Company Quick10K Filing
KVH Industries
Price10.68 EPS2
Shares18 P/E6
MCap193 P/FCF-17
Net Debt-9 EBIT33
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-03-31 Filed 2020-05-01
10-K 2019-12-31 Filed 2020-02-28
10-Q 2019-09-30 Filed 2019-10-31
10-Q 2019-06-30 Filed 2019-08-02
10-Q 2019-03-31 Filed 2019-05-02
10-K 2018-12-31 Filed 2019-03-01
10-Q 2018-09-30 Filed 2018-10-31
10-Q 2018-06-30 Filed 2018-08-02
10-Q 2018-03-31 Filed 2018-05-04
10-K 2017-12-31 Filed 2018-03-02
10-Q 2017-09-30 Filed 2017-11-02
10-Q 2017-06-30 Filed 2017-08-04
10-Q 2017-03-31 Filed 2017-05-09
10-K 2016-12-31 Filed 2017-03-09
10-Q 2016-09-30 Filed 2016-11-03
10-Q 2016-06-30 Filed 2016-08-05
10-Q 2016-03-31 Filed 2016-05-10
10-K 2015-12-31 Filed 2016-03-14
10-Q 2015-09-30 Filed 2015-11-09
10-Q 2015-06-30 Filed 2015-08-10
10-Q 2015-03-31 Filed 2015-05-11
10-K 2014-12-31 Filed 2015-03-17
10-Q 2014-09-30 Filed 2014-11-10
10-Q 2014-06-30 Filed 2014-08-07
10-Q 2014-03-31 Filed 2014-05-09
10-K 2013-12-31 Filed 2014-03-17
10-Q 2013-09-30 Filed 2013-11-08
10-Q 2013-06-30 Filed 2013-08-09
10-Q 2013-03-31 Filed 2013-05-09
10-K 2012-12-31 Filed 2013-04-02
10-Q 2012-09-30 Filed 2012-11-08
10-Q 2012-06-30 Filed 2012-08-08
10-Q 2012-03-31 Filed 2012-05-09
10-K 2011-12-31 Filed 2012-03-08
10-Q 2011-09-30 Filed 2011-11-04
10-Q 2011-06-30 Filed 2011-08-04
10-Q 2011-03-31 Filed 2011-05-05
10-K 2010-12-31 Filed 2011-03-14
10-Q 2010-09-30 Filed 2010-11-05
10-Q 2010-06-30 Filed 2010-08-06
10-Q 2010-03-31 Filed 2010-05-04
10-K 2009-12-31 Filed 2010-03-09
8-K 2020-05-03 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2020-05-01 Earnings, Exhibits
8-K 2020-04-08 Enter Agreement, Officers, Regulation FD, Exhibits
8-K 2020-02-28 Earnings, Exhibits
8-K 2019-10-30 Earnings, Exhibits
8-K 2019-10-04 Other Events
8-K 2019-08-02 Earnings, Exhibits
8-K 2019-06-04 Shareholder Vote
8-K 2019-05-13 Enter Agreement, M&A, Earnings, Off-BS Arrangement, Exhibits
8-K 2019-05-02 Earnings, Exhibits
8-K 2019-03-01 Earnings, Exhibits
8-K 2018-10-31 Earnings, Exhibits
8-K 2018-08-02 Earnings, Exhibits
8-K 2018-06-05 Shareholder Vote
8-K 2018-05-04 Earnings, Exhibits
8-K 2018-03-02 Earnings, Sale of Shares, Exhibits

KVHI 10Q Quarterly Report

Part I. Financial Information
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 6. Exhibits
EX-31.1 kvhi331202010qex311.htm
EX-31.2 kvhi331202010qex312.htm
EX-32.1 kvhi331202010qex321.htm

KVH Industries Earnings 2020-03-31

Balance SheetIncome StatementCash Flow
Assets, Equity
Rev, G Profit, Net Income
Ops, Inv, Fin


Washington, D.C. 20549
(Mark One)
For the quarterly period ended: March 31, 2020
For the transition period from              to             
Commission File Number 0-28082
KVH Industries, Inc.
(Exact Name of Registrant as Specified in its Charter)

(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
Common Stock, par value $0.01 per shareKVHI
The NASDAQ Stock Market LLC
(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 filerAccelerated filer
Non-accelerated filerSmaller 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
April 27, 2020Common Stock, par value $0.01 per share17,993,244

Form 10-Q

  Page No.
Consolidated Balance Sheets as of March 31, 2020 (unaudited) and December 31, 2019
Consolidated Statements of Operations for the three months ended March 31, 2020 and 2019 (unaudited)
Consolidated Statements of Comprehensive Loss for the three months ended March 31, 2020 and 2019 (unaudited)
Consolidated Statements of Stockholders' Equity for the three months ended March 31, 2020 and 2019 (unaudited)
Consolidated Statements of Cash Flows for the three months ended March 31, 2020 and 2019 (unaudited)

ITEM 1. Financial Statements
(in thousands, except share and per share amounts)
March 31,
December 31,
Current assets:
Cash and cash equivalents$18,542  $18,365  
Marketable securities22,487  29,907  
Accounts receivable, net of allowance for doubtful accounts of $1,722 and $1,589 as of March 31, 2020 and December 31, 2019, respectively
28,968  32,891  
Inventories, net25,555  23,465  
Prepaid expenses and other current assets 3,422  3,188  
Current contract assets1,424  1,458  
Total current assets100,398  109,274  
Property and equipment, net
54,756  53,584  
Intangible assets, net
4,432  4,943  
Goodwill14,730  15,408  
Right of use asset operating lease5,026  6,286  
Other non-current assets6,644  6,443  
Non-current contract assets3,259  3,408  
Non-current deferred income tax asset40  45  
Total assets$189,285  $199,391  
Current liabilities:
Accounts payable$13,818  $15,031  
Accrued compensation and employee-related expenses5,129  5,637  
Accrued other8,551  7,733  
Accrued product warranty costs2,212  2,194  
Contract liabilities4,933  4,443  
Current operating lease liability1,634  2,831  
Liability for uncertain tax positions532  521  
Total current liabilities36,809  38,390  
Other long-term liabilities1,138  1,292  
Long-term operating lease liability3,422  3,482  
Long-term contract liabilities5,221  5,476  
Non-current deferred income tax liability818  762  
Total liabilities$47,408  $49,402  
Commitments and contingencies (Notes 2, 10, 12, and 19)
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; 19,419,121 and 19,398,699 shares issued at March 31, 2020 and December 31, 2019, respectively; and 17,986,427 and 18,001,261 shares outstanding at March 31, 2020 and December 31, 2019, respectively
194  194  
Additional paid-in capital145,457  144,485  
Retained earnings13,324  19,538  
Accumulated other comprehensive loss(5,247) (2,767) 
153,728  161,450  
Less: treasury stock at cost, common stock, 1,432,694 and 1,397,438 shares as of March 31, 2020 and December 31, 2019, respectively
(11,851) (11,461) 
Total stockholders’ equity141,877  149,989  
Total liabilities and stockholders’ equity$189,285  $199,391  

See accompanying Notes to Unaudited Consolidated Interim Financial Statements.

(in thousands, except earnings per share amounts, unaudited)
Three Months Ended
March 31,
Product$13,094  $13,215  
Service23,474  23,161  
Net sales36,568  36,376  
Costs and expenses:
Costs of product sales9,636  8,284  
Costs of service sales15,195  15,373  
Research and development4,287  3,868  
Sales, marketing and support8,700  8,130  
General and administrative6,398  6,955  
Total costs and expenses44,216  42,610  
Loss from operations(7,648) (6,234) 
Interest income313  175  
Interest expense4  385  
Other income (expense), net1,502  (97) 
Loss from continuing operations before income tax expense (benefit)(5,837) (6,541) 
Income tax expense (benefit)377  (44) 
Net loss from continuing operations(6,214) (6,497) 
Income from discontinued operations, net of tax—  243  
Net loss$(6,214) $(6,254) 
Net loss from continuing operations per common share
Basic and diluted (a)
$(0.35) $(0.38) 
Net income from discontinued operations per common share
Basic and diluted (a)
$0.00  $0.01  
Net loss per common share
Basic and diluted (a)
$(0.35) $(0.36) 
Weighted average number of common shares outstanding:
Basic and diluted17,529  17,302  

(a) Earnings per share components for 2019 do not sum due to rounding.

See accompanying Notes to Unaudited Consolidated Interim Financial Statements.

(in thousands, unaudited)
Three Months Ended
 March 31,
Net loss$(6,214) $(6,254) 
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustment(2,480) 1,080  
Unrealized gain on derivative instruments, net  8  
Other comprehensive (loss) income, net of tax(1)
(2,480) 1,088  
Total comprehensive loss$(8,694) $(5,166) 

(1) Tax impact was nominal for all periods.

See accompanying Notes to Unaudited Consolidated Interim Financial Statements.

(in thousands, unaudited)
 Common StockAdditional
Retained EarningsAccumulated
Treasury StockTotal
Balance at December 31, 201919,399  $194  $144,485  $19,538  $(2,767) (1,397) $(11,461) $149,989  
Net loss—  —  —  (6,214) —  —  —  (6,214) 
Other comprehensive loss—  —  —  —  (2,480) —  —  (2,480) 
Stock-based compensation—  —  805  —  —  —  —  805  
Issuance of common stock under employee stock purchase plan20  —  156  —  —  —  —  156  
Acquisition of treasury stock—  —  —  —  —  (36) (390) (390) 
Exercise of stock options and issuance of restricted stock awards, net of forfeitures—  —  11  —  —  —  —  11  
Balance at March 31, 202019,419  $194  $145,457  $13,324  $(5,247) (1,433) $(11,851) $141,877  

 Common StockAdditional
Accumulated DeficitAccumulated
Comprehensive Loss
Treasury StockTotal
Balance at December 31, 201819,026  $190  $139,617  $(15,397) $(14,731) (1,282) $(10,164) $99,515  
Net loss—  —  —  (6,254) —  —  —  (6,254) 
Other comprehensive income—  —  —  —  1,088  —  —  1,088  
ASC 606 correction (FN 16)—  —  —  1,680  —  —  —  1,680  
Stock-based compensation—  —  874  —  —  —  —  874  
Issuance of common stock under employee stock purchase plan23  —  218  —  —  —  —  218  
Exercise of stock options and issuance of restricted stock awards, net of forfeitures85  1  81  —  —  —  —  82  
Balance at March 31, 201919,134  $191  $140,790  $(19,971) $(13,643) (1,282) $(10,164) $97,203  

See accompanying Notes to Unaudited Consolidated Interim Financial Statements.

(in thousands, unaudited) 
Three Months Ended
 March 31,
Cash flows from operating activities:
Net loss$(6,214) $(6,254) 
Adjustments to reconcile net loss to net cash used in operating activities:
Provision for doubtful accounts238  (65) 
Depreciation and amortization2,650  3,527  
Deferred income taxes  71  
Loss on disposals of fixed assets54  56  
Compensation expense related to stock-based awards and employee stock purchase plan
805  874  
Unrealized currency translation (gain) loss(1,065) 1,082  
Changes in operating assets and liabilities:
Accounts receivable3,577  944  
Inventories(2,094) (3,117) 
Prepaid expenses, other current assets and current contract assets(243) 952  
Other non-current assets and non-current contract assets(47) 1,236  
Accounts payable(1,174) 2,627  
Contract liabilities and long-term contract liabilities317  (1,254) 
Accrued compensation, product warranty and other246  (1,738) 
Other long-term liabilities2  (15) 
Net cash used in operating activities$(2,948) $(1,074) 
Cash flows from investing activities:
Capital expenditures(3,277) (3,027) 
Cash paid for acquisition of intangible asset(22) (25) 
Purchases of marketable securities(79)   
Maturities and sales of marketable securities7,500    
Net cash provided by (used in) investing activities$4,122  $(3,052) 
Cash flows from financing activities:
Repayments of long-term debt  (31) 
Proceeds from stock options exercised and employee stock purchase plan156  314  
Repurchase of common stock(390)   
Payment of finance lease(156) (152) 
Net cash (used in) provided by financing activities$(390) $131  
Effect of exchange rate changes on cash and cash equivalents(607) 204  
Net increase (decrease) in cash and cash equivalents177  (3,791) 
Cash and cash equivalents at beginning of period18,365  18,050  
Cash and cash equivalents at end of period$18,542  $14,259  
Supplemental disclosure of non-cash investing activities:
Changes in accrued other and accounts payable related to property and equipment additions$423  $161  

See accompanying Notes to Unaudited Consolidated Interim Financial Statements.

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, and inertial navigation products for both the commercial and defense markets. KVH's reporting segments are as follows:

the mobile connectivity segment and
the inertial navigation segment

KVH’s mobile connectivity products enable customers to receive voice and Internet services, and live digital television via satellite services in marine vessels, recreational vehicles, buses and automobiles. KVH sells and leases its mobile connectivity products through an extensive international network of dealers and distributors. KVH also sells and leases products directly to end users.

KVH’s mobile connectivity service sales represent primarily sales earned from satellite voice and Internet airtime services. KVH provides, for monthly fixed and usage fees, satellite connectivity services, including broadband Internet, data and VoIP services, to its TracPhone V-series customers. AgilePlans, a mini-VSAT Broadband service offering, is a monthly subscription model providing global connectivity to commercial maritime customers, including hardware, installation, broadband Internet, Voice over Internet Protocol (VoIP), entertainment and training content and global support for a monthly fee with no minimum commitment. KVH offers AgilePlans customers a variety of airtime data plans with varying data speeds and fixed data usage levels with overage charges per megabyte, which is similar to the plans that the Company offers to its other customers. The Company recognizes the monthly subscription fee as service revenue over the service delivery period. The Company retains ownership of the hardware that 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.

Mobile connectivity service sales also include the distribution of commercially licensed entertainment, including news, sports, music, and movies to commercial and leisure customers in the maritime, hotel, and retail markets through KVH Media Group. KVH also earns monthly usage fees from third-party satellite connectivity services, including voice, data and Internet services, provided to its Inmarsat and Iridium customers who choose to activate their subscriptions with KVH. Mobile connectivity service sales also include engineering services provided under development contracts, sales from product repairs, and extended warranty sales.

On May 13, 2019, the Company and its wholly owned subsidiary, KVH Media Group Limited (KMG), entered into a Share Purchase Agreement (the Purchase Agreement) with Pelican Holdco Limited, an affiliate of Oakley Capital IV Master SCSp, a UK company (together, Oakley), pursuant to which KMG sold all of the issued share capital of Super Dragon Limited and Videotel Marine Asia Limited (together referred to as Videotel) to Oakley for $89,387 in cash, on a cash-free, debt-free basis, subject to a working capital adjustment. Videotel comprised the Company’s maritime training business, which offered video, animation, eLearning computer-based training and interactive distance learning services to the maritime industry. The sale was completed immediately upon execution of definitive agreements. The Company received payment of the initial purchase price pursuant to a loan agreement (the Bridge Loan) on June 21, 2019. The Bridge Loan was secured by a charge (a type of foreign security interest) over the shares of Super Dragon Limited and Videotel Marine Asia Limited and was further backed by an equity commitment letter from Oakley Capital IV Master SCSp. The Bridge Loan’s interest rate was 5% per year during the period from closing until and including the 15th business day after the closing and increased to 12% per year during the period after the 15th business day until the maturity date. In December 2019, the Company finalized the working capital adjustment, which reduced the proceeds from the sale of Videotel to $88,447. The Company does not have any continuing involvement in these operations other than to provide short-term transition services, which are being recorded in other income in continuing operations. 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 20 for the discontinued operations disclosures.


KVH's inertial navigation products offer precision fiber optic gyro (FOG)-based systems that enable platform and optical stabilization, navigation, pointing and guidance. KVH’s inertial navigation products also include tactical navigation systems that provide uninterrupted access to navigation and pointing information in a variety of military vehicles, including tactical trucks and light armored vehicles. KVH’s inertial navigation products are sold directly to U.S. and foreign governments and government contractors, as well as through an international network of authorized independent sales representatives. In addition, KVH's inertial navigation technology is used in numerous commercial products, such as navigation and positioning systems for various applications including precision mapping, dynamic surveying, autonomous vehicles, train location control and track geometry measurement systems, industrial robotics and optical stabilization.

KVH’s inertial navigation service sales include product repairs, engineering services provided under development contracts and extended warranty sales.

(2)  Summary of Significant Accounting Policies

Basis of Presentation

The accompanying consolidated 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 2019 consolidated interim financial statements reflect the sale of Videotel as discontinued operations. See Notes 1 and 20 for further information on the sale of Videotel.

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, 2019 filed on February 28, 2020 with the Securities and Exchange Commission. The results for the three months ended March 31, 2020 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 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 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 most significant estimates and assumptions 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. The Company has reviewed these estimates and determined that these remain the most significant estimates for the three months ended March 31, 2020.

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.

During the second quarter of 2019, the Company sold Videotel. Please see Notes 1 and 20 for further discussion.

During the third quarter of 2019, the Company identified an out-of-period immaterial error related to the implementation and application of ASC 606 with respect to the recognition of revenue associated with sales-type leases, which impacted our March 31, 2019 consolidated interim financial statements. Please see Note 16 for further discussion.


(3)  Accounting Standards Issued and Not Yet Adopted

ASC Update No. 2016-13, ASC Update No. 2018-19, ASC Update No. 2019-04, ASC Update No. 2019-05, ASC Update No. 2019-10, ASC Update No. 2019-11 and ASC Update No. 2020-02.

In June 2016, the FASB issued ASC Update No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The update is effective for fiscal years beginning after December 15, 2019. Early adoption is permitted for fiscal years beginning after December 15, 2018. The purpose of Update No. 2016-13 is to replace the current incurred loss impairment methodology for financial assets measured at amortized cost with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information, including forecasted information, to develop credit loss estimates.

In November 2018, the FASB issued ASC Update No. 2018-19, Codification Improvements: Financial Instruments – Credit Losses (Topic 326). This update introduced an expected credit loss methodology for the impairment of financial assets measured at amortized cost basis. The amendment also clarifies that receivables arising from operating leases are not within the scope of Subtopic 326-20. Instead, impairment of receivables arising from operating leases should be accounted for in accordance with Topic 842, Leases.

In May 2019, the FASB issued ASC Update No. 2019-04, Codification Improvements: Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815) and Financial Instruments (Topic 825). This update introduced clarifications of the Board’s intent with respect to accrued interest, the transfer between classifications or categories for loans and debt securities, recoveries, reinsurance recoverables, projects of interest rate environments for variable-rate financial instruments, costs to sell when foreclosure is probable, consideration of expected prepayments when determining the effective interest rate, vintage disclosures, and extension and renewal options.

In May 2019, the FASB issued ASC Update No. 2019-05, Financial Instruments – Credit Losses (Topic 326): Targeted Transition Relief. The amendments in the update ease the transition for entities adopting ASC Update 2016-13 and increase the comparability of financial statement information. With the exception of held-to-maturity debt securities, the amendments allow entities to irrevocably elect to apply the fair value option to financial instruments that were previously recorded at amortized cost basis within the scope of Subtopic 326-20, Financial Instruments - Credit Losses - Measured at Amortized Cost.

In November 2019, the FASB issued ASC Update No. 2019-10, Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates. The amendments in this update change some effective dates for certain new accounting standards for certain types of entities. The update amends ASC 326 and ASC 350's effective date for all SEC filers other than smaller reporting companies to be the fiscal years beginning after December 15, 2019, and interim periods therein. The effective date for all other entities, including smaller reporting companies, will be the fiscal years beginning after December 15, 2022, and interim periods therein. The update does not change the effective date of ASC 815 and ASC 842 for public business entities (PBEs), but amends the effective date for all other entities to be the fiscal years beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021.

In November 2019, the FASB issued ASC Update No. 2019-11, Codification Improvements: Financial Instruments – Credit Losses (Topic 326). The update is effective for entities that have adopted ASU 2016-13, and the amendments in ASU 2019-11 are effective for fiscal years beginning after December 15, 2019, and interim periods therein. Early adoption is permitted in any interim period after issuance of this update as long as an entity has adopted the amendments in Update 2016-13. The purpose of Update No. 2019-11 is to clarify the scope of the recovery guidance to purchased financial assets with credit deterioration.

In February 2020, the FASB issued ASC Update No. 2020-02, Financial Instruments – Credit Losses (Topic 326) and Leases (Topic 842). The purpose of Update No. 2020-02 is to amend SEC paragraphs in the ASC that describe SEC guidance or SEC staff views that the Financial Accounting Standards Board (FASB) includes as a convenience to Codification users.

As a current smaller reporting entity, the effective date will be the fiscal years beginning after December 15, 2022. The adoption of Update Nos. 2016-13, 2018-19, 2019-04, 2019-05, 2019-10, 2019-11 and 2020-02 are not expected to have a material impact on the Company's financial position or results of operations.


ASC Update No. 2019-12

In December 2019, the FASB issued ASC Update No. 2019-12, Income Taxes (Topic 740). The update is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Early adoption is permitted, including adoption in any interim period, for public business entities for periods for which financial statements have not yet been issued. The purpose of Update No. 2019-12 is to remove certain exceptions for recognizing deferred taxes for investments and simplify the accounting for income taxes in certain areas, including recognizing deferred taxes for tax goodwill and allocating taxes to members of a consolidated group. It amends the requirements relating to the accounting for "hybrid" tax regimes. Update No. 2019-12 is not expected to have a material impact on the Company's financial position or results of operations.

There are no other recent accounting pronouncements issued by the FASB that are expected to have a material impact on the Company's financial statements.

(4) Marketable Securities
Marketable securities as of March 31, 2020 and December 31, 2019 consisted of the following:
March 31, 2020Amortized
Money market mutual funds$22,487  $  $  $22,487  
Total marketable securities designated as available-for-sale$22,487  $  $  $22,487  
December 31, 2019Amortized
Money market mutual funds$29,907  $  $  $29,907  
Total marketable securities designated as available-for-sale$29,907  $  $  $29,907  
Interest income from marketable securities was $113 and less than $1 during the three months ended March 31, 2020 and 2019, 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. Stock-based compensation expense, excluding compensation charges related to our employee stock purchase plan, or the ESPP, was $789 and $860 for the three months ended March 31, 2020 and 2019, respectively. As of March 31, 2020, there was $2,724 of total unrecognized compensation expense related to stock options, which is expected to be recognized over a weighted-average period of 2.41 years. As of March 31, 2020, there was $2,869 of total unrecognized compensation expense related to restricted stock awards, which is expected to be recognized over a weighted-average period of 2.29 years.

Stock Options

During the three months ended March 31, 2020, no stock options were exercised for common stock, and no shares of common stock were delivered to the Company as payment for the exercise price or related minimum tax withholding obligations for the exercise of such options. During the three months ended March 31, 2020, no stock options were granted and 95 stock options expired, were canceled or were forfeited. The Company estimates the fair value of each option grant on the date of grant using the Black-Scholes option-pricing model.

As of March 31, 2020, there were 1,529 options outstanding with a weighted average exercise price of $9.68 per share and 370 options exercisable with a weighted average exercise price of $9.60 per share.


Restricted Stock

During the three months ended March 31, 2020, no shares of restricted stock were granted and no shares of restricted stock were forfeited. Additionally, during the three months ended March 31, 2020, 102 shares of restricted stock vested, none of which were surrendered to the Company to satisfy minimum tax withholding obligations for the vesting of such shares.

As of March 31, 2020, there were 397 shares of restricted stock outstanding that were subject to service-based vesting conditions.

As of March 31, 2020, the Company had no unvested outstanding options and no shares of restricted stock that were subject to performance-based or market-based vesting conditions.

(b) Employee Stock Purchase Plan

The Company's Amended and Restated 1996 Employee Stock Purchase Plan (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 March 31, 2020 and 2019, 20 and 23 shares were issued under the ESPP plan, respectively. The Company recorded compensation charges of $16 and $14 for the three months ended March 31, 2020 and 2019, respectively, related to the ESPP.

        (c) Stock-Based Compensation Expense
The following table presents stock-based compensation expense, including under the ESPP, in the Company's consolidated statements of operations for the three months ended March 31, 2020 and 2019:
Three Months Ended
March 31,
Cost of product sales$40  $41  
Cost of service sales    
Research and development153  172  
Sales, marketing and support154  182  
General and administrative458  479  
$805  $874  

(d) Accumulated Other Comprehensive Loss (AOCI)
Comprehensive income (loss) includes net income (loss), unrealized gains and losses from foreign currency translation, unrealized gains and losses from available for sale marketable securities and changes in fair value related to interest rate swap derivative instruments, net of tax attributes. 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 income (loss).
Foreign Currency TranslationTotal Accumulated Other Comprehensive Loss
Balance, December 31, 2019$(2,767) $(2,767) 
Other comprehensive loss(2,480) (2,480) 
Net other comprehensive loss(2,480) (2,480) 
Balance, March 31, 2020$(5,247) $(5,247) 
Foreign Currency TranslationInterest Rate SwapsTotal Accumulated Other Comprehensive Loss
Balance, December 31, 2018$(14,720) $(11) $(14,731) 
Other comprehensive income before reclassifications1,080    1,080  
Amounts reclassified from AOCI  8  8  
Net other comprehensive income1,080  8  1,088  
Balance, March 31, 2019$(13,640) $(3) $(13,643) 

For additional information, see Note 4, "Marketable Securities," and Note 17, "Derivative Instruments and Hedging Activities."

(6)  Net Loss per Common Share

Basic net loss per share is calculated based on the weighted average number of common shares outstanding during the period. Diluted net loss 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 months ended March 31, 2020 and 2019, since there was a net loss from continuing operations, the Company excluded 1,341 and 1,042, respectively, in outstanding stock options and non-vested restricted shares from its diluted loss per share calculation, as inclusion of these 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 Ended
 March 31,
Weighted average common shares outstanding—basic17,529  17,302  
Dilutive common shares issuable in connection with stock plans    
Weighted average common shares outstanding—diluted17,529  17,302  


(7)  Inventories

Inventories, net are stated at the lower of cost and net realizable value using the first-in first-out costing method. Inventories as of March 31, 2020 and December 31, 2019 include the costs of material, labor, and factory overhead. Components of inventories consist of the following:
March 31,
December 31,
Raw materials$14,203  $12,755  
Work in process2,793  3,117  
Finished goods8,559  7,593  
$25,555  $23,465  

(8)  Property and Equipment

Property and equipment, net, as of March 31, 2020 and December 31, 2019 consist of the following:

March 31,
December 31,
Land$3,828  $3,828  
Building and improvements24,185  24,172  
Leasehold improvements499  501  
Machinery and equipment18,381  18,022  
Revenue-generating assets49,810  47,010  
Office and computer equipment14,259  14,054  
Motor vehicles31  31  
110,993  107,618  
Less accumulated depreciation(56,237) (54,034) 
$54,756  $53,584  

Depreciation expense was $2,402 and $2,093 for the three months ended March 31, 2020 and 2019, respectively.

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

(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 March 31, 2020 and December 31, 2019, the Company had accrued product warranty costs of $2,212 and $2,194, respectively.
The following table summarizes product warranty activity during 2020 and 2019:
Three Months Ended
 March 31,
Beginning balance$2,194  $1,916  
Charges to expense470  453  
Costs incurred(452) (348) 
Ending balance$2,212  $2,021  


(10)  Debt

Term Note and Line of Credit

Effective October 30, 2018, the Company entered into an amended and restated three-year senior credit facility agreement (the 2018 Credit Agreement) with Bank of America, N.A., as Administrative Agent, and the lenders named from time to time as parties thereto (the 2018 Lenders), for an aggregate amount of up to $42,500, including a term loan (2018 Term Loan) of $22,500 and a reducing revolving credit facility (the 2018 Revolver) of up to $20,000 initially and reducing to $15,000 on December 31, 2019, each to be used for general corporate purposes, including the refinancing of indebtedness under the Company’s then-outstanding senior credit facility agreement.
On May 13, 2019, the Company entered into a consent with Bank of America, N.A., as Administrative Agent, authorizing the Purchase Agreement and Bridge Loan, as discussed in Note 1. On June 27, 2019, the Company used the proceeds of the sale of Videotel to repay in full the then-outstanding balance of $21,375 under the 2018 Term Loan and to repay $13,000 of the then-outstanding balance under the 2018 Revolver. Under the terms of the consent, the 2018 Revolver will remain at $20,000 through the term of the Credit Agreement. On October 30, 2021, the entire principal balance of any outstanding loans under the 2018 Revolver will be due and payable, together with all accrued and unpaid interest, fees and any other amounts due and payable under the 2018 Credit Agreement. As of March 31, 2020, no amounts were outstanding under the 2018 Revolver.