,284 2,284 — 
$10,847 $10,443 $404 
v3.23.3
Revenue from Contracts with Customers (Tables)
 9 Months Ended
Sep. 30, 2023
Revenue from Contract with Customer [Abstract]  
Disaggregation of revenue
The following table summarizes net sales from contracts with customers for the three and nine months ended September 30, 2023 and 2022:

Three Months EndedNine Months Ended
September 30,September 30,
2023202220232022
Product, transferred at point in time$3,531 $5,974 $12,578 $18,057 
Product, transferred over time621 651 1,948 1,751 
Service 29,397 28,544 86,883 83,065 
 Total net sales$33,549 $35,169 $101,409 $102,873 
Schedule of customer contract balances
The following table provides the balance sheet location and amounts of contract assets, or unbilled accounts receivable, and contract liabilities, or deferred revenue, from contracts with customers as of September 30, 2023 and December 31, 2022:

Contract Balance TypeBalance Sheet LocationSeptember 30, 2023December 31, 2022
Current portion of deferred costsCurrent contract assets$1,130 $1,243 
Non-current portion of deferred costsNon-current contract assets2,557 3,033 
Current portion of deferred revenuesContract liabilities*1,668 1,743 
Non-current portion of deferred revenuesLong-term contract liabilities3,905 4,315 

*Management notes that the remaining “Contract liabilities” balance not included in the above table (which as of September 30, 2023 and December 31, 2022 is $1,600 and $1,365, respectively) relates to deferred income unaffiliated with the Company’s primary revenue streams, the majority of which relates to our content subscription business. These values are therefore excluded from the contract assets and contract liabilities from contracts with customers.
v3.23.3
Leases (Tables)
 9 Months Ended
Sep. 30, 2023
Leases [Abstract]  
Future minimum lease payments under operating leases Maturities of lease liabilities as of September 30, 2023 under operating leases having an initial or remaining non-cancelable term of one year or more are as follows:
Remainder of 2023$400 
2024629 
202593 
202647 
2027 and thereafter79 
Total minimum lease payments$1,248 
Less amount representing interest$(55)
Present value of net minimum operating lease payments$1,193 
Less current installments of obligation under current-operating lease liabilities$921 
Obligations under long-term operating lease liabilities, excluding current installments$272 
Weighted-average remaining lease term - operating leases (years)1.53
Weighted-average discount rate - operating leases5.50 %
Sales-type lease, future undiscounted cash flows
The future undiscounted cash flows from these leases as of September 30, 2023 are:
Remainder of 2023$1,547 
20243,346 
20252,016 
20261,033 
2027514 
202898
Total undiscounted cash flows$8,554 
Present value of lease payments$7,723 
Difference between undiscounted cash flows and discounted cash flows $831 
Future minimum lease payments to be received under operating leases
As of September 30, 2023, minimum future lease payments to be recognized on the operating leases are as follows:
Remainder of 2023$138 
2024343 
202525 
Total $506 
v3.23.3
Discontinued Operations - (Tables)
 9 Months Ended
Sep. 30, 2023
Discontinued Operations and Disposal Groups [Abstract]  
Schedule of Discontinued Operations
The following table presents a reconciliation of the major financial line items constituting the results for discontinued operations to the net income from discontinued operations, net of tax, presented separately in the Company's consolidated statement of operations for the three and nine months ended 2022:

Three Months EndedNine Months Ended
September 30,September 30,
20222022
Sales:
Product$1,276 $16,042 
Service218 679 
Net sales1,494 16,721 
Costs and expenses:
Costs of product sales1,504 12,732 
Costs of service sales169 457 
Research and development374 3,147 
Sales, marketing and support348 3,035 
Other income, net12 81 
Loss from discontinued operations before income tax expense(889)(2,569)
Gain on sale of discontinued operations before tax expense30,858 30,858 
Total income from discontinued operations before tax expense$29,969 $28,289 
Income tax expense on discontinued operations228 228 
Net income from discontinued operations, net of tax$29,741 $28,061 
Net income from discontinued operations per common share
Basic$1.59 $1.51 
Diluted$1.59 $1.51 
Weighted average number of common shares outstanding:
Basic18,706 18,574 
Diluted18,706 18,574 

The following table presents supplemental cash flow information of the discontinued operations:
Three Months EndedNine Months Ended
September 30,September 30,
20222022
Cash used in operating activities - discontinued operations$(252)$(3,853)
Cash used in investing activities - discontinued operations$(220)$(307)
The following table presents non-cash expenses from discontinued operations:

Three Months EndedNine Months Ended
September 30,September 30,
20222022
Depreciation$91 $622 
Compensation expense related to stock-based awards and employee stock purchase plan$237 $475 
v3.23.3
Description of Business (Details)
$ in Thousands
 3 Months Ended 9 Months Ended
Aug. 09, 2022
USD ($)
extensionOption
Sep. 30, 2023
USD ($)
country
Sep. 30, 2023
USD ($)
reportableSegment
country
Sep. 30, 2022
USD ($)
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]        
Number of countries in which entity operates | country   150 150  
Transition Services Agreement   $ (13) $ 710  
Number of reportable segments | reportableSegment     1  
Revenue-generating assets        
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]        
Leased assets, useful life   5 years 5 years  
Intertial Navigation        
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]        
Proceeds from the sale of KVH Media Group Entertainment Limited, net of cash sold     $ 0 $ 55,000
Intertial Navigation | Intertial Navigation        
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]        
Proceeds from the sale of KVH Media Group Entertainment Limited, net of cash sold $ 54,904      
Transition support service period 6 months      
Transition support service, number of extensions | extensionOption 2      
Transition support service, extension period 3 months      
Monthly transaction fees $ 100      
v3.23.3
Summary of Significant Accounting Policies (Details) - USD ($)
$ in Thousands
 3 Months Ended 9 Months Ended
Oct. 11, 2022
Sep. 30, 2023
Sep. 30, 2022
Sep. 30, 2023
Sep. 30, 2022
Accounting Policies [Line Items]          
Foreign currency exchange gains (losses)   $ 92 $ 450 $ (18) $ 1,009
Accrued employee benefits   $ 286   $ 286  
Chief Operating Officer          
Accounting Policies [Line Items]          
Annual base salary $ 448        
Percent of base salary, second half of year 80.00%        
Retention bonus, percent of base salary 75.00%        
Retention bonus, percent of highest base salary 75.00%        
Chief Operating Officer | Restricted Stock And Non-Statutory Stock Options          
Accounting Policies [Line Items]          
Aggregate grant date fair value $ 100        
v3.23.3
Marketable Securities (Details) - USD ($)
$ in Thousands
Sep. 30, 2023
Dec. 31, 2022
Debt Securities, Available-for-sale [Line Items]    
Amortized Cost $ 57,710 $ 55,692
Gross Unrealized Gains 0 0
Gross Unrealized Losses 0 (12)
Fair Value 57,710 55,680
Money market mutual funds    
Debt Securities, Available-for-sale [Line Items]    
Amortized Cost 57,710 30,977
Gross Unrealized Gains 0 0
Gross Unrealized Losses 0 0
Fair Value 57,710 30,977
United States treasuries    
Debt Securities, Available-for-sale [Line Items]    
Amortized Cost 0 24,715
Gross Unrealized Gains 0 0
Gross Unrealized Losses 0 (12)
Fair Value $ 0 $ 24,703
v3.23.3
Marketable Securities - Narrative (Details) - USD ($)
$ in Thousands
 3 Months Ended 9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Sep. 30, 2023
Sep. 30, 2022
Marketable Securities [Abstract]        
Interest income, money market deposits $ 744 $ 193 $ 2,019 $ 203
v3.23.3
Stockholder's Equity - Narrative (Details) - USD ($)
$ / shares in Units, $ in Thousands
 3 Months Ended 9 Months Ended 12 Months Ended
Jun. 08, 2022
Sep. 30, 2023
Jun. 30, 2023
Sep. 30, 2022
Sep. 30, 2023
Sep. 30, 2022
Dec. 31, 2022
Jun. 07, 2022
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]                
Share-based payment   $ 559   $ 1,109 $ 1,433 $ 2,695    
Proceeds from stock options exercised and employee stock purchase plan         2,604 $ 796    
Acquisition of treasury stock (in shares)     23,000       0  
Stock Options                
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]                
Increase in shares authorized (in shares) 1,280              
Shares authorized (in shares) 6,080             4,800
Unrecognized compensation expense   $ 2,272     $ 2,272      
Weighted-average period of recognition         2 years 7 months 28 days      
Shares issued (in shares)   14,000     274,000      
Proceeds from stock options exercised and employee stock purchase plan   $ 113     $ 2,480      
Restricted stock surrendered (in shares)   0     0      
Stock options granted (in shares)   0     317,000 398,000    
Stock options expired (in shares)   133,000     564,000      
Stock options outstanding (in shares)   1,230,000     1,230,000      
Stock options outstanding, weighted average exercise price (in USD per share)   $ 9.57     $ 9.57      
Stock options exercisable (in shares)   510,000     510,000      
Exercisable stock options, weighted average exercise price (in USD per share)   $ 9.56     $ 9.56      
Stock Options | ESPP Plan                
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]                
Share-based payment   $ 558   1,103 $ 1,408 $ 2,663    
Employee Stock                
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]                
Share-based payment   $ 1   $ 6        
Employee Stock | ESPP Plan                
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]                
Share-based payment         $ 25 $ 32    
Percentage of Company's common stock share price   85.00%     85.00%      
Stock options issued ESPP (in shares)   17,000   0 17,000 22,000    
Restricted Stock                
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]                
Unrecognized compensation expense   $ 2,953     $ 2,953      
Weighted-average period of recognition         2 years 6 months 7 days      
Restricted stock surrendered (in shares)   0     0      
Restricted stock (in shares)   66,000     217,000      
Restricted stock, weighted average price (in USD per share)   $ 8.75     $ 9.49      
Restricted stock award, forfeitures, less than (in shares)   0     72,000      
Restricted stock vested (in shares)   7,000     101,000      
Unvested outstanding options (in shares)   0     0      
Performance-Based or Market-Based Shares                
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]                
Unvested outstanding options (in shares)   0     0      
v3.23.3
Stockholder's Equity Weighted Average Assumptions (Details) - Stock Options
 9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Risk-free interest rate 4.49% 2.97%
Expected volatility 43.93% 43.16%
Expected life (in years) 4 years 3 months 18 days 4 years 2 months 26 days
Dividend yield 0.00% 0.00%
v3.23.3
Stockholder's Equity - Schedule of Stock Based Compensation Expense (Details) - USD ($)
$ in Thousands
 3 Months Ended 9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Sep. 30, 2023
Sep. 30, 2022
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]        
Share-based payment $ 559 $ 1,109 $ 1,433 $ 2,695
Cost of Sales | Product        
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]        
Share-based payment 9 333 25 468
Cost of Sales | Service        
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]        
Share-based payment 6 3 15 8
Research and development        
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]        
Share-based payment 162 371 399 702
Sales, marketing and support        
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]        
Share-based payment 63 14 160 225
General and administrative        
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]        
Share-based payment $ 319 $ 388 $ 834 $ 1,292
v3.23.3
Stockholder's Equity - Schedule of AOCL (Details) - USD ($)
$ in Thousands
 3 Months Ended 9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Sep. 30, 2023
Sep. 30, 2022
AOCI Attributable to Parent [Roll Forward]        
Beginning balance $ 160,704 $ 124,028 $ 156,656 $ 128,977
Other comprehensive loss (267) (646) (112) (1,258)
Net other comprehensive loss [1] (267) (646) (112) (1,258)
Ending balance 157,007 154,588 157,007 154,588
Foreign Currency Translation        
AOCI Attributable to Parent [Roll Forward]        
Beginning balance (3,955) (4,021) (4,098) (3,409)
Other comprehensive loss (267) (646) (124) (1,258)
Net other comprehensive loss (267) (646) (124) (1,258)
Ending balance (4,222) (4,667) (4,222) (4,667)
Unrealized Loss on Available for Sale Marketable Securities        
AOCI Attributable to Parent [Roll Forward]        
Beginning balance     (12)  
Other comprehensive loss     12  
Net other comprehensive loss     12  
Ending balance 0   0  
Total Accumulated Other Comprehensive Loss        
AOCI Attributable to Parent [Roll Forward]        
Beginning balance (3,955) (4,021) (4,110) (3,409)
Net other comprehensive loss (267) (646) (112) (1,258)
Ending balance $ (4,222) $ (4,667) $ (4,222) $ (4,667)
[1] Tax impact was nominal for all periods.
v3.23.3
Net (Loss) Income from Continuing Operations per Common Share - Narrative (Details) - shares
shares in Thousands
 3 Months Ended 9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Sep. 30, 2023
Sep. 30, 2022
Earnings Per Share [Abstract]        
Antidilutive securities excluded from computation of earnings per share (in shares) 1,572 1,572 1,053 1,763
v3.23.3
Net (Loss) Income from Continuing Operations per Common Share - Reconciliation of Basic and Diluted Weighted Average Common Shares Outstanding (Details) - shares
shares in Thousands
 3 Months Ended 9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Sep. 30, 2023
Sep. 30, 2022
Schedule of reconciliation of basic and diluted weighted average common shares outstanding        
Weighted average common shares outstanding - basic (in shares) 19,231 18,706 19,090 18,574
Dilutive common shares issuable in connection with stock plans (in shares) 0 0 0 0
Weighted average common shares outstanding - diluted (in shares) 19,231 18,706 19,090 18,574
v3.23.3
Inventories (Details) - USD ($)
$ in Thousands
Sep. 30, 2023
Dec. 31, 2022
Inventory Disclosure [Abstract]    
Raw materials $ 15,325 $ 14,203
Work in process 4,083 4,164
Finished goods 7,015 4,363
Inventories, net $ 26,423 $ 22,730
v3.23.3
Property and Equipment (Details) - USD ($)
$ in Thousands
Sep. 30, 2023
Dec. 31, 2022
Property, Plant and Equipment [Line Items]    
Property and equipment, gross $ 117,122 $ 115,373
Less accumulated depreciation (67,715) (62,255)
Property and equipment, less accumulated depreciation 49,407 53,118
Land    
Property, Plant and Equipment [Line Items]    
Property and equipment, gross 2,833 2,833
Building and improvements    
Property, Plant and Equipment [Line Items]    
Property and equipment, gross 18,839 18,869
Leasehold improvements    
Property, Plant and Equipment [Line Items]    
Property and equipment, gross 439 513
Machinery and equipment    
Property, Plant and Equipment [Line Items]    
Property and equipment, gross 5,927 5,948
Revenue-generating assets    
Property, Plant and Equipment [Line Items]    
Property and equipment, gross 75,440 72,527
Office and computer equipment    
Property, Plant and Equipment [Line Items]    
Property and equipment, gross 13,613 14,652
Motor vehicles    
Property, Plant and Equipment [Line Items]    
Property and equipment, gross $ 31 $ 31
v3.23.3
Property and Equipment - Narrative (Details) - USD ($)
$ in Thousands
 3 Months Ended 9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Sep. 30, 2023
Sep. 30, 2022
Property, Plant and Equipment [Line Items]        
Depreciation $ 3,180 $ 3,283 $ 9,952 $ 9,591
KVH Media Group        
Property, Plant and Equipment [Line Items]        
Net assets $ 383   $ 383  
v3.23.3
Product Warranty - Narrative (Details) - USD ($)
$ in Thousands
 9 Months Ended
Sep. 30, 2023
Dec. 31, 2022
Product Warranty (Textual) [Abstract]    
Accrued product warranty costs $ 642 $ 1,287
Minimum    
Product Warranty (Textual) [Abstract]    
Limited warranty period on product 1 year  
Maximum    
Product Warranty (Textual) [Abstract]    
Limited warranty period on product 2 years  
v3.23.3
Product Warranty - Schedule of Product Warranty Activity (Details) - USD ($)
$ in Thousands
 9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Summary of product warranty activity    
Beginning balance $ 1,287 $ 1,084
Charges to expense 521 964
Costs incurred (1,166) (764)
Ending balance $ 642 $ 1,284
v3.23.3
Fair Value Measurements (Details) - USD ($)
$ in Thousands
Sep. 30, 2023
Dec. 31, 2022
Money market mutual funds    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Assets $ 57,710 $ 30,977
United States treasuries    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Assets   24,703
Level 1 | Money market mutual funds    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Assets 57,710 30,977
Level 1 | United States treasuries    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Assets   24,703
Level 2 | Money market mutual funds    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Assets 0 0
Level 2 | United States treasuries    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Assets   0
Level 3 | Money market mutual funds    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Assets $ 0 0
Level 3 | United States treasuries    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Assets   $ 0
v3.23.3
Fair Value Measurements - Narrative (Details) - USD ($)
 9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Fair Value Disclosures [Abstract]    
Long-lived assets impairment charge $ 5,990,000 $ 0
Goodwill and other intangible asset impairment $ 0  
v3.23.3
Goodwill and Intangible Assets - Narrative (Details)
$ in Thousands
 3 Months Ended 9 Months Ended
Sep. 30, 2023
USD ($)
Sep. 30, 2022
USD ($)
Sep. 30, 2023
USD ($)
reportingUnit
Sep. 30, 2022
USD ($)
Finite-Lived Intangible Assets [Line Items]        
Number of reporting units | reportingUnit     2  
Goodwill impairment charge $ 5,333 $ 0 $ 5,333 $ 0
Long-lived assets impairment charge 657 0 657 0
Amortization expense     167  
General and administrative        
Finite-Lived Intangible Assets [Line Items]        
Amortization expense $ 19 $ 90 $ 167 $ 409
KVH Media Group | Subscriber relationships        
Finite-Lived Intangible Assets [Line Items]        
Intangible assets, useful lives 10 years   10 years  
v3.23.3
Goodwill and Intangible Assets - Goodwill Changes in Carrying Amount (Details) - USD ($)
$ in Thousands
 3 Months Ended 9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Sep. 30, 2023
Sep. 30, 2022
Goodwill [Roll Forward]        
Beginning balance     $ 5,308  
Goodwill impairment loss $ (5,333) $ 0 (5,333) $ 0
Foreign currency translation adjustment     25  
Ending balance $ 0   $ 0  
v3.23.3
Goodwill and Intangible Assets - Intangible Assets Changes in Carrying Amount (Details)
$ in Thousands
 9 Months Ended
Sep. 30, 2023
USD ($)
Finite-lived Intangible Assets [Roll Forward]  
Beginning balance $ 404
Amortization expense (167)
Intangible assets acquired in asset acquisition 35
Impairment (274)
Foreign currency translation adjustment 2
Ending balance $ 0
v3.23.3
Goodwill and Intangible Assets - Goodwill and Intangible Assets Subject to Amortization (Details) - USD ($)
$ in Thousands
Sep. 30, 2023
Dec. 31, 2022
Finite-Lived Intangible Assets [Line Items]    
Gross Carrying Amount $ 2,284 $ 10,847
Accumulated Amortization 2,284 10,443
Net Carrying Value 0 404
Subscriber relationships    
Finite-Lived Intangible Assets [Line Items]    
Gross Carrying Amount 0 7,649
Accumulated Amortization 0 7,245
Net Carrying Value 0 404
Distribution rights    
Finite-Lived Intangible Assets [Line Items]    
Gross Carrying Amount 0 315
Accumulated Amortization 0 315
Net Carrying Value 0 0
Internally developed software    
Finite-Lived Intangible Assets [Line Items]    
Gross Carrying Amount 0 446
Accumulated Amortization 0 446
Net Carrying Value 0 0
Proprietary content    
Finite-Lived Intangible Assets [Line Items]    
Gross Carrying Amount 0 153
Accumulated Amortization 0 153
Net Carrying Value 0 0
Intellectual property    
Finite-Lived Intangible Assets [Line Items]    
Gross Carrying Amount 2,284 2,284
Accumulated Amortization 2,284 2,284
Net Carrying Value $ 0 $ 0
v3.23.3
Revenue from Contracts with Customers - Disaggregation of Revenue (Details) - USD ($)
$ in Thousands
 3 Months Ended 9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Sep. 30, 2023
Sep. 30, 2022
Disaggregation of Revenue [Line Items]        
Total net sales $ 33,549 $ 35,169 $ 101,409 $ 102,873
Product        
Disaggregation of Revenue [Line Items]        
Total net sales 4,152 6,625 14,526 19,808
Service        
Disaggregation of Revenue [Line Items]        
Total net sales 29,397 28,544 86,883 83,065
Mobile Connectivity | Service        
Disaggregation of Revenue [Line Items]        
Total net sales 29,397 28,544 86,883 83,065
Mobile Connectivity | Transferred at point in time | Product        
Disaggregation of Revenue [Line Items]        
Total net sales 3,531 5,974 12,578 18,057
Mobile Connectivity | Transferred over time | Product        
Disaggregation of Revenue [Line Items]        
Total net sales $ 621 $ 651 $ 1,948 $ 1,751
v3.23.3
Revenue from Contracts with Customers - Narrative (Details) - USD ($)
$ in Thousands
 3 Months Ended 9 Months Ended 12 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Sep. 30, 2023
Sep. 30, 2022
Dec. 31, 2022
Disaggregation of Revenue [Line Items]          
Revenue recognized $ 533 $ 572 $ 1,826 $ 1,645  
Revenue Benchmark | Product Concentration Risk | Mobile Comm Product Sales          
Disaggregation of Revenue [Line Items]          
Concentration risk 12.00% 19.00% 14.00% 19.00%  
Revenue Benchmark | Product Concentration Risk | VSAT Airtime Service Sales          
Disaggregation of Revenue [Line Items]          
Concentration risk 82.00% 76.00% 80.00% 74.00%  
Revenue Benchmark | Geographic Concentration Risk | Non-US          
Disaggregation of Revenue [Line Items]          
Concentration risk 69.00% 62.00% 67.00% 61.00%  
Revenue Benchmark | Geographic Concentration Risk | Singapore          
Disaggregation of Revenue [Line Items]          
Concentration risk 18.00% 17.00% 18.00% 16.00%  
Accounts Receivable | Customer Concentration Risk | Customer One          
Disaggregation of Revenue [Line Items]          
Concentration risk     18.00%   16.00%
Accounts Receivable | Customer Concentration Risk | Customer Two          
Disaggregation of Revenue [Line Items]          
Concentration risk     11.00%   12.00%
Accounts Receivable, Sales-Type Leases | Customer Concentration Risk | Customer Two          
Disaggregation of Revenue [Line Items]          
Concentration risk     64.00%   66.00%
v3.23.3
Revenue from Contracts with Customers - Schedule of Customer Contract Balances (Details) - USD ($)
$ in Thousands
Sep. 30, 2023
Dec. 31, 2022
Revenue from Contract with Customer [Abstract]    
Current contract assets $ 1,130 $ 1,243
Non-current contract assets 2,557 3,033
Contract liabilities 1,668 1,743
Long-term contract liabilities 3,905 4,315
Deferred income, current $ 1,600 $ 1,365
v3.23.3
Income Taxes (Details) - USD ($)
$ in Thousands
 3 Months Ended 9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Sep. 30, 2023
Sep. 30, 2022
Dec. 31, 2022
Income Tax Disclosure [Abstract]          
Effective income tax rate (2.30%) (578.60%) (5.00%) (16.50%)  
Liability for uncertain tax positions $ 693   $ 693   $ 637
Decrease in unrecognized tax benefits is reasonably possible $ 38   $ 38    
v3.23.3
Leases - Narrative (Details) - USD ($)
$ in Thousands
 3 Months Ended 9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Sep. 30, 2023
Sep. 30, 2022
Dec. 31, 2021
Lessee, Lease, Description [Line Items]          
Operating lease expense $ 417 $ 507 $ 1,291 $ 1,588  
Short-term lease costs 15 41 55 139  
Net investment in lease, current 3,739   3,739    
Net investment in lease, noncurrent 3,984   3,984    
Sales-type lease, interest income 159 $ 191 501 $ 591  
Lessor, operating lease, term of contract         3 years
Lessor, operating lease, gross costs 1,880   1,880    
Lessor, operating lease, accumulated depreciation 798   $ 798    
Lessor, operating lease, useful life     5 years    
Depreciation expense 94   $ 282    
Lease revenue $ 138   $ 415    
Operating Lease, Lease Income, Statement of Income or Comprehensive Income [Extensible Enumeration]     Total net sales    
Minimum          
Lessee, Lease, Description [Line Items]          
Sales-type leases, term of contracts 3 years   3 years    
Maximum          
Lessee, Lease, Description [Line Items]          
Sales-type leases, term of contracts 5 years   5 years    
v3.23.3
Leases - Future Minimum Operating Lease Payments (Details) - USD ($)
$ in Thousands
Sep. 30, 2023
Dec. 31, 2022
Leases [Abstract]    
Remainder of 2023 $ 400  
2024 629  
2025 93  
2026 47  
2027 and thereafter 79  
Total minimum lease payments 1,248  
Less amount representing interest (55)  
Present value of net minimum operating lease payments 1,193  
Less current installments of obligation under current-operating lease liabilities 921 $ 1,532
Obligations under long-term operating lease liabilities, excluding current installments $ 272 $ 636
Weighted-average remaining lease term - operating leases (years) 1 year 6 months 10 days  
Weighted-average discount rate - operating leases 5.50%  
v3.23.3
Leases - Sales-type Lease Future Undiscounted Cash Flows (Details)
$ in Thousands
Sep. 30, 2023
USD ($)
Leases [Abstract]  
Remainder of 2023 $ 1,547
2024 3,346
2025 2,016
2026 1,033
2027 514
2028 98
Total undiscounted cash flows 8,554
Present value of lease payments 7,723
Difference between undiscounted cash flows and discounted cash flows  $ 831
v3.23.3
Leases - Future Minimum Lease Payments Receivable (Details)
$ in Thousands
Sep. 30, 2023
USD ($)
Leases [Abstract]  
Remainder of 2023 $ 138
2024 343
2025 25
Total $ 506
v3.23.3
Discontinued Operations - Schedule of Net Income From Discontinued Operations (Details) - USD ($)
$ / shares in Units, shares in Thousands, $ in Thousands
 3 Months Ended 9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Sep. 30, 2023
Sep. 30, 2022
Costs and expenses:        
Net income from discontinued operations, net of tax $ 0 $ 29,741 $ 0 $ 28,061
Net income from discontinued operations per common share        
Basic (in shares) $ 0.00 $ 1.59 $ 0.00 $ 1.51
Diluted (in shares) $ 0.00 $ 1.59 $ 0.00 $ 1.51
Weighted average number of common shares outstanding:        
Basic (in shares) 19,231 18,706 19,090 18,574
Diluted (in shares) 19,231 18,706 19,090 18,574
Discontinued Operations, Disposed of by Sale        
Sales:        
Sales   $ 1,494   $ 16,721
Costs and expenses:        
Research and development   374   3,147
Sales, marketing and support   348   3,035
Other income, net   12   81
Loss from discontinued operations before income tax expense   (889)   (2,569)
Gain on sale of discontinued operations before tax expense   30,858   30,858
Total income from discontinued operations before tax expense   29,969   28,289
Income tax expense on discontinued operations   228   228
Net income from discontinued operations, net of tax   $ 29,741   $ 28,061
Net income from discontinued operations per common share        
Basic (in shares)   $ 1.59   $ 1.51
Diluted (in shares)   $ 1.59   $ 1.51
Discontinued Operations, Disposed of by Sale | Product        
Sales:        
Sales   $ 1,276   $ 16,042
Costs and expenses:        
Cost of sales   1,504   12,732
Discontinued Operations, Disposed of by Sale | Service        
Sales:        
Sales   218   679
Costs and expenses:        
Cost of sales   $ 169   $ 457
v3.23.3
Discontinued Operations - Schedule of Cash Flows from Discontinued Operations (Details) - Discontinued Operations, Disposed of by Sale - USD ($)
$ in Thousands
 3 Months Ended 9 Months Ended
Sep. 30, 2022
Sep. 30, 2022
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]    
Cash used in operating activities - discontinued operations $ (252) $ (3,853)
Cash used in investing activities - discontinued operations $ (220) $ (307)
v3.23.3
Discontinued Operations - Schedule of Non-Cash Expenses from Discontinued Operations (Details) - Discontinued Operations, Disposed of by Sale - USD ($)
$ in Thousands
 3 Months Ended 9 Months Ended
Sep. 30, 2022
Sep. 30, 2022
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]    
Depreciation $ 91 $ 622
Compensation expense related to stock-based awards and employee stock purchase plan $ 237 $ 475
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