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DATE

Thursday, Nov. 6, 2025, at 9:00 a.m. ET

CALL PARTICIPANTS

  • Chief Executive Officer — Brent C. Bruun
  • Chief Financial Officer — Anthony Pike

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TAKEAWAYS

  • Service Revenue -- $25.4 million in service revenue for Q3 2025. Service revenue increased 10% from the prior quarter and 4% year-over-year, with growth despite the absence of significant U.S. Coast Guard revenue present in the prior year.
  • Subscribing Vessels -- Approximately 9,000 vessels at quarter-end, an 11% increase from the prior quarter and a 26% increase year-to-date; more than half currently receive Starlink services.
  • Terminal Shipments -- 1,600 satellite communication terminals shipped during the quarter, a company record for a single quarter.
  • LEO Airtime Margin -- Steady compared to the prior quarter, while management confirmed "our LEO margins remain strong," according to Anthony Pike.
  • GEO Airtime Margin -- 31.9% airtime gross margin for the quarter (basis not specified), a 3.9% decrease from the prior quarter; driven by reduced revenue on a fixed cost base, a trend management expects to persist in the fourth quarter.
  • Product Gross Profit -- Negative $6.8 million in product gross profit for the quarter, including a $5.5 million VSAT inventory write-down and a further $1.6 million reduction from pricing actions on Starlink and H Series VSAT antennas.
  • Adjusted EBITDA -- Adjusted EBITDA was $1.4 million for the quarter.
  • Operating Expenses -- $9.5 million for the quarter (basis not specified), unchanged from the prior quarter, reflecting ongoing cost controls.
  • Cash Balance -- $72.8 million at quarter-end, up $16.9 million during the quarter, supported by $7.8 million in net proceeds from the Rhode Island facility sale.
  • Major Acquisition -- Closed acquisition of a maritime communications customer base in the Asia Pacific region; will add more than 800 vessels (including 300 existing VSAT customers), over 4,400 land-based subscribers acquired, and is expected to deliver a corresponding increase in annual top-line revenue.
  • Starlink Data Pool -- Management stated negotiations are underway to purchase an additional Starlink data pool, targeting "significant growth trajectory of Starlink airtime as a portion of our business," according to Anthony Pike, and sustaining "solid airtime margins," according to Anthony Pike.
  • Combox Revenue -- Combox shipments and activations increased sequentially; revenue grew by approximately 36% quarter-over-quarter (basis not specified).
  • Capital Expenditure -- $1.6 million for the quarter (basis not specified), down from $2.4 million in the prior quarter.

SUMMARY

Management confirmed the continued strategic pivot toward recurring service revenue, emphasizing record vessel subscriptions. Cost containment remained a focus, as operating expenses were flat compared to the prior quarter. Leadership completed a significant Asia Pacific acquisition, poised to expand both maritime and land-based subscriber counts starting in the next quarter. Shifts in product pricing and a VSAT inventory write-down resulted in negative product gross profit, while GEO airtime margin erosion remained a headwind until lower bandwidth commitments begin in January 2026. Negotiations to expand Starlink data capacity reflect management's confidence in demand for LEO services and margin stability as Starlink becomes a larger revenue share.

  • Brent C. Bruun stated that vessel growth increased by approximately 1,000, from 8,000 to 9,000, with the majority of those being LEO, during the quarter, signaling the shift in subscriber composition toward LEO services.
  • CEO Bruun stated, "we have reinforced that inflection point. This is due to our strategic focus on LEO airtime revenue and subscriber growth, which have yielded positive results."
  • Brent C. Bruun cited both competitive wins and "going further downstream," indicating subscriber growth comes from both new market penetration and competitive conversions.
  • Management reported Combox cybersecurity features are "being well received," according to Brent C. Bruun, but did not signal incremental product investments or a strategy change for this solution.

INDUSTRY GLOSSARY

  • LEO: Low-Earth Orbit satellite communication services, typically characterized by low latency and broader coverage for mobility applications.
  • GEO: Geostationary Orbit satellite services, commonly used for maritime and fixed-location connectivity requiring consistent, wide-area coverage from a fixed orbital position.
  • VSAT: Very Small Aperture Terminal, a satellite ground station used to access data by transmitting and receiving real-time signals.
  • Combox: KVH Industries' proprietary integrated hub providing connectivity, networking, and cybersecurity solutions for maritime vessels.

Full Conference Call Transcript

Anthony Pike: Thank you, Dana. Good morning, everyone, and thank you for joining us today for KVH Industries' Third Quarter Results, which are included in the earnings release we published earlier this morning. Joining me on the call is the company's Chief Executive, Brent C. Bruun. Before I get into the numbers, a few standard statements. Firstly, if you would like a copy of the earnings release, or if you would like to listen to a recording of today's call, both will be available on our website. And if you are listening via the web, please feel free to submit questions to [email protected].

Further, this conference call will contain certain forward-looking statements that are subject to numerous assumptions and uncertainties that may cause our actual results to differ materially from those expressed in these statements. We undertake no obligation to update or revise any of these statements. We will also discuss adjusted EBITDA, which is a non-GAAP financial measure. You will find the definition of this measure in our press release as well as a reconciliation to comparable GAAP numbers. We encourage you to review the cautionary statements made in our SEC filings, specifically those under the heading Risk Factors in our most recently filed 10-Q. The company's other SEC filings are available directly from the Investor Information section of our website.

Now to walk you through the highlights of our third quarter, I'll turn the call over to Brent C. Bruun.

Brent C. Bruun: Thank you, Anthony, and good morning, everyone. The positive momentum that we reported in the second quarter has continued into the third quarter. On our last call, we talked about an inflection point, and this quarter, we have reinforced that inflection point. This is due to our strategic focus on LEO airtime revenue and subscriber growth, which have yielded positive results. Highlights of the quarter include a new record for vessel subscriber growth, record quarterly shipments of satellite communication terminals, sequential and year-over-year service revenue growth, closing the sale of our Middletown, Rhode Island facility, and the acquisition of customer and vendor agreements along with other assets from a satellite service provider operating in the Asia Pacific region.

At the same time, we maintained our commitment to strong cost control, with flat OpEx and reduced CapEx compared to 2025. Service revenue for Q3 was $25.4 million, a 10% increase from the prior quarter and a 4% increase from Q3 2024. The increase in year-over-year revenue is particularly encouraging as the prior year included a significant amount of U.S. Coast Guard revenue, which has drastically decreased since the third quarter of last year. Equally encouraging, our subscriber growth continued in the third quarter. Our total subscribing vessel count increased by 11% to approximately 9,000 compared to the second quarter, and as a result, our subscribing vessel count is up 26% year to date.

This growth is being driven by the ongoing demand for the Starlink and OneWeblio services we provide. During Q3, we shipped roughly 1,600 terminals, a new record. There continues to be strong demand for both standalone LEO services and hybrid installations, which represent a combined service utilizing a LEO service in tandem with our legacy VSAT offer.

Anthony Pike: Our Starlink subscriber growth also helped us to meet our target to consume the bulk data pool we purchased in July 2024 before the end of this year. We are in the final stages of negotiations with Starlink to purchase an additional data pool. We expect that a new purchase commitment will scale to reflect the significant growth trajectory of Starlink airtime as a portion of our business, enable us to retain flexibility to create custom competitive data plans to meet our subscribers' needs, and allow us to sustain solid airtime margins. In addition, we continue to pursue strategic growth opportunities.

In Q3, we completed the acquisition of the Maritime Communications customer base of a service provider operating in the Asia Pacific region. This acquisition is expected to bring on board more than 800 vessels that are currently utilizing satellite communication services, approximately 300 of which receive our VSAT service, more than 4,400 land-based subscribers who use Inmarsat and Iridium handheld services, and a corresponding increase in annual top-line revenue. This strategic move represents an essential milestone in our evolution as it is intended to expand our customer base, broaden our product and service portfolio, and significantly increase our LAN connectivity subscriber base. This step is representative of our commitment to investing in KVH Industries, Inc. and strengthening our market position.

And finally, we successfully closed the sale of our facility in Rhode Island, which generated approximately $8 million in net proceeds. Now I will turn the call back to Anthony to discuss the numbers.

Anthony Pike: Thank you, Brent. As a reminder, I would like to note that similar to our call for Q2, I will not restate data that is in the earnings release or clearly described in our 10-Q. I will focus my comments on information which either elaborates on or clarifies published data. So with respect to our third quarter financial results, airtime gross margin was 31.9%, which is down by 3.9% compared to the prior quarter gross margin of 35.8%. This decrease was driven by the reduction in GEO airtime margins as a result of declining revenue set against a relatively fixed cost base. That said, GEO revenue decline continues to be in line with expectations and is not significantly accelerating.

We expect this trend on GEO airtime margin to continue in the fourth quarter. However, from January 2026, our minimum commitments for GEO bandwidth decline considerably by around a third, which we expect will reduce pressure on margins. Our LEO airtime margin was consistent with the prior quarter. Total subscribing vessels at the end of Q3 were just below 9,000, which, as Brent mentioned, is 11% up from the prior quarter and 26% up from the beginning of the year. Reported Q3 product gross profit was negative $6.8 million compared to a product gross profit of positive $300,000 in the prior quarter.

This quarter's negative product gross profit included a $5.5 million write-down of our VSAT inventory based upon reduced demand and pricing. The remaining reduction in profitability of $1.6 million this quarter was driven by price reductions on Starlink and our H Series VSAT antennas. We expect product margins to improve in the fourth quarter from the third quarter of this year, but product margins will remain relatively modest, and we believe the real value of our mobile connectivity hardware shipments is the recurring airtime revenue they generate in the future.

The Q3 operating expenses of $9.5 million were flat compared to the prior quarter, and our adjusted EBITDA for the quarter was $1.4 million, and our earnings release has a numerical reconciliation of that. Capital expenditure for the quarter was $1.6 million. This compares to adjusted EBITDA of $2.7 million and capital expenditure of $2.4 million in 2025. Our ending cash balance of $72.8 million was up approximately $16.9 million from the beginning of the quarter, and as Brent mentioned, net proceeds from the sale of our property at Middletown, Rhode Island, was $7.8 million.

So overall, we are pleased with the third quarter performance, which shows our strategy to focus on our recurring revenue service business is proving successful with double-digit sequential growth on both service revenue and subscribed vessels in the quarter. Although we cannot assure that growth will continue at this rate, our LEO margins remain strong, and we are managing the global decline in GEO well. The sale of our manufacturing facility and the first acquisition we have completed in several years evidences our strategic intent moving forward, and we are optimistic for the future. This now concludes our prepared remarks.

Now I'll turn the call over to the operator to open the line for the Q&A portion of this morning's call. Operator?

Operator: At this time, we will conduct a question and answer session. As a reminder, to ask a question, you will need to press 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again.

Anthony Pike: Please stand by while we compile the Q&A roster.

Operator: First question comes from Christopher David Quilty of Quilty Space. Your line is now open.

Christopher David Quilty: Thanks, guys. Wanted to dial in a little bit to the growth in the LEO business.

Brent C. Bruun: The demand is really pretty evenly spread between all regions and all types of vessels. So there's not anything specific that's driving the demand, Christopher. We probably did scale back a bit on leisure marine in the third quarter just due to the time of year. Right? That's a very, you know, the fourth quarter, first quarter, we'll see a lot more activity there as the boats are moving south. But it's just not really any significant concentration.

Christopher David Quilty: And how about, I mean, are you seeing these as competitive wins? Or are these new wins installs, or is that mix changing?

Brent C. Bruun: It's a bit of both. It's definitely some competitive wins. The new installs also because, you know, we're going further downstream, and that trend has continued. With the service plans that we offer and the price per bit delivered, it's opened up the market quite a bit to the lower end.

Operator: Gotcha.

Christopher David Quilty: And I think I received my first Starlink email yesterday offering me free on the consumer side. But apparently, you're also enterprise side. How are you managing hardware?

Brent C. Bruun: Well, and as Anthony alluded to, they reduced price. We're not necessarily offering free. We're not offering free equipment for maritime unless you know something I don't. They have reduced price. It's caused a bit it's difficult. You have to manage it because when you're buying inventory, you have it at a higher price, and then they're selling it well, and you need to drop your price. It did impact our margins to a degree. On a go-forward basis, we have an understanding with Starlink and how to handle this a bit better.

And if in fact they have further price concessions, we would anticipate that any stock that we're holding we would get a corresponding reduction, you know, in or credit for the difference between previous sale purchase price and the new purchase price.

Christopher David Quilty: Gotcha. And can you contrast that with, you know, your OneWeb terminal sales where, you know, I think you mentioned a lot of those are being sold under AgilePlans.

Brent C. Bruun: It'll definitely price definitely has an impact. You know, we've shipped quite a few more Starlinks than OneWeb's on the raw alternatives to using a OneWeb and not just on a standalone basis. We talk about our hybrid service offering, which is primarily concentrating on a LEO service with VSAT, but it doesn't we also have some customers that have provided two different LEO services onboard to ensure diversity.

Christopher David Quilty: Fair to us quarter probably like less than $1,000,000. The head you mean as far as the amount of revenue we recognized in the fourth quarter of last year? Yeah. Because when you say headwind, we had a significant amount of revenue in the third quarter, but the contract was expired at the September '24. And we've retained a small amount of Coast Guard revenue, it's not completely gone. But that small amount was representative in 2024, in 04/2024, and it will be in 04/2025. So it's really not going to be a factor in a year-to-year over year comparison in the fourth quarter. If that's your question.

Operator: Yeah. That was it.

Christopher David Quilty: And aside from the Coast Guard, what are you seeing in the trends on the GEO ARPU?

Brent C. Bruun: I'll defer to Anthony on that.

Operator: Question.

Anthony Pike: Yeah. So the GEO ARPUs this year have been fairly static. The first and the second drop quarter, they dropped a little bit, but since then, they've been very static. So we were very pleased with the third quarter's ARPUs on our GEO side. They seem to be remaining.

Christopher David Quilty: Great. And guys didn't talk about Combox much in the quarter. Is there any significant movement in customer adoption or had the new?

Brent C. Bruun: Well, the cybersecurity feature is being well received. There's not necessarily new news on that. It's being well received. We shipped I don't have the exact number, but hundreds of Comboxes, and we activated hundreds of services, and it's being well received in the market. But we didn't really see a need to call it out specifically this quarter. Shipments were up sequentially in the third quarter versus the second.

Anthony Pike: Yeah. I mean, if I just jump in there, Brent, I mean, revenue was about revenue was up about 30 mid 30%. I think 36% quarter on quarter. Which just shows, you know, we're getting some successful growth, and the growth from what we discussed in prior quarters continues both in terms of shipments and activations.

Christopher David Quilty: And sorry. I'm all over the map. I should've organized my questions. But, Anthony, did you mention how many LEO terminals were activated in the quarter?

Anthony Pike: I did not. No. I'm not sure. Brent, do we?

Brent C. Bruun: So, basically, you know, we talked about our growth, which went is approximately a thousand from 8,000 to 9,000. A significant portion, majority of those would be LEO. As far as the vessels that we have out there, 9,000, more than half are receiving Starlink services. But we'd like to just keep it at that level. You know, and know that our overall subscribing vessels are significant. And they've had significant growth in the quarter, which we hope and we anticipate or we hope will continue. There's no guarantees. And as we move forward, a larger and larger portion of our installed base will be receiving LEO services, and for the current time period, in particular, Starlink.

Christopher David Quilty: Starting to hear whispers from the Amazon guys coming to market?

Brent C. Bruun: Yeah. There's all kinds, and there's not whispers. I think they're shouting from the mountaintops. So Right.

Christopher David Quilty: Does that look like it'll be a competitive service based upon what you're seeing in terms of?

Brent C. Bruun: Yeah. I mean, on paper, yes. You know, the proof is in the pudding. So once we are able to test it, see what the cost of the equipment is, the data speeds, the ability to maintain link, and the overall quality of the service. When that all comes to fruition, we're able to do significant testing, we'll be able to answer that question a bit more concisely. But on paper, it looks like it will be compelling.

Operator: Great.

Christopher David Quilty: With the acquisition, I think you mentioned 800 vessels that obviously didn't show up in the numbers for this quarter. See a, you know, one-time jump of 800 vessels that happened?

Brent C. Bruun: Let's just be clear. Yes. But over 500 vessels. Right? So 300 of those vessels were already receiving our service. We'll be able to achieve higher margin on those vessels because we were selling it to the service provider, the service provider was charging their end customer a higher price. But those will be reflected in our fourth quarter. That net 500 will be reflected in our fourth quarter numbers.

Christopher David Quilty: You would previously talked about primarily Latin American land growth. But it sounds like there's an element of that with, I think you specifically called out part of their business. Is that a focus? Or is it traditional land?

Brent C. Bruun: A bit of both. In this particular case, it was opportunistic because that's what they provided. So we're taking it on. We do have we think it would make sense to go into an adjacent market outside of maritime and provide land services since we have the infrastructure to support it. We're looking into that to do more.

Christopher David Quilty: Gotcha. And is that expanding or services, you know, is this all Satcom related services? Or do you move into other adjacent services?

Brent C. Bruun: It primarily will be Satcom. You know, the handhelds are very high volume, low ARPU type business. So it's easy to get a lot of them out there to make any type of significant revenue.

Christopher David Quilty: And question just because I don't pay close attention to the maritime market. Any notable trends due to the tariffs or global situation? You know, you're watching in terms of the demand?

Brent C. Bruun: Yeah. Well, of course, we watch it and we pay attention to what's going on, but we're not seeing any significant impact from tariffs or the geopolitical environment.

Christopher David Quilty: That's it for me, gentlemen. Thank you.

Brent C. Bruun: Alright. Thanks so much, Christopher. Thank you, Christopher.

Operator: I'm showing no further questions at this time. Thank you for your participation in today's conference call. This does conclude the program. You may now disconnect.