[Management View]
KVH Industries reported a strategic pivot towards recurring service revenue, emphasizing record vessel subscriptions and cost containment. The company completed a significant acquisition in the Asia Pacific region, expanding both maritime and land-based subscriber counts. Management highlighted shifts in product pricing and a VSAT inventory write-down, resulting in negative product gross profit. GEO airtime margin erosion remains a headwind until lower bandwidth commitments begin in January 2026. Negotiations to expand Starlink data capacity reflect confidence in demand for LEO services and margin stability.

[Outlook]
KVH Industries expects continued growth in LEO airtime revenue and subscriber numbers, with plans to purchase additional Starlink data pools to support this trajectory. The company anticipates improved product margins in the fourth quarter and aims to leverage its infrastructure to expand into adjacent markets, including land services.

[Financial Performance]
Service revenue for Q3 2025 was $25.4 million, a 10% increase from the prior quarter and a 4% increase year-over-year. Subscribing vessels increased by 11% from the prior quarter and 26% year-to-date. Adjusted EBITDA was $1.4 million, with operating expenses flat at $9.5 million. The cash balance at quarter-end was $72.8 million, up $16.9 million, supported by proceeds from a facility sale.

[Q&A Highlights]
Question 1: Can you elaborate on the growth in the LEO business?
Answer: Demand is evenly spread across regions and vessel types, with a slight seasonal scale-back in leisure marine. Growth comes from both competitive wins and new installs, driven by service plans and price per bit delivered.

Question 2: How are you managing Starlink hardware pricing changes?
Answer: Starlink reduced prices, impacting margins. KVH has an understanding with Starlink to manage future price changes better, including potential credits for inventory held at higher prices.

Question 3: What are the trends in GEO ARPU?
Answer: GEO ARPUs have been static, with slight drops earlier in the year but stable in Q3. The company is pleased with the current ARPUs.

Question 4: Is there significant movement in Combox customer adoption?
Answer: Combox cybersecurity features are well received, with sequential growth in shipments and activations. Revenue increased by approximately 36% quarter-over-quarter.

Question 5: How many LEO terminals were activated in the quarter?
Answer: Growth from 8,000 to 9,000 vessels, with a significant portion being LEO. More than half of the vessels receive Starlink services.

Question 6: Are there whispers of Amazon entering the market?
Answer: Amazon's entry is anticipated, but KVH will assess the service quality and cost before determining competitiveness.

Question 7: Will the acquisition of 800 vessels show up in Q4 numbers?
Answer: Yes, over 500 vessels will be reflected in Q4 numbers, with higher margins expected on vessels already receiving KVH services.

Question 8: Is there a focus on Latin American land growth?
Answer: The acquisition was opportunistic, but KVH is exploring adjacent markets outside maritime for land services.

Question 9: Are there notable trends due to tariffs or global situations?
Answer: No significant impact from tariffs or geopolitical environment on demand.

[Sentiment Analysis]
Analysts and management maintained a positive tone, focusing on strategic growth and expansion opportunities. Management expressed confidence in LEO service demand and margin stability, while analysts showed interest in competitive dynamics and market expansion.

[Quarterly Comparison]
| Metric | Q3 2025 | Q2 2025 | Q3 2024 |
|-------------------------|---------|---------|---------|
| Service Revenue | $25.4M | $23.1M | $24.4M |
| Subscribing Vessels | 9,000 | 8,100 | 7,200 |
| Adjusted EBITDA | $1.4M | $2.7M | N/A |
| Operating Expenses | $9.5M | $9.5M | N/A |
| Cash Balance | $72.8M | $55.9M | N/A |

[Risks and Concerns]
Risks include continued GEO airtime margin erosion and potential impacts from competitive pricing changes in satellite services. The geopolitical environment and tariffs are monitored but have not significantly impacted demand.

[Final Takeaway]
KVH Industries is strategically expanding its service revenue base, with significant growth in LEO services and vessel subscriptions. The acquisition in the Asia Pacific region and negotiations for additional Starlink data pools position the company for future growth. While GEO margins face pressure, management's focus on cost control and strategic investments in LEO services and adjacent markets reflects confidence in sustaining growth and profitability.