Comtech Telecommunications Corp (CMTL) 2004 Q2 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the Comtech Telecommunications Corporation second-quarter fiscal-year 2004 earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. (OPERATOR INSTRUCTIONS) As a reminder, this conference is being recorded on Wednesday, March 10, 2004. I would now like to turn the conference over to Ms. Stephanie Palmer (ph) of Comtech Telecommunications. Please go ahead, ma'am.

Thank you and good morning. Welcome to the Comtech Telecommunications Corp. conference call for the second quarter of fiscal 2004. With us on the call this morning are Fred Kornberg, President and Chief Executive Officer of Comtech, and Robert Rouse, Chief Financial Officer.

A news release on the company's results was issued earlier this morning. If you have not received a copy, please call me and I will be happy to send you one. Before we proceed I need to remind you of the company's Safe Harbor language in the following way. Certain information presented in this call will include, but not be limited to, information relating to the future performance and financial condition of the company. The plans and objectives of the company's management and the company's assumptions regarding such performance and plans are forward-looking in nature and involve certain significant risks and uncertainties. Actual results could differ materially from such forward-looking information. Any forward-looking statements are qualified in their entirety by cautionary statement contained in the company's Securities and Exchange Commission filings.

With that, I am pleased to introduce the president of Comtech, Fred Kornberg. Fred.

Thank you, Stephanie. Good morning everyone. Thank you for joining us today. This morning, we will be discussing our results for the second quarter of fiscal 2004, another outstanding quarter for company. Our sales increased over the prior period by 34 percent to a record of $56.8 million. Diluted earnings per share increased to 34 cents from 16 cents for the second quarter of fiscal 2003, and this significant increase of EPS was achieved despite a more than 30 percent increase in the number of weighted shares outstanding.

We are pleased with our performance so far in fiscal 2004 and are confident it will be another record-breaking year. In addition to the strong performance in Q2, we are equally pleased about our convertible Senior Notes offering WHICH closed in late January. The offering leaves us with nearly 150 million in cash to pursue strategic acquisitions, with a modest 2 percent interest cost on the Notes.

At this point, let me introduce Rob Rouse, our CFO, who will review our operating results for the second quarter of fiscal 2004 in more detail. After that, I will discuss recent developments, provide guidance for the remainder of fiscal 2004, and then take your questions. Rob.

Thanks, Fred, and good morning to all of you. As Fred mentioned, Q2 of fiscal 2004 was yet another strong quarter for Comtech. Let's review some of the key income statement trends for the quarter ended January 31st, 2004. Sales were a record $56.8 million, and the 34 percent increase over the prior year period was virtually all organic growth.

Strong sales of over-the-horizon microwave and satellite earth station products in our telecommunications transmission segment, combined with a substantial increase in sales in our mobile data communications segment, were the primary drivers behind the revenue growth. These increases were offset by a decrease in sales in our RF microwave amplifier segment due to softness in our aviation and instrumentation product lines.

Second quarter sales broken out by segment were as follows; 59.3 percent telecommunications transmission, 32.3 percent mobile data communications, and 8.4 percent RF microwave amplifiers. Of the Q2 sales, 43.8 percent were to international end-users, 42.9 percent were to the U.S. government or prime contractors of the U.S. government, and 13.3 percent were to domestic commercial customers.

Gross profit was $20.6 million for the second quarter of fiscal 2004, versus $13.5 million for the second quarter of fiscal 2003. The higher gross profit was primarily the result of the significant increase in sales. Gross margin as a percentage of sales was 36.3 percent in Q2 of fiscal 2004, as compared to 32 percent in Q2 of fiscal 2003. The increase in the gross margin percentage was primarily due to increased sales of high-margin satellite earth station products and the greater operating efficiencies associated with the increase in overall sales.

SG&A expenses increased from $6.4 million in the second quarter of fiscal 2003 to $8.8 million in the second quarter of fiscal 2004. The increase was attributable to higher expenses related to the significant increase in sales and profitability during the fiscal 2004 period, as well as increased compliance costs in connection with recent corporate governance regulations. SG&A expenses as a percentage of sales were 15.5 percent in Q2 of fiscal 2004, versus 15.1 percent in the prior-year period.

R&D spending increased to $3.7 million during the second quarter of fiscal 2004 from $3.3 million during the same period in 2003. We expect R&D to continue to ramp up during the remainder of fiscal 2004.

Our operating income for the three months ended January 31, 2004, was $7.6 million compared to $3.3 million in the prior-year period. The increase was driven by substantial increases in profitability in our telecommunications transmission and mobile data communications segments, as a result of the increase in sales.

Interest expense decreased to 51,000 from 686,000 as a result of the repayment of our then-outstanding debt in July 2003. Interest expense will increase in future quarters as our convertible Senior Notes will be outstanding for the full period. Interest income increased slightly in Q2 of fiscal 2004 as a result of an increase in available cash balances. We also expect interest income to increase in future quarters until the proceeds from the Notes offering are deployed.

The effective tax rate of 32 percent in both periods reflects the continuing benefit of research and experimentation tax credits, as well as tax benefits associated with our international sales.

Net income for the second quarter of fiscal 2004 was $5.2 million or 34 cents per share, compared to $1.9 million or 16 cents per share for the second quarter of fiscal 2003. The higher diluted shares outstanding for the second quarter of fiscal 2004 reflect the 2.1 million shares issued in our July 2003 private placement, as well as the impact of our increased stock price on the calculation of incremental stock option shares.

EBITDA, or earnings before interest, income taxes, depreciation, and amortization, was $9.2 million in the second quarter of fiscal 2004, versus $4.9 million in the second quarter of fiscal 2003.

Our backlog as of January 31, 2004, was $97.1 million compared to $87.9 million last year and $99 million as of October 31, 2003. Our balance sheet as of January 31, 2004, remained strong, and we increased our deployable cash to $148.2 million in connection with the convertible Notes offering. In so doing, were able to fix the interest rate on acquisition debt at a very modest 2 percent. And as you will hear later from Fred, our guidance incorporates the dilution from the offering and therefore largely already includes the financing costs associated with future acquisitions.

Our accounts receivable increased during the second quarter of fiscal 2004 by $13.4 million. The increase is the result of an increase in billed receivables due to the greater than anticipated Q2 sales, particularly in our mobile data communications segment. In addition, as we talked about during our last conference call, unbilled receivables increased in connection with work being performed on our long-term contracts, including the MTS contract and including a large over-the-horizon microwave contract. Receivables related to large contracts can fluctuate significantly from quarter to quarter, and we expect this trend to reverse by the end of fiscal 2004.

All in all, the second quarter of fiscal 2004 was another strong showing for Comtech. Now back to Fred.

Thanks, Rob. First, I would like to review recent developments in our three business segments and then provide guidance for the balance of fiscal 2004. Once again, our telecommunications transmission segment performed remarkably well. Our leadership positions in satellite earth station equipment and over-the-horizon microwave systems continued leading the way in making fiscal 2004 another record year.

During our last conference call, we mentioned that we had experienced an extremely strong level of bookings in Q1 for our satellite earth station products. We also noted that our previous earnings guidance assumed a more modest level of satellite earth station equipment bookings for the remainder of the year. So far, bookings in recent months have been in line with those expectations.

Where bookings will trend for the balance of the year continues to be difficult to predict. However, we are confident that if the economy continues to improve, our industry-leading products, including the Next Generation of our Turbo Product Coding in our satellite modems will allow us to continue to maintain and grow marketshare in this segment.

We also had another strong quarter in our forward-error correction and data compression products and further established ourselves as a leader in the forward-error correction area. We also are continually seeking further growth in this area by searching for new applications and markets for our patented technology.

Turning to our over-the-horizon microwave product line, the two large international contracts we booked in fiscal 2003 have contributed significant revenues and profits during the first half of fiscal 2004. As we mentioned during our last call, the contribution of such contracts to our operating results is expected to slow during the second half of the year.

However, we have a number of international defense and oil and gas opportunities in the pipeline, some of which are substantial in size. Although it is difficult to predict when the ultimate award of a contract, particularly in the international arena, will occur, we are optimistic that at least one large over-the-horizon microwave contract will be booked before the end of this fiscal year.

On the government side in our telecom segment, we're leveraging the successful demonstration in Q1 of our ability to significantly improve the data throughput performance of the U.S. military's over-the-horizon microwave terminals. We're also continuing to pursue other opportunities to upgrade and potentially replace the government's current inventory of terminals.

Activity in this area has increased dramatically during Q2. In fact, earlier this week, we announced our first significant U.S. military order for an over-the-horizon microwave application. This $3.1 million order will provide over-the-horizon capability to four existing line-of-sight systems, with significant follow-on potential for our products to be integrated into approximately 150 terminals in the government's inventory.

Our mobile data communications segment had another record quarter with sales of 18.4 million. The second quarter was favorably impacted by earlier than anticipated U.S. Army orders on our Movement Tracking Systems, or MTS, contracts, which were expected to be booked in the third and fourth quarter of this year. To date, we have received cumulative orders on the MTS contract of approximately 95 million versus the total potential contract value of 418 million.

Estimating MT orders for the remainder of the year continues to be very difficult. MTS funding is now coming from various buckets within the defense budget, both in and outside of the budget line item. In our guidance for the balance of fiscal 2004, we remain conservative and are not assuming that the level of bookings will continue. We will probably continue at the same rate experienced during the first half.

In addition, we continue to participate in the FBCB2 or Blue Force Tracking Program, which is a battlefield command and control project. Our satellite-based technology has enhanced this communications platforms to provide for satellite capability when terrestrial line-of-sight microwave channels are out of communications range. Overall, we are assuming mobile data communications revenues for fiscal 2004 to be in the range of 52 to 55 million, which is a modest increase from our last conference call.

With the scale and reputation we have established in the government market, we do continue to explore various alternatives as to how to enter the commercial market in a balanced way. We are continuing to try to do that without sacrificing profitability in this segment.

In our third segment, our microwave amplifiers, second-quarter sales were impacted by the recent softness in some of our commercial product lines. However, during our last conference call, we noted an increase in bid activity in the segment. And as you have seen from our recent news releases, this activity has translated into very strong bookings in Q2. This strengthening in bookings should translate into increases in sales and profitability in this segment for the second half of fiscal 2004.

In summary, during the second quarter of fiscal 2004, we once again posted strong levels of sales, earnings, and EBITDA. We believe our success is attributable to a disciplined approach to growing our business both organically and through acquisitions. As I mentioned earlier, with acquisitions in mind, we raised $105 million during Q2 at very attractive terms to insure that we have the firepower necessary to continue to implement our growth strategy.

The nearly 150 million of cash we have on hand provides us with much-needed flexibility in structuring and executing potential acquisitions or other strategic investments. As you know, we have been very disciplined in the past about the types of acquisitions we make. You can be assured that the same discipline will not be impacted by the increase in our available cash resources.

As far as guidance for the balance of the year, there continue to be many factors that make the projection of EPS difficult, including the fact that most of our satellite earth station business, which is our largest product line, is typically booked and shipped in the same quarter. The last time we spoke, we estimated that full-year fiscal 2004 diluted earnings per share would be between $1.05 and $1.10. Consistent with our preannouncement two weeks ago, we have raised our guidance for fiscal 2004 by 5 cents, to be between $1.10 and $1.15, compared to 80 cents in fiscal 2003.

Keep in mind that these revised estimates for fiscal 2004 also include the absorption of 4 cents of dilution relating to the convertible Senior Notes offering. This guidance assumes full-year revenues of between 207 and $212 million, compared to $174 million in fiscal 2003.

Some of the key assumptions in this guidance include that our satellite earth station bookings continue at the more modest level of Q2 versus the higher level experienced in Q1; a lower level of revenues relating to existing over-the-horizon microwave contracts during the second half of the year; and no impact of large potential bookings in our over-the-horizon microwave product line. And lastly, a lower level of mobile data communications segment sales during the second half of the year as a result, of the earlier than anticipated strong first-half bookings.

In summary, once again, we are pleased that fiscal 2004 is shaping up to be another record-breaking year. We look forward to the balance of the year and beyond. Thank you very much. At this point, I would just like to mention that an updated investor presentation will be posted to our website at www.Comtechtel.com shortly after this call. Now, we would be happy to take your questions.

(OPERATOR INSTRUCTIONS) Mark Jordan, A.G. Edwards.

Good morning, gentlemen, and by the way congratulations on mobile data. The revenue level of this quarter exceeded all of '02. That is kind of an amazingly event. The question that I have is I think Fred mentioned that in the over-the-horizon arena, he made one statement that a goal was to book another large over-the-horizon sale in the second half; and then proceeded to talk about initiatives that were ongoing with the government relative to adding that capability or the enhanced modem capability into some of the terminals that the government has.

Would that be in addition to that over-the-horizon sales? Or really just there are multiple initiatives going here? Or is your goal just one and that would include something potentially from the government?

I think what we mean is the potential large contract that I mentioned is really outside of the government initiatives that we have had. (multiple speakers) typical international initiatives.

That would be a traditional international one, similar to the two that you're executing on now?

Correct. The government area, obviously, we have mentioned that in the last couple of phone calls, that we have been working in a number of initiatives in that area. We had a successful demonstration in Q1, and this has resulted in some real interest by a number of the Armed Forces areas, which as you saw translated into our first order of $3.1 million from one of the DOD areas.

That is outside of the previous one that we mentioned, which was the Track 170, (ph) which still has about 600 terminals in its inventory. However, I have to caution everybody that funding for government programs remains to be very tricky right now.

Okay. If you were to see follow-through on the 150 units, which again you have the four prototype or demonstration units under contract, do you have a feeling as to how quickly you might see a contract there? And secondly, an idea on how quickly that would be deployed?

I think we can probably surmise that sometime by the end of this fiscal year or maybe into the first quarter of next year, we expect another modest chunk; maybe instead of four terminals maybe like eight terminals. Thereafter, it gets a little cloudy as far as funding is concerned.

Final question if I may, on the RF amplifier area. Again with a large contract you received, when does that contract start to impact the revenue stream? Again you have been running at about 5 million a quarter. With a larger contract like that, does that allow you to scale up your production run rate? And if so, would you go from a sort of $5 million a quarter run rate to 7 or 8? Or any thought, any guidance you could give us on that?

I think what I alluded to is that obviously those bookings will affect the second half in a positive way. I think maybe the best way to answer your question would be that FY '04 sales for that segment will be higher than FY '03.

Okay. Thank you very much.

James McIlree from Unterberg, Towbin.

Rob, can you tell us what the operating cash flow and CAPEX for the quarter was? And what you anticipate CAPEX for the year to be?

The CAPEX for the six months was 2.4 million. We expect it for the year to be somewhere in the, let's say, 4.7 to $5.2 million range for the year.

Operating cash flow?

The cash flow from operations off our cash flow statement was actually a use of cash of around $300,000, which was a function of our buildup in accounts receivable, which as I mentioned was primarily the result of work we are performing on two large long-term contracts.

That shows up in the unbilled receivables, is that correct?

That is correct. We also on the billed receivable side, as Fred mentioned in his comments, did have a significant amount of additional bookings come in during the quarter, much of which was shipped in the last month of the year. So the billed receivables also spiked somewhat, just given the function of the timing of when orders came in.

So, what we expect for the rest of the year on the receivables side is to see that kind of flatten out in Q3. And as some of these larger contract near completion and we start progress billing more upon delivery, we will start to see the receivables normalize to the days outstanding you have seen in the past.

When we look at the backlog over the past couple of quarters, is the decline due to the delivery of the over-the-horizon contracts primarily? Is that what is happening?

Primarily. We get these contracts in large chunks, and you will see us spurt upwards in the backlog; and then kind of a working down until a big contract kind of boosts it up.

So, if we assumed that you hit at least one of these over-the-horizon contracts, then the backlog goes up again; and then we work it down over the whatever time period.

Yes, it will rise dramatically for that period. I should point out that this quarter the book to bill was pretty close to 1; even with record sales and no over-the-horizon microwave contracts.

At one point in time, round about the time that both of those contracts were booked, the 40 million and the 20 million, we had over $60 million in backlog. And obviously they have been contributing, as Fred said, to our results. So even in terms of the rest of our businesses, the backlog has been pretty flat the last three quarters or so, despite the fact that we have had the record revenue.

So it is a very encouraging sign. And as Fred said, we do have a couple of very large international over-the-horizon opportunities out there, in that type of a range. So, that could drive the backlog up considerably upon the booking.

Right. Okay. Lastly, I just want to make sure. I think you answered this, but just to make sure. The $3.1 million over-the-horizon contract that you booked last week, or earlier this week, does not relate to the upgrade of the over-the-horizon terminals that you have talked about in prior conference calls. This is something that is in addition to that. Is that correct?

That is correct.

But is there a chance then that adding the over-the-horizon capabilities to these line-of-sight terminals would obviate the need to do the Track 170? Or do you think they would do both?

I don't think so. This particular terminal is a presently configured line-of-sight microwave terminal that gives them a line-of-sight capability. This new way will incorporate our over-the-horizon microwave into that terminal, and provide this terminal with a dual capability of both terrestrial and over-the-horizon microwave. The Track 170 terminals that we have talked about before are strictly an over-the-horizon microwave terminal. So they really are two different functions.

Okay. Great. Thank you.

Selman Akyol from Stifel, Nicolaus & Co.

Can we get backlog by segment?

Sure. The backlog on the Telcom segment was $47 million; and RF microwave amplifiers, it was 23.3; and mobile datacom was 26.8.

Great. Thank you. Also, Fred, you mentioned a number of 95 million. Was that what you have delivered so far under the contract for MTS?

Yes, that is the total bookings in MTS to date.

Great. On a prior call, you had talked about the miniaturization of the unit.

Yes.

Can you give an update or a status of that?

We have been working for quite some time with the government on miniaturizing our transceiver for extended applications down to an individual, and making the transceiver almost the size of, let's say, a cigarette pack. I think as I mentioned in the last telecon that we supplied about 100 pieces for a data application; and these units are presently being tested in various applications.

We are very very pleased the way things are going in that area. We are working with about three major U.S. primes along with the U.S. government in this area. We expect some good things happening in that area in the near term.

I know it is awful early to look at it, but would you say the opportunity therefore exceeds what you currently have?

I think, if we look at the MTS program, which obviously it's a large number, $418 million, but as I mentioned we have only booked so far only about 95 million for that. I think this new application will be more towards the war fighter, war fighter area, other applications within the DOD. Will it exceed the logistics part? Definitely it will.

Thank you very much.

(OPERATOR INSTRUCTIONS) Raina Smith (ph) from Needham & Co.

Good afternoon. You mentioned that you expect R&D to continue to ramp up over the remainder of the fiscal year. Can you talk about what that is going towards? What you are working on? And just sort of the magnitude of the increase that you are expecting?

We certainly don't want to at this telephone call to really mention what we are working towards. And mind you that is primarily due to that these telephone conference call are open to our competition as well.

Certainly, we are working in all areas. I could say primarily in the satellite area with DF (ph) data. Obviously this small unit in the mobile data communications area continues to get some R&D dollars. So we are really spending R&D dollars across the board.

In terms of magnitude, we would expect for the final two quarters for the amount to average somewhere between, let's say, 4 million a quarter or 4.25 a quarter; somewhere in there.

Great. That is very helpful. As far as the second half of the year, I know your original guidance had been fairly conservative because you had limited visibility as far as timing of several different opportunities. Now that we've gone through a couple quarters, and seen some nice upside in the first two quarters, and you mentioned a couple of areas where you could see some things developing, on the margin, do you have any increased visibility into upside for the second half? Can you talk about that a little bit?

I think, as I mentioned in my closing remarks there, when I gave the guidance, some of the key assumptions. Let me just repeat it again. I kind of mentioned that the satellite earth station bookings were at a more modest level. Obviously should that increase due to the economy, we would see some upside to that.

Our lower level of revenues relating to over-the-horizon microwave contract, that is because those two contracts are just being worked down. Now, should we book that potential over-the-horizon microwave product line more in the near term than far term, we certainly feel it is going to be in this fiscal year; that could also have an upside potential for the second half. But large contracts tend to require some real preparatory work before some sales can be had. So, that kind of depends upon exactly when that will come in.

The mobile data communications area, I think we were very surprised in booking an excessive amount of what the planned bookings were in our first two quarters, rather than what was expected to really fall into the third and fourth quarter. That does not necessarily mean that new monies will not be found. As I mentioned, now the monies for the MTS and FBCB2 programs, because of the success they have had in Iraq and in the Mideast, have really gotten some tremendous interest. And more than just in the line budget items are being affected here. So, it wouldn't surprise us if some more money came out of some pockets that we don't expect at the moment.

So all those combined could really affect the second half, but we have decided to go on a conservative basis and pretty well continue to predict what we predicted in the prior quarter.

Okay. I guess what I was getting at was that you had mentioned some of these before, but in particular the U.S. government over-the-horizon and some of the upside that you're seeing in MTS, sound like they're new. Or at least new compared to what you had discussed before. So, I am wondering. It just seems like the second half has more potential; understanding that timing is still fairly uncertain, but also we are closer to the second half.

Just to keep in mind also, we did raise our guidance by the five cents. And as Fred mentioned, there is 4 cents worth of dilution related to our net interest expense that is also in those numbers. So since the last call we did raise the guidance by 9 cents to effectively, as Fred said, to assume that the mobile datacom revenues would be 2 to $5 million higher, as well as a few other miscellaneous items.

So, I think as Fred said, we are trying to really view the rest of the year based on what we feel pretty comfortable is out there. As Fred said, an over-the-horizon microwave engagement could come in that requires to be worked on immediately. But we're just not going to assume that at this point. Because even if it came in, it may drift into the first quarter of '05. So, the 9-cent increase in the guidance, in the core operating income guidance, I think reflects some of those things coming to fruition.

Okay. Maybe a little bit more specifically, you mentioned that there were a couple potential contracts in the pipeline for foreign over-the-horizon. And that those might come in in 2005, or bookings could come later this fiscal year. In terms of magnitude, would that likely be similar to what you are expecting? If it came in fiscal '05, would it likely just replace the level of revenue that you're seeing from those two large orders for over-the-horizon in fiscal 2004? Or could it potentially be larger than that?

I think the best we can really tell you, it is very difficult to predict exactly when those contracts come in. We have a lot in the pipeline. I think we are confident that at least one of them of a significant magnitude will come in before this fiscal year ends. We certainly hope fiscal 2005 will have at least another one or two of those as well.

Okay. Can you talk a little bit about the potential timing of the Track 170 and where funding from that comes from?

That is part of the problem that we have alluded to. We have had a successful demonstration. We believe the Armed Forces are extremely interested, and funding continues to be very very tricky. Will it happen before fiscal year-end, 2004 end? Or will it flow into 2005? Very very difficult for us to predict. It is being addressed by the various arms of the DOD, but we really can't predict at this point.

Okay. I appreciate your help.

James McIlree, Unterberg, Towbin.

Thank you. Fred, a couple of times you have referred to these potential over-the-horizon contracts as either large or significant. Can you just frame that? Is large greater than 5 million or is it greater than 10 million? Just some sort of -- what is large in your vocabulary?

I think large probably may be -- it may be a wide range that I am going to give you, but it will be let's say larger than 20 and less than 100.

Okay. That's fair. Maybe I am nitpicking here, but the mobile data business was up, I don't know, 2 million and change quarter-to-quarter. But the operating income was flattish. What is going on there? I thought you had a lot of fixed costs, and so you should drop a lot of that incremental revenue to the operating line. Is there something else going on?

Some of it was product mix. As we said I think during our last call, the MTS contract is actually currently at a lower margin than the warfighter opportunity. So, as Fred mentioned, the Delta in terms of the bookings level was primarily MTS. So, that is going to drive the blended margin down a little bit. So it's a mix between the warfighter and the logistics pieces of their revenue base.

Great. Thank you.

Selman Akyol.

In terms of just sort of the OTH opportunities out there, you currently have the 3.1 million; and that was for four units. What kind of delivery time frame are you looking at on those?

Those four units will probably be somewhere between the fourth quarter this year and the first quarter of next year.

Okay. The only near-term visibility you have is potentially another eight terminals on that, probably sometime then in fiscal year '05?

That is probably -- we would hope to try to get it into this fiscal year. But if I were to bet, I would be in the first or second quarter of next year.

Okay. Going back to what is large, if we can do this, on the Track 170 with the 600 terminals, would that be something similar to the 150 units that you're getting ready to deliver on, in terms of selling price?

Yes. The answer to that is yes, depending upon what the final result will be. I remind you, here we are supplying a number of products for this integration. Because this particular terminal had no over-the-horizon microwave capability prior to this. The Track 170 is an existing terminal, and there we are starting with just the modem that we demonstrated. It could grow into just the modem; or into the modem and let's say the up-and-down links; or even the modem and the up-and-down links and the antennas and the whole terminal. So, it's got a wide range of possibilities.

Okay. All right. That's it. Thanks.

At this time we have no further questions.

Okay. Thank you very much for your continued interest in Comtech. We certainly look forward to speaking with you again in approximately three months. Thank you very much.

Thank you for participating in today's conference call. You may disconnect at any time.