KVH's maritime VSAT and television antennas continues to be a valuable component of our portfolio. However, the changing product mix driven by new LEO services does not warrant the continuing operation of a dedicated manufacturing facility. We are in the midst of buying components to complete our final build plan. All component purchases and a substantial portion of the VSAT and TVRO terminals will be completed by the end of June, at which time we will significantly reduce the number of employees in the facility. The remaining reduced staff will focus on repairs, refurbishments and will continue to slowly build antennas for the remainder of this year and next year. We will have sufficient TracNet and TracVision terminals to meet anticipated demand through 2025 and possibly a portion of 2026.

We anticipate that our reorganization efforts will result in annualized savings of approximately $9 million with the initial benefits being realized in the third quarter of this year. New additions to our product and service portfolio are generating significant interest. During the first quarter, we introduced CommBox Edge, an advanced network and bandwidth management solutions. As fleet managers and yacht owners begin to add new communication systems, such as LEO and 5G cellular to their existing VSAT systems, we expect that the ability to manage those channels will become increasingly vital. Our CommBox Edge service offering delivers those capabilities affordably and securely using the CommBox Edge 6 and CommBox Edge 2 below decks units and powerful cloud-based tools.

CommBox Edge also augments the tools available from other services. For example, CommBox Edge expands the reporting for Starlink daily usage and adds management tools not currently available from Starlink. We are very excited about the enthusiastic response to these tools and their modern mobile-friendly user interface received from our customers. The fastest growing addition to our portfolio is Starlink. Demand remained strong. In fact, we almost doubled our strong Starlink terminal shipments compared to Q4 of last year just under half of those systems have been activated. So we will see airtime subscriptions from Starlink and the Companion KVH OneCare service fees begin to contribute in Q2. Offering Starlink also lets us engage with new customers who have never worked with KVH and retain existing customers who might have otherwise left as they shift their primary communications away from VSAT to this new low earth orbit service.

At the same time, we are making excellent progress integrating OneWeb's global service into our multi-orbit multi-channel network strategy. We expect to launch the service by the end of the second quarter. We have commenced presales sales efforts and which are resulting in a robust opportunity pipeline. Subscriber growth through Starlink, OneWeb, CommBox Edge and other value-added services are key to our future success, where we once measured our progress based on the number of terminals we shipped, airtime and service subscriptions now represent the bulk of our revenue. With that in mind, we are changing how we calculate reported active subscribers. Previously, we reported the number of VSAT terminals as our subscriber count. That worked fine when we were only shipping these tech systems.

An aerial view of lone workers in the wilderness being tracked by a modern satellite communication system.

However, our evolution to a multi-orbit, multi-channel model means more vessels are turned to KVH for more than one satellite-based communications terminal. As a result, we are now using a more straightforward approach and report on the total number of subscribing vessels. We believe this is representative of the changes in the market and our business while providing more clarity on the number of subscribers. Based on our previous reporting method, we ended Q4 of 2023 with roughly 6900 subscribers. Based on this new reporting method, we ended 2023 with 6700 subscribing vessels and 6600 vessels at the end of the first quarter. We believe that our accelerating Starlink activations, the addition of OneWeb and CommBox Edge deployments will spur new subscriber growth beginning in the third quarter.

The reality of our industry is that GEO-only subscriptions are contracting, while GEO/LEO hybrid solutions are becoming more popular. The planned acquisition of Intelsat by SES is an illustration and the pressure on the GEO market. Intelsat is our Ku GEO partner and at this time we do not anticipate any disruptions to our service or changes to our arrangement with Intelsat. We are on our way to achieving strategic and operational goal. We have a plan to resume the growth of our subscriber base, airtime revenue, value-added service subscriptions in the second half of this year. While we are facing some turbulence during this transition, I believe we're on the right path and will emerge as a financially sound growing world-class solutions provider built on global airtime and superior service and support. Now I'd like to hand it back to our CFO Anthony Pike for a look at the numbers.

Anthony Pike: Thank you, Brent. As a reminder, I would like to note that similar to our call for Q4 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 that either elaborates on or clarifies the published data. So with respect to our first quarter financial results, airtime gross margin, which is not reported in our earnings release was 41.8%, essentially flat compared to prior year gross margin of 42.0%. As noted during prior calls, we do expect airtime margins compressed slightly, as LEO services become a larger percentage of our total airtime revenue. As Brent noted, total subscribing vessels at the end of Q1 were just over 6600, which is approximately 4% down from Q1 of last year.

Compared to year end 2023, total vessels were lower by approximately 2%. Reported Q1 product gross profit of negative $1.1 million including $9.4 million of employee severance charges related to the reorganization and manufacturing wind down. Excluding the manufacturing restructuring charges product gross profit was a negative $9.7 million, as compared to a positive $9.1 million in Q1 of last year. Once we have completed our manufacturing wind-down initiatives and to build sufficient inventory levels to satisfy demand for the foreseeable future, we expect product gross profit to return to positive territory. The Q1 operating expenses of $13.7 million include $1.7 million of employee severance charges relating to the restructuring initiatives and manufacturing wind down announced on February 13.

Overall, we expect to incur further employee severance charges of $1.1 million in Q2 for these changes will generate $9.1 million of annualized savings in employee costs. Around $3.7 million of this will benefit product gross profit and around $5.4 million will reduce operating expenses. Our adjusted EBITDA for the quarter was a positive $2.0 million and our earnings release has the usual reconciliation of that. Capital expenditures for the quarter were $2.3 million. And so adjusted EBITDA less CapEx was negative by about $9.3 million. This compares to a positive $1.6 million in Q1 of the prior year with adjusted EBITDA of $3.7 million less capital expenditures of $2.1 million. Our ending cash balance of $66.6 million was down approximately $3 million from the beginning of the quarter.

This was mostly driven by an increase in our working capital with reduced payables to our satellite bandwidth providers. In light of the intensifying competition that we are seeing from lower cost LEO satellite service providers, customers are reducing that level of GEO services. In consideration of this industry transition and the specific risk factor described below, we are reducing our expectations for revenue and adjusted EBITDA in 2024. At this time, we expect that our 2024 revenue will be in the range of approximately $117 million to $127 million and that our 2024 adjusted EBITDA will be in the range of approximately $6 million to $12 million. A key driver of this reduction is an acceleration of the previously disclosed transition by one of our largest customers the US Coast Guard and its primary satellite service relationship to Starshield.

As a result of the accelerated transition, the decline in revenue from this customer will occur earlier than originally anticipated. Reducing the aggregate amount of revenue we expect to receive in 2024. Investors should appreciate that in light of the uncertainty caused by the broad industry transition currently underway there is an increased risk of variability between our forecasted and future actual financial results. As the year progresses, we may announce further revisions to this guidance. This concludes our prepared remarks and I will now turn the call over to the operator to open the line for the Q&A portion of this afternoon's call. Operator?

Operator: Thank you. [Operator Instructions] Our first question comes from the line of Chris Quilty from Quilty Space.

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