KVH Industries Inc (KVHI) 2012 Q3 法說會逐字稿

Good day, everyone, and welcome to today's KVH Industries Q3 2012 earnings announcement conference call. Today's conference is being recorded.

At this time for opening remarks and introductions, it's my pleasure to turn the conference over to your host for today's call, Mr. Patrick Spratt, Chief Financial Officer. Please go ahead.

Good morning. I am Pat Spratt, and with me is Martin Kits van Heyningen, Chief Executive Officer; and Peter Rendall, Chief Financial Officer. This call will address the third-quarter earnings release that we issued earlier today. Copies of the release are available on our website and also from our Investor Relations department.

This call is being simulcast on the Internet and will be archived on our website for future reference. If you are listening via the web, feel free to submit questions to IR at KVH.com, and we will answer them following this call.

This conference call will contain certain forward-looking statements that involve risks and uncertainty. For example, statements regarding financial and product development goals are forward-looking. The Company's future results may differ materially from the projections described in today's discussion. Factors that might cause these differences include, but are not limited to, those mentioned in today's call and risk factors described in our Quarterly Report on Form 10-Q filed with the SEC on August 8, 2012. The Company's SEC filings are directly available from us, from the SEC, or from our Investor Information section of our website.

Now I will turn it over to Martin for today's discussion. Martin?

Thanks, Pat, and thank you all for joining us today. I'm pleased to report that KVH achieved record results during the third quarter. Revenues of $38.8 million were 52% from the -- above the same period last year, and 21% higher than the previous record quarter. This exceeded the high end of our previous guidance by almost $2 million. We reported EPS for the quarter of $0.12 per share, which was in line with our guidance.

Our strong revenue growth during the quarter was a result of several factors. We continue to sell successfully to the global VSAT market; we began to ship our TACNAV navigation systems and build management services under the Saudi Arabia National Guard contract; and we also saw an uptick in new orders for our fiber-optic gyros, both from our remote weapons station customers and from new customers.

Regarding our mini-VSAT broadband business, we added many new customers during the quarter, and saw a solid follow-on business from our existing customers, resulted in sales over 250 new TracFone V3 and V7 systems, the majority of which were the higher priced V7 system. Our airtime revenues continue to grow and were $9.5 million for the quarter -- that's up 56% year-over-year -- while our unit sales were up 36% over the third quarter of 2011.

Our leadership position in the maritime VSAT market was reaffirmed in September in a report published by leading satellite market research company, COMSYS, who named KVH as the global market share leader in fielded maritime VSAT systems. We're working hard to solidify our leadership position with regular network upgrades, and the introduction of new innovative products that will position us for future growth, as we continue to expand our global customer base.

Our previously announced expansion of our mini-VSAT broadband network, with three new global C band beams to overlay our Ku-band service, was brought online during the quarter, and is now fully operational. We began shipping our new dual-mode TracFone V11 earlier this month, which makes KVH the only company in the world to offer a global maritime VSAT service with a single 1 meter antenna. The new TracFone V11 can seamlessly switch between C and Ku-band, and represents one of the most ambitious product development efforts we have ever undertaken. This is a truly unique product, and we now have several patent applications pending.

During the third quarter, we also introduced our new TracFone V7 IP system. This groundbreaking product features a new robust 3-Axis antenna mechanism that can track satellites from horizon to horizon, including those directly overhead. In addition, we've combined our Commbox network manager, our antenna control unit, VoIP adaptors, WiFi, and ethernet switches, all into a single 1.1.5U rack mountable enclosure.

We've taken the below-deck GSM service modem and put that inside the antenna. So the result is a dramatically smaller and simplified below-decks equipment package, which, in turn, will simplify the installation, and speed deployment of our new TracFone V7 IP and V11 systems. This end-to-end solution will also extend the functionality of our mini-VSAT broadband service to include onboard networking, and create a delivery vehicle for new value-added services, which we had envisioned when we acquired Virtek in 2010. The CommBox hardware technology is now built into all V7 IPs and all V11s.

From a competitive perspective, KVH continues to pull away from other maritime VSAT competitors while gaining ground on the MSS market leader, Inmarsat. It's interesting to note that in order to be able to provide a reliable service, Inmarsat is marketing their upcoming global express KA band satellite service as a dual antenna solution, that will require both the 1 meter KA band VSAT antenna and a 67 meter L band antenna.

Satellite provider Intelsat, who supplies KVH's C band capacity, as well as some of our Ku-band transponders, is now openly competing with Inmarsat in the mobile broadband markets. From our perspective, access to readily available commercial satellite capacity from Intelsat and others enables us to continue to incrementally add to our network in exactly those regions where we have customer concentrations, offering a very flexible growth path in our business model.

Moving on to our satellite TV business, TracVision revenues were up 17% in the third quarter over the same period in 2011, as the maritime satellite television market continues to show signs of modest improvement. We received a very good reaction from dealers and customers to our new TracVision HD11 global dual band antenna, which accounted for about half of the year-over-year increase in our satellite TV sales this past quarter.

Our premium TracVision HD7 also sold well, and was recognized by the National Marine Electronics Association last month, winning the annual award for the Best Entertainment Product in the maritime industry. This was the 14th year in a row KVH has won this award for our TracVision products. This year, we also won the NMEA's Best Communications Product Award for the TracFone V3 mini-VSAT broadband system.

So, globally, we continue to strengthen our sales network and make inroads in new international markets, especially for our mini-VSAT systems. We've opened a subsidiary office in Japan this quarter, to better service our Japanese customers in conjunction with our partners, SKY Perfect JSAT, Furuno, and Japan Radio Company.

The Japan office will coordinate with our regional headquarters in Singapore to continue to reinforce KVH's commitment to be a recognized supplier to the important Asia-Pacific market. We've already seen some notable sales success, like the recent contract announcement with NYK, and we have a number of other important trials underway in Japan and Singapore.

In South America, our new partners Andisat and Tesacom are starting to win customers, particularly in the commercial fishing markets, and we continue to gain traction in the emerging Brazilian oil and gas market. The TracFone V3 has just been approved by the Brazilian Regulatory Agency, Anatel, so now both the TracFone V3 and the TracFone V7 can be used with the mini-VSAT broadband service anywhere in Brazil and the surrounding waters.

Moving on to our guidance and stabilization business, our TACNAV product revenues were $6.4 million for the third quarter -- that's up more than 200% year-over-year -- as we began to ship the recently announced contract for the Saudi Arabia National Guard. Overall, we recognized just over $7 million of product and service revenue in the third quarter for the Saudi Arabian retrofit contract, of which product revenue was roughly 60%. The non-product portion of the revenue related to project management and building construction milestones for a new installation facility in Saudi.

TACNAV prospects for new business continue to look strong. Earlier this month, we received authorization to start work under the Canadian Army's tactical armored patrol vehicle program. This program could ultimately involve the installation of our TACNAV system between 500 to 600 vehicles. In addition to TACNAV systems, these vehicles will also be equipped with a CROWS system, so this has the potential to be a double win for us. We could end up with our FOGs in the stabilized remote weapons station, and our TACNAV system as the navigation solution on these vehicles.

Turning to KVH's fiber optic Gyro business, our revenues grew to $7.1 million in the third quarter. That's up 34% year-over-year. We continue to enjoy success in remote weapon station applications, which accounted for about 40% of our FOG revenues in the third quarter. One of our RWS customers, Kongsberg, won the $1 billion US Army CROWS III program. The initial award to Kongsberg from the U.S. Army was for up to 3000 systems, plus the additional repair and refit systems. We expect this program to result in substantial FOG sales for KVH.

For applications other than remote weapon stations, our FOG revenues were up 12% for the quarter compared to last year. Feedback from initial customer trials using engineering samples of the upcoming series 1750 IMU have been very positive. And we've received initial orders for several exciting new applications.

Now, these early design wins are what leads to successful production in the future. That's been the pattern with our FOG products historically, and we're hoping this trend will continue in the emerging markets -- some of the emerging markets like autonomous vehicles and robotics.

So, looking forward to the remainder of this year, we're comfortable with our prospects for continued success in each of the strategic areas of our business. For the mobile broadband business, our new TracFone V11 is a breakthrough product, introducing a new global capability. And customers are starting to trial the service on their vessels.

Our TracFone V7 IP will provide another significant advantage by making our maritime VSAT products faster and easier to install than the much larger and complex competitive solutions. The value-added service capabilities enabled by our CommBox ACU represents an interesting new business opportunity for KVH to provide additional service offerings to our existing mini-VSAT customers.

We have a strong pipeline of opportunities, and we're on the verge of concluding some large trials that we hope will lead to substantial fleet orders. For our guidance and stabilization business, we continue to have a strong backlog, and expect to see significant new orders being signed in the coming weeks. Our important relationship with Kongsberg has been solidified, and we believe we'll enjoy growing orders in the CROWS III Program as it goes into production. And lastly, emerging applications suggest promising future growth for our fiber optic Gyro business.

And now, I'll turn the call over to Pat for detailed financial results of Q3. And then he'll hand the baton to Peter to talk about the outlook for Q4. Pat?

Thank you, Martin. The following summarizes our Q3 revenue by business. The total VSAT business was approximately $14.5 million, of which airtime services was about $9.5 million and up 56% year-over-year. Total VSAT products and service revenue increased 38% year-over-year.

ARPU for by-the-megabyte plans continued to be in the $600 to $700 per month range. And fixed rate plan ARPU moved above the $1900 per month level. The mix of VSAT unit sales for the quarter was about in line with prior periods, with about 35% V3 systems and 65% V7. All other marine satcom revenue, including TV systems and Inmarsat systems in airtime, was about $5.8 million. Within that amount, marine satellite TV sales increased 17%, while sales of Inmarsat L band satellite systems declined more than 50% on an ever-shrinking base.

Land satcom and aviation system maintenance services combined was $1.9 million, down 4% year-over-year. TACNAV product revenue was up -- was $6.4 million, and that was up 200% -- over 200% year-over-year. FOG was $7.1 million, up 34%; other guidance and stabilization products and services was $3.2 million compared with only $0.4 million last year. Gross margin was 39.9%. This was a little lower than our expectation.

Even though total revenue was stronger than expected, the mix included a relatively large amount of low-margin service revenue relating to the construction of the vehicle facility in Saudi Arabia. Gross margins for other products and services generally met our expectations. Gross margin for VSAT airtime was approximately 31% for the quarter, and down modestly compared to Q2. This was expected, because this was the first quarter in which we experienced the full impact of C band satellite capacity costs.

For the near-term, we will absorb the full run rate cost impact of the C band network, while only having a nominal level of new C band airtime revenue. So VSAT airtime gross margin will likely move about sideways through the fourth quarter, before resuming an upward trend during the first half of 2013.

Revenue and gross margin for all other services, including nonrecurring engineering, repairs, Inmarsat airtime, and services related to our Saudi Arabia contract, were about $4.8 million and 28%, respectively. Gross margin for these other services was much lower than in the prior few quarters, because of the relatively high content of the facility construction services in Saudi Arabia. These construction services have a gross margin of less than 10%.

Operating expenses were up 15% year-over-year and up 7% sequentially. The increase was largely driven by sales commissions that directly relate to the TACNAV contract with Saudi Arabia. These commissions are in sales and marketing expense, which increased sequentially 15%. Also, on a sequential basis, engineering expense declined 4%, while administrative expense increased 4%.

The reported tax expense was about 46% of pretax income. Taxes are always difficult to forecast, since there can be so many variables and unanticipated discrete events. Based on current visibility, we now expect the full-year rate could be in excess of 50%.

On the balance sheet, cash and marketable securities were $32.9 million. Cash flow from operations was approximately $2.6 million. EBITDA, adjusted for equity compensation expense, was $5.2 million, and EBITDA margin was 13.4%. Depreciation and amortization was $1.17 million, and equity expense was about $880,000 in the quarter.

Accounts Receivable was $28.6 million and days sales outstanding was 66. A large portion of the shipments for the Saudi Arabia order occurred very late in the quarter, thus pushing the DSO figure up a little higher than normal. Inventory increased sequentially to $17.8 million.

Capital expenditures were $0.7 million for the quarter and are now $5.2 million year-to-date. We now expect the CapEx for the full year will be approximately $6 million, a little less than we had previously projected. Backlog for guidance to stabilization products to services at the end of September was $45.8 million, down approximately $11 million because of the large Saudi Arabia shipments.

At this point, I will turn it over to Peter to review our outlook for the full year and the fourth quarter. Peter?

Thank you, Pat. When we last provided guidance in July, we said that we were confident that we would ship a substantial quantity of the TACNAV product for the Saudi Arabian order before year-end, and that we would initiate the facility and program management services for this program.

We had less clarity at that time about how much of this revenue would occur in Q3. Given the substantial amount of revenue that we actually reported in Q3, relating to milestones for the building construction, we now don't expect to record much additional construction or project management service revenue until early 2013. The expected total value of the TACNAV product and service revenue to be recognized for 2012 is in line with our prior guidance assumption, but the Q4 amount could be a little bit less than recorded in Q3.

For our other businesses, and also consistent with prior guidance, we expect the VSAT business to continue to grow at a strong year-over-year pace. We expect FOG product sales will show solid year-over-year growth, with the sales level about equal to the third quarter result. We remain cautious with respect to the leisure markets.

In summary, the total Company profile for the second half of 2012 is coming together as we expected it would. We did a bit better in Q3 on the topline, while EPS was at the midpoint of our guidance. Considering all of these factors, our guidance for the full year is essentially unchanged from what we provided in July, with the exception of the impact of taxes.

We expect that revenue will be in the range of $133 million to $138 million, and that EPS will be in the range of $0.21 to $0.26. The full-year effective tax rate is expected to be 500 basis points or more, higher than we were assuming in July. This change in tax rate reduced our full-year EPS projection by $0.03. On the other hand, our projections for the full-year operating profit and EBITDA are in line with our prior expectations. The resulting profile for fourth-quarter guidance is for revenue in the range of $35.5 million to $40.5 million, and EPS in the range of $0.15 to $0.20.

And in conclusion, our confidence in our strategic growth businesses and operating fundamentals is quite strong.

And now we will take your questions. Operator?

(Operator Instructions). Chris Quilty, Raymond James.

Good morning, gentlemen, congratulations on the results. I wanted to follow-up on the mini-VSAT business and just a clarification. I think last year at this time, you were shipping on average about 250 antenna systems per quarter. If I apply the unit growth rate here, is it fair to assume you were somewhere in the 320 to 350 unit type level?

No. Last year, we were in the 150 to 200 range, and this quarter, we were in the 250 to 300 range. So we had a unit increase year-over-year of about 36% for the quarter.

Okay. And again, the mix there was 35% with the V3 antenna?

That is approximately correct. I didn't give the exact number, but it was mostly V7s. And the mix hasn't really changed. So, that's pretty close to (multiple speakers) --.

(multiple speakers) Yes, I did provide that. 35% -- FOR the quarter, approximately 35% V3. In terms of units, not in terms of revenue dollars.

Got you. And any shift in the type of customer accounts, commercial versus leisure, large shipping fleets versus coastal, of where you're seeing the units go?

No, we haven't really seen any change. It's this quarter basically materialized exactly as we had planned. There was no substantial change in mix or customer trends, so it was a pretty steady quarter.

Q3 is traditionally a little bit of a slow quarter for our commercial business, because all the European vacations and everything. So Q3, the last three or four years, has been kind of a low point for the year. So -- but we took that into account when we gave our guidance and did our internal projections. So, Q3 was up over last year, but below Q2, and hopefully, below Q4.

Okay. And competitively, you've had both VSAT competitors lowering prices and you've had Inmarsat raising prices. Can you give us any sense of where you think you're taking business, either new installations or displacing VSAT or Inmarsat competitors?

Yes, I think the VSAT competitors, we -- you know, to be honest, we see sort of less and less of that. So, we've kind of moved on now and are really focused on what's traditionally been called the MSS market -- you know, the all-band market that Inmarsat's in. And their response has been raising prices for the small customers and lowering prices for the big customers.

So, they've been very aggressive on the high-end in terms of price discounts, and they've been raising prices on the entry-level folks. So, we see that as being an opportunity for us with the V3. And we're seeing good growth in the V3 business, and it is putting competitive pressure on pricing at the high-end.

Okay. In terms of distribution channel, I think you, year-to-date, have signed up a good half-dozen new distributors. Are you seeing some tangible traction with those partners?

We are starting to see that now. It was slow in the first half of the year, and now we are starting to see some good traction with some of the distributors that we signed up, particularly the ISPs that are also selling competitive products.

That was the distribution channel we had avoided in the beginning because of the conflict. And about six months ago, we started opening some of those guys up, really, to see how that would work. And we are starting to see that pay off now.

Right. And I think you mentioned several trials underway that could result in large fleet orders. Are these of the size of NYK and Vroon? Or smaller in nature?

Yes, that's what we call large is sort of 80 to 100 or 200, in that size range is what I call large. So they're in that scale, same as a Vroon or a V.Ships or NYK.

And you think you could get some wins before the end of the year with rollouts beginning sort of middle of next year?

I would hope so. But you know how those programs go. It's -- the decision-making cycle can be torturously long. So even if they lean your way, just getting contracts closed and -- you know, it's difficult to predict the timing of it. So, I would hope it would happen in Q4 but I wouldn't be shocked if it didn't.

Okay. And are any -- do any of those involve the V11 antenna system?

Yes.

(multiple speakers) Okay. So these would, I suppose, I guess they would be larger vessels, larger in size?

Exactly. So the V11, just to recap on that, we've got some trials underway. We shipped a product a little bit later than we wanted. We're hoping to get it out in -- at the end of September. It ended up being in the first week of October. But some of those units now are being installed and doing trials, so we're optimistic that that's going to lead to some good future business.

Great. Shifting gears on the (multiple speakers) --

Chris, if I may interrupt, I just want to add a little color on the VSAT unit shipments. Last year, you were correct in assuming in 2011 that we averaged between 200 and 250 units per quarter. It happened to be that in the third quarter, it was lower than that. And as you know, the trend-line for our VSAT sales is strongly up over time. However, every quarter is not -- you know, there's a bit of unevenness to it quarter-to-quarter.

So, in Martin's answer, he was specifically referring to the third quarter of last year in terms of the number that you should use as the baseline for Q3 2011. Okay?

Got you. Fair enough. And if I recall, wasn't the year-ago, the prior Q2 when you began shipping the V3?

Correct.

That caused some timing issues.

Which was a very strong quarter for unit shipments in Q2 of last year, yes.

Right. I'll ask one more and move on, just on the FOG-related business and specifically remote weapon stations. Now that Kongsberg has been awarded the contract, what does the timing of orders look like for you? And given the size of the contract they were awarded and the backlog in place, where does the steady-state move if you're doing 1 million to 1.5 million a quarter of RWS-related revenues? Clearly, it's not going back to the $7 million to $8 million type of surge revenues you saw in years past. But is there a steady-state somewhere in between you might be able to target?

Well, we don't really have visibility into that yet. I can say that Q4 is looking larger than Q3, and we have basically everything in backlog already for Q4 that's in our guidance. So we've seen an acceleration, but at this point, we don't have any [gross three] visibility for 2012 yet, so.

Okay. Fair enough. (multiple speakers)

Sorry, 2013. Sorry. I meant to say we don't have visibility for 2013 for Q4; it's all in backlog.

Okay. So we should -- we'll have to wait for a specific order from Kongsberg in order to judge this (multiple speakers) --?

Right. Yes, because their contract was an IDIQ type contract, so they'll just get POs and draw down similar to the way they've been operating for the last four years. So, and that typically, we don't get three to six months visibility at a time, based on just steady factory run rates.

So much for efficient level production for the government, yes?

Right.

Okay. Chris, I assume with the pause that you've completed your questions. Jason, could you move on to the next questioner, please?

Rich Valera, Needham & Company.

Just a follow-up first on the FOG business. First, Pat, I wanted to clarify you said you thought that would be flat quarter-over-quarter in Q4? Is that correct?

Peter actually said that. (multiple speakers)

Sorry, Peter. That's right.

Our current expectation is that it will be up nicely year-over-year, but probably roughly flat to maybe slightly up in the fourth quarter, compared to the third quarter of this year.

Right. And then I understand you don't have a lot of CROWS III visibility into next year, but are you willing to say anything about your non-CROWS business next year, how you think that might trend, given some of your new product initiatives? And I don't know if you'd be willing to give us kind of a FOG number -- sorry, a CROWS number for 2012, sort of an actual at this point?

I'll let Pat or Peter talk about the actual number for 2012, but (multiple speakers) --

(multiple speakers) I can do that.

-- in terms of next year visibility, we do have a number of new products, the DSP 1750 is getting designed into some new applications, so that should help. We have this new IMU, which we announced and we expect to start shipping in Q4. That's 3-Axis fiber optic Gyro and 3-Axis MEMS accelerometers, and a very small package with a flexible digital output. So, we're excited about that product. So we see the trend for commercial applications for that growing very nicely next year.

And just to give you a sense, Rich, of the CROWS Program shipments this year -- year-to-date through the third quarter, it's now at about $6 million, just a shade under $6 million. We had averaged $1.5 million a quarter in the first two quarters. And then it actually bumped up in the third quarter to close to $3 million.

And we -- right now, we essentially have a good picture of the fourth quarter. We would expect the fourth quarter to be more or less in line with what we did in the third quarter. So, probably in the $2 million to $3 million range. So that would put the full year at around $8 million to $9 million for the year -- a bit higher than our original expectation when we started the year.

No, that's helpful. Very good. And with respect to TACNAV, certainly some encouraging commentary there around the Canadian opportunity; I guess, that applies to both TACNAV and CROWS there. Can you give us any other color on your near-term pipeline for TACNAV and/or CROWS? It sounded like in some of your other remarks that you expect that there could be some relatively near-term orders in either or both of those in the guidance stabilization. So just any color in terms of timing or other opportunities out there in your pipeline would be appreciated. Thanks.

Yes, and just in terms of timing, some of those are actually very short-term, so we're expecting contracts in the next few weeks as opposed to months or years, you know, which for a military program is unusual. So that's good.

As far as looking out into next year, we're going to carry a fairly significant backlog into next year. So, overall, we should see strong TACNAV next year as well. It will be a mix of programs, some of which we've got in backlog now; some of which will be new programs; and some of which are kind of baseline business from contracts that we signed a year ago that are now getting into production. So we see the TACNAV business being fairly predictable now in the sense that they're multi-year programs, and we're getting enough of them together that it's starting to be a little bit less volatile than it has been in the past.

I know this is looking out quite a ways, but I guess one possible concern would be that there might be somewhat of a letdown in that TACNAV business post the Saudi -- fulfillment of the Saudi order. Anything you can say on that? I know it's a long way out, but just in terms of other things in the pipeline that might sort of backfill, as that gets delivered.

Yes. We do have some of the programs that are in the pipeline, we think could be comparable to what we have now, with the exception of the facility business, which we don't expect to recur. And that was really just an enabling contract feature that we agreed to do to help them get these -- get this program underway. But we don't envision that part recurring.

But that's kind of a low margin thing anyway. So -- but as far as unit sales, we do see additional TACNAV programs, some of which is in the Middle East, some of which is elsewhere, that, taken together, should allow us to continue the TACNAV business after this Saudi LAV retro program winds up.

Great. And could you just refresh my memory, how much revenue did you get from the service portion of the Saudi program this quarter?

I have that. Let me --

On the order of $2 million, I think.

Yes.

A little over $2 million.

Yes. (multiple speakers)

And you didn't expect much more of that in the fourth, is that correct?

Correct. And we actually, in our original projection, we had thought that most of that revenue that we recognized in the third quarter would have actually been in the fourth quarter. So, it was just a switch more or less between quarters.

Great. And just with respect to tax rate, I know it's tough to predict, but since we're all modeling next-year numbers, I'm wondering if we should assume maybe a somewhat higher tax rate than we've historically assumed here, given whatever dynamics you recently experienced here. And any thoughts at all on sort of a normalized future tax rate?

So, this is Peter speaking. Yes, so, we definitely think that the tax rate is going to be higher than what we've experienced in the past. Probably more of the order of magnitude that we're seeing and projecting for the full year.

So a 50-percent-ish type of tax rate?

Hopefully, it will come in below that. But again, the one-time events and our regional business close would dictate that.

Part of that -- you know, there's some discreet -- just to put some color around it, things like the R&D tax credit, that hasn't been approved yet for this year. If that does happen, that would have a big impact on our taxes this year, and of course, next year as well. So, it's a little difficult to forecast what we don't know what the tax situation is going to be for items like that. That would take a fairly significant percentage off our tax rate.

Sure. Just one final one from me. Just could you restate what your guidance and stabilization backlog was at the end of the quarter?

It was approximately $46 million. I have the exact number if you want it.

$46 million is close enough. Okay. (multiple speakers)

$45.8 million.

Got you. Okay. Thanks very much.

Yes.

And at this time, we have no further questions from the phones.

Okay. Well, if anybody wants to dial in, we'll give a few more seconds here. Otherwise you can reach us afterwards or you can email questions, as Pat mentioned, to IR at KVH.com.

Pat's going to be continuing on as a consultant here for the next six months or so. And in the meantime, Peter is taking over as CFO. We all thank Pat for doing a great job. And Peter's got difficult shoes to fill, especially coming off a record quarter. So, we thank Pat. And we will talk to you all next time. And feel free to contact us directly by phone after this call. Thank you.

This does conclude today's conference. Thank you for your participation.