EchoStar Corporation (SATS) Q1 2020 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by, and welcome to the EchoStar Earnings Conference Call for First Quarter 2020. [Operator Instructions] I would now like to hand the conference over to your speaker for today, Mr. Terry Brown. Sir, you may begin.

Good morning, everybody, and welcome to our earnings call for the first quarter of 2020. I'm joined today by Mike Dugan, our CEO; Dave Rayner, COO and CFO; Pradman Kaul, President of Hughes; Anders Johnson, Chief Strategy Officer and President of EchoStar Satellite Services; and Dean Manson, General Counsel. As usual, we invite media to participate in a listen-only mode on the call and ask that you not identify participants or their firms in your report. We also do not allow audio recording, which we ask that you respect. Let me now turn this over to Dean for the safe harbor disclosure.

Thank you, Terry. All statements we make during this call, other than statements of historical facts constitute forward-looking statements that involve known and unknown risks, uncertainties and other factors that could cause our actual results to be materially different from historical results and from any future results expressed or implied by the forward-looking statements. For a list of those factors and risks, please refer to our annual report on Form 10-K and quarterly report on Form 10-Q filed with the SEC. All cautionary statements we make during the call should be understood as being applicable to any forward-looking statements we make wherever they appear. You should carefully consider the risks described in our reports and should not place any undue reliance on any forward-looking statements. We assume no responsibility for updating any forward-looking statements. I'll now turn the call over to Mike Dugan.

Thanks a lot, Dean. Good day, and thank you for joining our Q1 2020 earnings call. The COVID-19 pandemic has had a significant impact on national economies, financial markets and business and consumer activities. All of us at EchoStar hope that you and your families are safe and healthy. Our operations are considered essential services and have continued uninterrupted. We have undertaken measures to protect the safety and health of our employees, including remote working for many of our employees and limiting access to and enhancing safety protocols at our physical facilities. We recognize the importance of our service and supporting the unprecedented volume of remote working arrangements and enabling personal connectivity while supporting social distancing. I am extremely proud of the way our team has stayed focused on connecting our customers around the world during this extraordinary time. Let me now turn it over to Pradman, who will talk about Hughes, then Anders will follow to discuss EchoStar global progress. And finally, Dave will provide an overview of our financials. Pradman?

Thank you, Mike. I'm pleased with our financial performance during this unprecedented time, and I echo Mike's pride in the entire team for continuing to deliver the connectivity our customers depend on during this pandemic. Hughes' Q1 revenue increased 3% year-over-year despite limited capacity in North America as well as foreign exchange headwinds that impacted our international operations. In the consumer Internet business, we ended Q1 of 2020, with approximately 1.5 million Hughes net subscribers, which includes net adds of approximately 39,000 this quarter. Let me note that to help support U.S. stay-at-home guidelines during the pandemic, we signed on to the FCC's Keeping America Connected pledge, and our subscriber numbers exclude subscribers, whose service would have ordinarily been terminated in the absence of the pledge. Our consumer subscriber base in Latin America is now approximately 267,000. Since the start of the pandemic, traffic at our network has increased dramatically and much of the network is operating at full capacity. We are diligently working to optimize broadband traffic and manage performance to accommodate this increase in network use and to prioritize remote learning and telecommuting for our subscribers. We continue to stay focused on managing churn and providing an outstanding customer experience. Due to our North American capacity constraints, we expect consumer growth primarily driven from our international markets, where we have available capacity. At this time, we have the ability to sell and service all of our domestic and international consumer markets as an essential service, except in Peru, where local regulations prevent sales and installation staff from working due to the pandemic. We continue to make progress on our Jupiter 3 satellite program. In the first quarter of 2020, Space Systems/Loral, the manufacturer of our satellite notified us that due to regulations in Santa Clara County, ordering residents to stay home to slow the spread of the virus, Space Systems/Loral's ability to timely manufacture and deliver the satellite may be delayed due to the occurrence of a force majeure event. Based on this information provided by SSL, we expect the satellite to be launched no earlier than the second half of 2021. The integration of the Hughes Brazil and Yahsat Brazil operations is progressing well. The activation of a new Jupiter gateway system and associated OSS/BSS connections to the Al Yah satellite is almost complete and beams are now operational. The new distribution channel brought by Yahsat is being assimilated into our new organization as planned. Finally, the migration of the existing Yahsat subscribers to the HughesNet platform is expected to be completed soon. We continue to work on closing our joint venture with Bharti Airtel in India. This is still subject to regulatory approvals, which are not expected before late this year. We are continuing our expansion of the Hughes Express Wi-Fi service, which we offer through a partnership with Facebook Connectivity. We now serve more than 1,000 Express WiFi hotspots in Brazil, Colombia, Mexico and Peru. Through the rest of the year, we intend to continue the growth of this service and to expand the coverage to include Ecuador and Chile. Our North American enterprise business got off to a strong start in Q1, which included a significant extension with a long-time customer, OneMain Financial and a large order from the Social Security Administration. Our franchise business, which primarily addresses the gas station and quick-service casual dining market, saw continued bookings in the first quarter from operators of BP, Phillips 66 and Chevron. We have been seeing a lot of activity in that market as retail petroleum customers prepared to accept credit cards with chip technology at the pump by October. Starting in March, a few active retail projects were paused due to COVID-19 and customer personnel preparing their company's infrastructure for work-from-home support and changes in retail operations. We're starting to see some customers reengage on these projects for completion in the second quarter. We've also seen a reduction in activity in the energy sector due to the dramatic drop in oil prices, where we expect our exploration customers to review equipment and networking requirements. Due to the significant reduction in air travel driven by COVID-19 pandemic, there has been a corresponding pause in the deployment of ISP systems in airplanes that is expected to linger until flights resume on fuller schedule. However, we are continuing our engineering activity associated with the next-generation system in support of SES and the SES-17 platform that we announced in the fourth quarter. One immediate impact of the disruption from the virus has been an increase in Internet and our digital media products for employee and customer engagement. As our customers adjust their business practices, they are seeking more efficient ways to stay connected to their employees through communications and training. We've also seen an increase in the SD-WAN for ensuring reliability of networks and supporting the increased user reliance on VoIP and video conferencing. In the international enterprise business, major operators around the world continue to expand their use of the Jupiter system for their own broadband services. This includes Eurona of Spain as well as a new operator in Russia, both of whom are using the Jupiter system to provide maritime mobility services. Hughes India, which was the first in the country to receive licenses for offering maritime and aero broadband services added 2 additional maritime customers during this quarter. Like the domestic market, though, we have seen and expect to see some customers pause activity in light of the virus. Our government and defense business built on its success in 2019 and had a very strong quarter with new orders from General Atomics and the U.S. Coast Guard for satellite systems. Additionally, we have begun implementing new services to expand our long-tenured relationship with the national weather service through our contract with ERT, Inc. providing satellite and wireless services. We continue to address several opportunities under the GSA Enterprise Information Solutions contract with our managed broadband and SD-WAN capability. We are also extremely proud to be providing satellite Internet access to U.S. troops returning from overseas deployment and facing 14-day quarantine. Despite the bankruptcy filed by OneWeb and the financial challenges they face, we still believe that LEO constellations will be an important part of the overall satellite ecosystem. LEOs will bring global coverage and lower latency services while geo satellites will bring density to support growing demand for data. For now, while we wait to see what happens with OneWeb, we have paused work on the gateways and reassigned our engineering staff to other ongoing projects. Our consumer business continues to be very strong, and I'm extremely proud of how we responded during this critical time. Let me now hand it over to Anders.

Thanks, Pradman. Good morning. In Q1 of 2020, ESS continuing operations revenue was $5 million, up slightly from the first quarter of last year. In the first quarter, the COVID-19 pandemic had minimal impact on our commercial FSS business. However, we could see some negative impact on existing or future business due to changing economic conditions and lengthened or delayed sales cycles. On the global S-band front, we have completed construction of our first pair of new satellites for our Echo global subsidiary, which obtained global NGSO spectrum rights. The launch of the satellites have been delayed due to the pandemic. And at this point in time, they have not been rescheduled, although we expect the launches to occur this year. We also continue to make progress in our various development initiatives supporting the EchoStar global mission. We are working with several strategic partners to develop a future system architecture to support high-quality service offerings expected to reduce the cost of satellite delivered IoT services. We foresee emerging opportunities in global mobile satellite vertical markets, including energy, utility, aero UAV, automotive, marine machine-to-machine communications, public protection and disaster relief, health monitoring and other end-to-end services. Regarding our European operation, EchoStar Mobile continues to see strong interest in the Hughes 4500 omnidirectional terminal and its variants, including the 4510 terminal, a hybrid MSS terrestrial version of the 4500 terminal. While the pandemic has temporarily slowed our rollout of these products through our distribution partners, we expect to be back on track within a few months. In the meantime, we are pushing forward with the development of our state-of-the-art service platform as well as plans to run proof-of-concept technologies that will help validate both the EchoStar global mission as well as enable EchoStar Mobile to offer devices that will greatly increase the potential addressable market for its European-focused satellite, M2M and IoT services. Full integration of the S-band satellite services into 5G networks remains our longer-term strategic goal, and we continue to explore ways to integrate our complementary ground component authorizations into these and other developments. I'll now turn it over to Dave.

Thank you, Anders. Good morning, everybody. During my comments, I'll be referencing our adjusted EBITDA measurement. This measurement excludes from EBITDA certain nonrecurring items as well as gains and losses on our investments and unrealized gains and losses on foreign exchange. More details are in the GAAP to non-GAAP reconciliation in our earnings release. We believe that adjusted EBITDA more closely represents our operating efficiency and financial performance. Now with the financial results. Consolidated revenue in the first quarter was $466 million, a growth of 2% over the same period last year, driven primarily by growth in our Hughes segment. Consolidated EBITDA -- I'm sorry, consolidated adjusted EBITDA in the first quarter was $149 million compared to $140 million last year. Our net loss from continuing operations was $58 million in Q1, the loss increasing by $54 million from last year. This change was primarily due to higher net losses on investments of $54 million, which included the write-off of a strategic investment, higher depreciation and amortization of $13 million and higher unrealized losses on foreign currency of $10 million. This was partially offset by lower net income tax expenses of $10 million, higher equity and earnings of $9 million and lower net interest expense of $8 million. Capital expenditures in the quarter were $105 million compared to $112 million last year. The decrease was primarily due to lower spend on construction associated with satellites, partially offset by higher spend on consumer equipment. Free cash flow, defined as adjusted EBITDA minus CapEx, was $44 million during the quarter. Turning to the segments. Hughes' revenue was $458 million, a 3% increase year-over-year despite negative foreign exchange impact of approximately $6 million. The growth was driven primarily by Hughes' consumer service and enterprise hardware sales, partially offset by lower enterprise service. Hughes' adjusted EBITDA in Q1 was $162 million, up slightly to Q1 last year. The margin associated with the higher revenue was offset by higher sales, marketing and G&A expense primarily associated with their growing consumer business in Latin America. ESS revenue in Q1 was $5 million, up slightly to the -- compared to last year. Adjusted EBITDA was $2 million in Q1, also up slightly. Adjusted EBITDA in the corporate and other segments in Q1 was a loss of $16 million compared to a loss of $24 million in Q1 last year. The segment had earnings and equity of affiliates of $4 million compared to losses of $5 million last year. As mentioned last quarter, we made a change to our accounting process on how we report our equity method investments by shifting reporting to a 3-month lag. These favorable impacts were partially offset primarily by the impact of certain real estate that was transferred to DISH in September of 2019 as part of the BSS transaction, which was not treated as discontinued operations. We ended the quarter with $2.4 billion of cash and marketable securities. While we did buy back a small amount of our stock, given the extreme uncertainty of current economic conditions, we felt it was prudent to maximize our liquidity. It affords us the flexibility to explore investment opportunities that could foster growth for organic and inorganic. Finally, I would note that Moody's recently performed a review of HSSC's credit and made no change to the ratings on our bonds. With that, I'll turn it back over to Mike.

Thanks a lot, David. As mentioned in my other comments, I'm extremely proud of our organization in terms of how quickly we were able to adapt to the challenges of the pandemic, the teamwork that's been displayed and the excellent service we continue to provide to both new and existing customers. While the ultimate impact of COVID-19 on our business will depend on future developments that are uncertain and cannot be predicted, the pandemic has made even more evident the worldwide need for connectivity and communications to facilitate the increasing vital global community and workplace. As the global leader in satellite broadband networks and services, we continue to be very well positioned for the challenges from the pandemic as well as new opportunities for future growth. Let me now turn it over to the operator to start the Q&A session.

[Operator Instructions] Your first question comes from the line of Rick Prentiss with Raymond James.

I hope you and your families and employees continue to stay well and go through these crazy times. A couple of questions. I appreciate the breakout of consumer versus enterprise being about 66% consumer, 34% enterprise. As we think about enterprise side, can you kind of list off what your top segments are? I know you've got some in the retail gas side. But just trying to think through what your exposure is to different industries on the enterprise side.

Pradman, you want to take that?

Yes. When we look at our enterprise business, and you've got to look at both North America and [indiscernible]. So if you look at -- we've got an echo coming back. Okay. Can you guys hear me or...

Yes. We're hearing okay here.

Okay. I'm getting a big echo. If it's okay with you, guys, I'll just continue. In North America, our business is -- it's primarily in the [indiscernible]. And you have both technologies which is the VSAT technology being used and also the, what we call, the SD-WAN technologies for improved reliability and availability. The retail is clearly the dominant sector in the United States. When you go outside the U.S., like, let's say, in India, we address a lot of the banking opportunities. Finance is big and also the gas stations. So those kinds of traditional VSAT opportunities are still dominant in countries like India and Brazil. Europe follows closely the U.S. model, is more focused in the retail area. So it's a mixture of the 2, depending on which part of the world we are in.

Okay. And when you say retail, what kind of example customers would that be?

Well, it's like -- traditional retail includes the energy sector, the gas stations, companies like big -- T.J. Maxx. So you have the department stores, et cetera, and then the energy sector, as I mentioned earlier.

Okay. And as we think of the impact of COVID-19, are you noticing any issues with bad debt or collections? I assume the auditors this time around were being very diligent in looking at what kind of reserves you guys have and everybody.

Yes. Obviously, that's something we look at every quarter, and we did pay more attention to it this quarter. The quarter ended in, obviously, March 31. The only customer that I'm specifically aware of that obviously declared bankruptcy was OneWeb in the first quarter. I think we'll see a fallout going forward of greater economic impact. But for the most part, we didn't have a big reserve impact across the broader customer base and it's something we certainly paid attention to. On the consumer side, as Pradman mentioned in his comments, we excluded from our reported subscribers those customers that we would have otherwise disconnected for nonpayment. We also excluded, obviously, from the revenue charges that we continue to make for those customers that we don't expect to collect. I think the uncertainty on the economic environment and the impact to the retail community broadly, as I said, we haven't seen yet, and it's tough to predict what it will look like going forward.

I know you guys don't provide guidance. As we think about -- as you're now into mid-May, how does business change to mid-May?

I'll start with that and then Pradman, maybe you can add some comments on top of it. I mean obviously, we saw some good growth in the first quarter in the consumer business in North America, certainly more growth than what we've seen in the last couple of quarters. We would expect that to slow down just because we simply don't have the capacity available. In South America, we expect continued strong growth in the consumer business. On the enterprise, I think, as Pradman mentioned, we're going to see slowdown from some customers as they're reevaluating things. He mentioned specifically customers in the IFC space. As you know, we don't provide direct IFC but we support some of those customers. And obviously, those guys -- some of those guys are going to struggle a little bit without any planes flying. So we're going to see a slowdown there. But we -- in terms of deployment of new equipment and services, but I think -- and Pradman, you can probably add more to this, we're starting to see customers looking to accelerate installation of new services and a step-up as they evaluate their needs going forward in this new environment.

I think, Dave, you addressed the major points. The consumer business in the first quarter was very strong both domestically and internationally. Going into the second quarter and third quarter, depending on what happens with the pandemic, we'll see what happens, but April was a strong month. So I think we continue in the consumer business to look good. The only limitation there, of course, is the lack of new capacity in the United States. So we are constantly working there to try to improve efficiencies and throughputs by technology improvements, and we'll try to see what happens as the year progresses. In the enterprise business, we have seen a little -- we saw a little slowdown in the beginning of the second quarter. But as we speak, many of these customers that were looking for delays are beginning to reengage. And I think we're optimistic, hopefully, that many of these will convert to contracts on the schedule that they had originally projected.

That's good to see those changes. I guess the last question for me would be on that capacity point. You mentioned the force majeure clause from the manufacturer of the Jupiter 3 rocket, no launch -- no -- launch no earlier than second half '21. How should we monitor that? What do you think as far as the service date that might affect you?

I think that's going to be dependent on, obviously, when the launch date is and the completion of the satellite. We're still being somewhat cautious in terms of predicting things. There's still uncertainty on delivery of subsystems from other vendors outside of Maxar. So -- yes, just given the overall uncertainty of the environment, we're still being relatively cautious.

Your next question comes from the line of Chris Quilty with Quilty Analytics.

Just a follow-up on Rick's earlier question on the timing of the Jupiter launch. If you're looking at the second half of next year, presumably, you need to put in a launch order sometime soon? And are you, in fact, moving towards that decision? And any impact from the recent insurance increases? And along with that, Dave, can you give us an update on your thought on the 2020 CapEx outlook?

Let me address the CapEx, and then I'll ask Anders to address your other questions. CapEx, we're monitoring very closely. And part of that is where we're going to be on the schedule for both Jupiter 3 and the rocket in terms of the CapEx. I do expect some delays in spending from this year to be pushed from 2020 into 2021. We're evaluating all the projects and planning for contingencies. While both Pradman and I have said that things -- cautiously optimistic in terms of the condition of our customer base. But at the same time, we're being prudent, making sure that we're looking at all opportunities to defer our own costs, should we see our customers slowing down things more than we expect. With that, let me ask Anders to address the rocket issue.

Yes. Chris, we've obviously been in discussions with all of the launch providers that are capable of launching a satellite like J3 and are aware and as the J3 mission potentially incurs some schedule slippage, it puts us in an interesting place from a launch vehicle standpoint. Because, as you know, the launch vehicle providers, some of them are evolving their product lines. And by virtue of that, they'll be sunsetting their existing launch vehicles and rolling out new and improved launch vehicles. And all of those evolutionary changes are subject to delays now themselves, some of it as a consequence of the pandemic, but some of it just -- these are complex evolutions, and there's a natural tension on the schedule. So we have current discussions with the launch vehicle providers that would be capable of launching this in the time frames in which we would most likely need them. But we have deferred that decision partially out of prudence because, obviously, as soon as we order a launch vehicle, we're going to have to start making payments on it. So we've deferred that decision until we get some greater specificity as to when the satellite will be completed. As to your question relating to the insurance market, yes, we've been monitoring that very carefully as well. We previously socialized the J3 mission to the insurance community and have been keeping a lot of large markets apprised as to our timing and our needs. But as you know, all the financial markets have incurred some instability. And when we actually go out into the insurance markets will also be a function of the stabilization of some of that. But we won't have insurance needs until the latter part of next year at the earliest. So those decisions and commitments as well we're going to defer as long as possible.

Fair enough. Also, just a question on the enterprise business. I think it was down in the current quarter about $13 million, and it was also down in Q4. What part of the business, the enterprise business specifically, is down? Is that international or North America? And then is it a particular segment? Or are there different factors that impacted Q4 from Q1?

Pradman?

Yes, sure. Yes, generally, historically, we always find Q4 peaks and then Q1 is usually lower than Q4 because we've made all the shipments at the end of the year in Q4. So I don't think there's any dominant piece of our business that changed dramatically. There were slightly lower performance in almost across the board but nothing dramatic.

Okay. And specific to OneWeb, I didn't see any disclosures in the 10-Q relating to potential write-downs. There are a couple of public companies that have taken write-downs. Can you give us an update of where you stand in terms of gateway deliveries on that program and maybe size your exposure from where you sit with WIP or finished products sitting on the floor?

Yes, Chris. I mean in terms of our investment, our investment is now fully impaired from the strategic investment standpoint. Effective with the bankruptcy, we ceased all work on OneWeb. Although we, subsequent to the quarter, did sign a small deal or a small agreement with OneWeb that basically allows us to wrap up some of the development documentation associated with them that was approved by the court, but that's onetime and not certainly ongoing. In terms of the gateway delivery, yes, we've got gateways sitting in the warehouse that we're ready to ship. Those have been primarily paid for in advance. Our overall exposure to OneWeb is relatively minimal, certainly compared to some others that we've seen through the bankruptcy filing. And we do have some exposure to our vendors for a cancellation of certain future orders that were in the pipeline, but we don't expect that to be particularly material. Other than those potential liabilities to the vendors, we think we've recorded everything effectively in Q1 related to OneWeb.

Got you. And was there any impact on your backlog? Or is there potential impact depending on how things go? And just more broadly, I mean, equipment sales were up in Q1. Is it reasonable to assume that both the slowdown in consumer and difficulties with deploying to enterprise customers that we're likely to see negative numbers for at least the next quarter and perhaps more?

So well, first of all, in terms of the backlog. Certainly, at the end of Q1, we did take out all backlog associated with OneWeb. So we've got nothing in the backlog anymore for OneWeb. I'm not sure I understood the second part of your question in terms of the future in terms of delivery. We didn't -- other than, as Pradman said, we're still restricted on how much work we can do for consumers in Peru. We did have some temporary limitations in some other South American countries. But we don't expect that situation to get worse going forward, unless the overall pandemic obviously becomes a worse situation overall on a global basis. So we wouldn't expect, from a consumer standpoint, if that was your question, a slowdown in activity going forward. We think we return to normalize levels, whatever the hell that means anymore. But we saw the surge in North America. We certainly saw a little bit of a surge in South America, but that, to a great extent, was pretty much in line with our plans. In North America, as Pradman mentioned, we're pretty much maxed out on capacity. I would not expect growth in North American subs. Certainly, I wouldn't want you using Q1 North America consumer as the benchmark going forward.

Understand, and final question on the broadband protection program. I forget the name. I mean kudos on that. I would be in a terrible situation if I lost my broadband connectivity in current environment. And clearly, it's a bit unprecedented. So difficult to think about how you're going to migrate going forward once the, I think, June 30 extension happens. But are you seeing a sizable number of folks that could become future churn? And what are your expectations in terms of how you might migrate those customers or extend them on the back end?

Pradman, you want to try and address that. I mean I would say, sort of from a numerical standpoint, Chris, in Q1, obviously, just given the timing of the end of the quarter and everything happening. The number of subs that were in that delinquent mode, as of March 31, were not overly significant. We do expect that naturally to grow going forward. But in terms of saving those customers and avoiding the churn as of June 30, I'll let Pradman try and address that.

Yes. I -- we have provided for, in our estimates that -- as Dave mentioned that, [indiscernible] because we can bill, we have not counted them in our numbers. So when we said we had 39,000 net adds in Q1, it took into account the subscribers that we thought would have normally churned out. So the stuff that's left is, we don't expect it to be very large in the scheme of the 1.5 million subs that we have on -- in service. So I don't expect that number to be very large. The number that we estimate is there is built into our forecast, but not significant.

This is Mike Dugan. I'd like to interject here. First of all, you're asking questions that require a crystal ball and ours is broken because a couple of the times, we've tried to predict for the pledge. We tried to prepare ourselves and say we're going to have potentially higher numbers of subs in the non-PAC configuration. And the truth is it's been less than what we predicted. I think we weren't too good at predicting the huge demand we saw as the pandemic took place. Because a lot of people needed to get a connection for work from home or school from home. And then finally, we said a couple of times we're out of capacity in the U.S. that's not true, okay? There are areas of the country that are highly urbanized, where we've got extremely tight capacity capability to expand. There are large areas of Jupiter 2s coverage that still have significant capacity. And that's where we're focused, from a U.S. standpoint, to add customers. So just to clarify that.

Your final question comes from the line of Giles Thorne with Jefferies.

Just picking up on OneWeb topic. Do you have any interest in NAV assets? Anything in there that you want?

Yes. We're looking at that as well as a lot of other things that are unfortunately starting to develop because of the change in business the pandemic has brought forward. So are there things with OneWeb's overall business? There's things that are very attractive to us. And we -- if somebody ends up acquiring OneWeb assets and then want to reengage that entire service, we know we'll be a big part of that. So it would be unfair to say we don't have any interest because we watch that kind of stuff on a day-to-day basis.

But I don't mean interest in -- yeah, go ahead. Sorry, I'm just hearing my echo come back to me. I thought it was -- anyway, I don't mean an interest in the situation. I mean do you have -- are there any specific assets, be it spectrum, be it, I don't know, satellites, hardware? Anything that you would want to buy?

Well, again, do we have interest? Yes. Are we going to be totally involved in bidding on specific parts of the assets? I don't expect so at this point in time. But again, my crystal ball hasn't worked very well the last couple of months. So...

Well, I don't think you need a crystal ball for this one [indiscernible]

By the way, everybody on the call, we apologize. I understand there's a bad echo, and we don't know where it's coming from. So we're trying to stay muted most of the time.

Okay. I can leave that. Okay. So sticking with OneWeb. There was the March announcement, just prior to bankruptcy, of a distribution agreement. Can you just confirm -- I think I know the answer. But is the fact that OneWeb is going bankrupt, is this a material impairment to any kind of services revenue growth that you were anticipating?

No. Because the distribution agreement was for way out there, I think it's 3 years from now it will start to be effective. So nothing in the next 3 years.

Giles, to be clear, I mean, there was certainly revenue that we expected over the course of this year and into next year for deployment of the remaining gateways. Clearly, we are no longer expecting that with the outcome of the bankruptcy process, whether that becomes reengaged, yet to be seen. But as we sit here today, we certainly do expect an impact to the revenue going forward.

I think, Dave, Giles was talking about the distribution agreement we signed in India.

Yes, that's the one.

Yes, that one wouldn't have come into effect for 3 years.

At this time, I would like to turn the call over to management for any closing remarks.

Yes. Thanks, everybody, for joining today. We're now ready to conclude the call. So everybody, have a great day.

Thank you for participating in today's teleconference. You may now all disconnect.