EchoStar Corporation (SATS) Q3 2022 Earnings Report, Transcript and Summary

Good day and thank you for standing by. Welcome to the EchoStar Corporation’s Conference Call for Third Quarter 2022 Results. [Operator Instructions] Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Terry Brown. Please go ahead.

Thank you. Good morning, everybody and welcome to our earnings call for the third quarter of 2022. I am joined today by Hamid Akhavan, our CEO and President; Pradman Kaul, President of Hughes; Dean Manson, General Counsel and Secretary; and Ali Butt, our Chief Accounting Officer. 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 the call over to Dean for the Safe Harbor disclosure.

Thanks, Terry. All statements we make during this call, other than statements of historical fact, constitute forward-looking statements made pursuant to the Safe Harbor provided by the Private Securities Litigation Reform Act of 1995. These forward-looking statements 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 for the year ended December 31, 2021 filed on February 23 and our subsequent filings made 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. Now I’ll turn the call over to Hamid.

Thank you, Dean, and good day, everyone. As some of you are aware, David Rayner retired as our Chief Operating Officer and Chief Financial Officer in early October. And we would like to thank him for his many contributions and wish him well in the future. An executive search for his replacement is underway, and we will keep you informed on our progress. As for agenda for the call today, first, we will provide a brief overview of financial and operational activity from the third quarter. After that, I will provide an update on our business strategy. And we’ll then move to question-and-answer session. Let’s start with our financials. Our revenue in the third quarter of 2022 was $497 million. That is down $7 million compared to the same period last year, though on a year-to-date basis, we have achieved $11 million of growth. The decline in the third quarter was primarily due to net result of lower U.S. consumer revenues and the negative impact of $4 million from foreign currency exchange which was partially offset by the growth in revenues in our enterprise business. Our adjusted EBITDA in the quarter was $159 million, decreasing 15% from last year, primarily due to the shift in revenue mix from consumer to enterprise, but also increased customer care and material costs, which we hope will be mitigated as inflationary pressures subside. In the third quarter, we saw continued momentum in our enterprise business with $174 million of new orders, that’s up 111% from third quarter last year. Our year-to-date 2022 orders are higher by 64% compared to the same period last year. We remain excited about opportunities within the enterprise market. This is an extremely large addressable market, one that will continue to allow us to better diversify our business, both domestically and internationally, which is a key component of our strategy. Although gross margin in this market segment is lower than our consumer segment, the capital investment in it is minimal and scaling this business unit will amplify its profitability through higher operating leverage. We intend to take the necessary measures regarding our fixed costs in line with the change in revenue mix to preserve our ability to generate cash. Capital expenditures in the quarter were $61 million compared to $90 million in quarter three of last year. The decrease was primarily due to lower spend on JUPITER 3 satellite program and in consumer premise equipment. Free cash flow, defined as adjusted EBITDA minus CapEx, was $97 million during the quarter and is $243 million year-to-date through September 30, 2022. We ended the quarter with $1.6 billion of cash and marketable securities. Our cash balance positions us well, given the uncertainty of current economic conditions. It affords us the flexibility to explore investment opportunities that could foster growth, which is part of our business strategy. On our last earnings call, I shared with you our strategic course. This methodical undertaking is designed to both improve our financial and competitive position as well as to capitalize on short- and long-term growth opportunities, both organic and inorganic. We are pursuing three parallel work streams that I call horizons. In Horizon 1, we are optimizing use of our existing assets and services until we bring JUPITER 3 into service. We are focused on capacity yield instead of subscriber growth and continue regearing our service offers to optimally manage churn. For instance, we launched the HughesNet Fusion service, which we expect to help reduce consumer churn in the U.S. while opening potential enterprise opportunities internationally. We recently optimized the staffing for better alignment around our strategic initiatives as well as to lower unproductive operating expenses. We’ll continue to manage our operating expenses in correlation with our revenue trend and profile to preserve our bottom line performance. Let me now turn it over to Pradman, who will provide some additional specifics on the quarter and Horizon 1 activities.

Thank you, Hamid. In our continued effort to optimize our current products and services, our team continues to focus on improving our North American consumer offering and customer satisfaction. You will recall that we began rolling out our new HughesNet service plans earlier this year, with 50% more data per plan. These are being well received by customers, and our ARPU remains strong, increasing from the prior quarter. We continue to optimize capacity allocations to yield the best performance possible from our satellite fleet. This past quarter, as Hamid mentioned, we launched our HughesNet Fusion plans to customers in select U.S. markets. And the early reaction has been overwhelmingly positive, meeting or exceeding our expectations. HughesNet Fusion combines our GEO satellite service with wireless service for a low latency Internet experience that’s responsive, reliable and fast. After a successful launch of customers in the southeast, we expanded availability to new customers in that region and have slowly began – been making it available to other markets across the U.S. with great response. By early December, HughesNet Fusion plans will be available nationwide. Moving to our North American enterprise business, in the third quarter, we secured a $37 million contract to the financial services company to upgrade their networking equipment and extend their SD-WAN network service out to 2028, a $4.4 million order of a leading retailer for equipment upgrade and extension of their Hughes-provided SD-WAN network, a contract with a new quick service restaurant chain for their corporate stores, covering network equipment and services, and additional contracts and deployments for customers in the retail, petroleum and energy markets. In our OneWeb program, we continued delivery of production gateways and systems as planned. We’ve shipped 26 gateways so far and expect to complete all gateways in ‘23. We’ve started production of the satellite subscriber modem modules for inclusion into OneWeb’s terminals and have begun shipments. Also, we received a large commitment by OneWeb to purchase a significant volume of our electronically steerable antenna once they are available in 2023 as well as an additional large order for operational support services. Our defense group procured an award to provide another private 5G network deployment in an additional military base. In the civilian government market, the team won awards for several upgrades and service extensions for both federal and state agencies. Now to our international operations. As in the U.S., our priority in the Latin American market is to maximize yield on our capacity. We signed an agreement with Itellum, a Costa Rican Internet service provider, to utilize our Ka-band capacity to provide a premium Internet service where fiber and terrestrial wireless services are not available. In addition, we are allocating additional Ka-band capacity to expand cellular backhaul services in Mexico. We remain focused on adding high-value subscribers through tactics such as selective screening and capacity-optimized pricing plans that are improving our ARPU. Our Brazilian enterprise business executed significant new orders in the third quarter, including additional equipment sales and an expansion of satellite services for a tool utility company. We also won an order from a bank to expand the scope of our existing service agreements for their SD-WAN network. New business with a major engineering company to provide managed satellite services across 2,000 sites and won a major contract with a telecommunications company for operations and field maintenance of the telephone [ph] network. This project is notable instead of providing connectivity services while leveraging our extensive field services infrastructure to provide this service. In India, cell backhaul continues to be a major opportunity. And we have now over 1 gigabit of capacity contracted to support 4G backhaul services in rural India. And with over 1,500 sites deployed, we are well on our way to implementing the 10,000-site managed SD-WAN network for the Indian oil company. In terms of JUPITER system sales, we expanded deployments with existing customers, including Yahsat and SES. The launch of our JUPITER 3 satellite program continues to be on track for the first half of 2023. The satellite is currently in final integration. And then we’ll begin dynamic testing, which would test the satellite for a large environment. We continue to work closely with Maxar to maintain the schedule. As previously noted, JUPITER 3 will add significant capacity to provide high-speed services in North and South America and present a strong growth opportunity for our business in these regions. Let me now turn the call over to Hamid.

Thank you, Pradman. As we have discussed in the quarter and some of our Horizon 1 activities, let me provide an update on Horizon 2 and 3 of our strategy. Horizon 2 finds us focused on monetizing JUPITER 3. And the team is hard at work now, planning not only for the launch itself, but for the service launch with new higher speed service plans. We will also have a new Fusion offering with higher-speed plans. We believe the market is eager for the kind of services we’ll be offering. And we expect to have a highly competitive set of services to take to market once JUPITER 3 enters service. Horizon 2 includes a strong focus on our global enterprise business, where we will leverage our business connectivity, managed services portfolio, hybrid LEO-GEO business solutions and our own manufactured products. Increased participation in this vast market segment is a key element of our diversification strategy. Horizon 2 is also about improving operational scale with potentially small acquisitions, which we are exploring at this time. This brings us to Horizon 3. For this longer term strategy, we are actively evaluating opportunities for new avenues of organic and inorganic growth, including commercialization of our S-band assets and potential larger scale M&A opportunities. We will share more details on our efforts and plans as plans solidify. I remain extremely excited about our strengths, including our strong balance sheet, our global presence and trusted reputation, our engineering expertise and our S-band spectrum assets. Let me now turn it over to the operator to start the question-and-answer session.

Thank you. [Operator Instructions] Our first question comes from the line of Ric Prentiss of Raymond James. Your line is now open.

Thanks, good morning, everyone.

Good morning.

A couple of questions on my side. First, I’m glad to see JUPITER 3 still on track for a first half ‘23 launch. I did see Xplornet out of Canada mention they are expecting to offer a Canadian service on that satellite in the summer of ‘23. So does it look like the launch and service date could still keep your move under 2Q, late June, July time? I’m just trying to think of when that Horizon 2 that Hamid and you talk about entering service, when should we think about that being? Is it summertime ‘23?

We can’t be more specific than what we have mentioned, and we certainly cannot comment on anything that Xplornet may have mentioned. We leave their comments regarding their announcements to them. We are very much on track at the moment to be in – launch our satellite in the first half of the year, and we’ve accounted for a good schedule. And we think that at this moment, everything is on track. So we’re not able to offer you any additional details, Ric, but we certainly expect that there will be a service offering post-launch in the second half of the year.

Okay. And can you give us a rough ballpark maybe as far as how long from launch date, obviously, it’s in testing, but how long should it be as far as from launch to in service? Are we thinking it’s less than 3 months or how fast a rise are you having?

Yes, it takes several weeks, but it’s about 7 or 8 weeks to get the satellite up there. But let me ask Pradman to give you more specifics about J3.

Yes. I think it’s – typically, in these systems, it takes us about 4 weeks to get the satellite debugged and tested – not debugged, but tested fully so that we’re confident it will operate as we have specified it to operate. And then probably another 2 to 4 weeks to put it into full service.

Okay. Good. As we think about the different Horizons, is there a time frame for when – what’s the definition of Horizon 3 longer-term? Obviously, Horizon 1, you’re in right now, optimizing until J3 launches. And Horizon 2 is J3 launches and you get it into service. How long a time frame is it beyond Horizon 2 to say here’s what Horizon 3 envisions? Is that a 2 to 5-year plan? Is that a 5- to 10-year plan? What kind of is the ballpark time frames of Horizon 3?

Yes. Great question. Let me start by reminding everyone that all three Horizons are being worked in parallel. The output of the effort on Horizons will appear in different time frames. So we are working Horizon 3 just as aggressively as we’re working Horizon 1 and 2. So from that perspective, these are three streams of work activity with outputs that will be measurable and impacting our financials in different windows of time. The way we look at this is Horizon 3 is about 2026 and beyond. So you should be able to see – and that’s our – is it 2026 to ‘26.5? Is it ‘27? 2026 is pretty much what we think. We see the efforts of what we’re working now and give us a bit of latitude, a couple of quarters back and forth. But that’s the window. Simply because it might happen sooner, depending on if we find an acquisition target that we think would be synergistic and would be absolutely the right one to do. The impact of that may be sooner than 2026. But to set the proper expectation, we think that we need to be – we need to have a business model that complements what we have today by 2026.

Okay. Another one from my side, obviously, stock buybacks are still out there, but it wasn’t significant in 3Q, was not very large in 2Q. You mentioned, in Horizon 2, there might be some small M&A opportunities as well as you look at providing services to the customer base. How should we think about how you’re viewing the strong balance sheet, the opportunity with the stock being basically trading at cash per share versus buying some other asset out there?

Right. So we – yes, commenting on share buyback. At the moment, we’re not actively purchasing shares. And this is a deliberate decision to keep the cash on balance sheet, partly because of the market conditions that we’re all experiencing, but also we think this is the right decision for us in terms of the execution of our road map and – the strategic road map. We are proud of the fact that we have a very strong balance sheet and we have an accumulation of cash today. Cash is king more than ever. And we think that condition will continue, positions us very well to execute the Horizons that we just talked about. I don’t think the acquisitions that we will be making for the Horizon 2 impact would be so significant that would significantly impact or deplete our cash position. So probably more of our cash position will be consumed and put to use for opportunities in Horizon 3. But again, we are a cash-generating business. As you heard me and Pradman talk about this, we’ve generated a significant amount of cash this year. We continue to optimize our fixed costs and optimize our operations in a way that, as we transition our business from consumer to enterprise and growing our enterprise business, the bottom-line cash generation is always a key focus. So we will enhance our cash position. We will use some of the cash as necessary to complement the Horizon 2 business we have. You should not expect that those acquisitions, if we make them, would be substantially and vastly different and just give us more competitive posture for execution. And then for Horizon 3, obviously, we are hoping and working on significant additional M&A.

Last one from me, and I’ll turn it over to some other folks. Hamid, you’ve been now in the seat for 7 months. Obviously, you come in during a very difficult macro environment, as you just talked to. You do have a significant cash position, no net debt. When we think of the equity, and where the stock is trading, what do you think you can do to help move the equity along? What’s kind of on your list of things to say, here is what I think I can put in place or communicate or what are you looking at as far as how to get the catalysts going to get the stock moving in the other direction?

Right. I mentioned a couple of things. One is that I think the strategic framework that we have put in place is the right one. Obviously, we have debated it. We’ve discussed it. We have shared with our Board. We seek views and opinions of other experts in the industry. We think we are heading in the right direction in terms of our thinking of how to develop the business for long-term indefinite sustainability and growth. Having said that, I also want to say that we want to be – we don’t want to be rash, we want to be patient. We don’t want to raise the share price just to have it come down based on some announcements and based on some very short-term-oriented tactical moves that raises the share price, and then after that, it precipitates again. That has not been the approach that this business has taken and is not the approach we will be taking going forward. Look, we are at a point where we believe this is an absolute rock bottom. And I think we’re trading at levels that nobody has ever seen in any other industry. And we want to be patient to some degree and we want to make sure that when we execute our horizon strategy, we do it in a sustainable way that the share price obviously goes to full value, full potential and beyond in a way that you can count on it being in there. So, we are on – obviously understanding the market expects me and expects us to move things. But for the kind of movement we’re talking about, you don’t want to make a mistake. You don’t want to go ahead – and for instance, I would not look at some of the M&A that is happening in our space in terms of creating larger scale in the same space, mergers in the same space. If it doesn’t diversify the business, I wouldn’t do it. So we are not – we’re very prudent about our thinking of long-term orientation of the business. So long way of saying, I’d like to share, it is my goal. It is our intent with our absolute focus to raise shareholder value and share price. But we want to do it the right way. And we will resist the pressure to do something for the sake of just being active. So there is a delicate balance, we understand it, but we are very focused on it.

Okay, very good. Looking forward to more details as I come forward. Thanks.

Thank you for questions.

[Operator Instructions] Our next question comes from the line of Michael Rollins of Citi. Your line is now open.

Thanks, and good morning. Just curious if you can give us an update on the competitive landscape in the consumer segment, what are you seeing in terms of where fiber maybe built in the future? What you’re seeing currently in terms of fixed wireless as well as other competitive alternatives that your customers may have? Thanks.

Sure. Look, some of the competitive dynamics you are fully aware of – you’re aware that, obviously, Starlink has been in the market now for almost a year. Starlink has grown at the – well, while they have created some new segments for themselves, they have also have impacted our business to some degree. You’ve seen it in our consumer numbers. But I want to say that we are not really focused on just maximizing the number of consumers. We are looking at maximizing yield. We may have less consumers now, but we have a growing ARPU. So our revenue per customer has grown on a quarter-over-quarter basis. So we’re keeping great customers. Again, we maximizing yield. So I don’t think you should be focusing as we are not as focused on the number of customers more than what we get out of the consumer business, both domestically and internationally. Now as it comes to fiber and fixed wireless, look, fiber never made sense to go in every place. Obviously, with near zero interest rates and historically low interest rates for borrowing capital, the infrastructure deployment was unlimited. You could go ahead and justify investments in places where the density of population was very low and return on investment was acceptable. With interest rates coming higher, I do expect that, that slows down. I don’t think fiber can go everywhere. You couldn’t and now even less so today at the cost of borrowing for infrastructure deployment. I think the market – in a long way of saying, as self-serving as it may sound, I think the market is coming our way. We remain confident that there is about 15 million homes just in the United States that we think that are underserved from a broadband perspective. We think when JUPITER 3 shows up, we have more than doubled our capacity of what we have had to date. We are looking at 50 and 100 megabit per second speeds with the Fusion helping with the latency and reliability and unlimited plans that the team is working on in Horizon 2. We think our position in the marketplace will be very strong and the market is coming more our way than running away from us. We’re not blind to the competition, but we are – we feel that we are actually gearing up to improve our position going forward.

Thank you.

Thank you. Please standby for our next question please. Our next question comes from the line of Chris Quilty from Quilty Analytics LLC. Your line is now open.

Thanks. You have to excuse me, I didn’t get through the full 10-Q. But the EBITDA margins in the Hughes business were the lowest they have hit in about 10 quarters. Were there specific incremental costs in the quarter? And how do we look at some of the pre-Jupiter 3 rollout costs and the impact on margins over the next couple of quarters?

Yes, would be happy to comment on that. Yes, the EBITDA margin has come down. Look, it’s been primarily due to the shift in mix from consumer to enterprise. I will comment on that a bit more in a second. But there has also been some inflationary pressures as the customer care and some of the material costs have come up. Obviously, those things all add up. We think that those other costs are transient. They will be – as the inflation subsides, I think those costs will go back to more historical terms, and I think we are going to recover some of that margin. The shift in revenue from consumer to enterprise obviously comes at a – which has a lower margin will impact our EBITDA. On the other hand, you have to know that when you go below EBITDA, the enterprise business doesn’t have as much CapEx. It has some lower cost in terms of general services that are not on the gross margin. So, the CapEx will be the biggest impact here for the enterprise business having less drag than the consumer. So, if you look at a transition of consumer to enterprise business, as you have seen, our enterprise business is growing at a very, very rapidly, probably one of the fastest years we have had in terms of growth. You could see that as that business grows, if it grows at the scale that we have been selling, it can – with adjustments in our cost structure for that business, it can replenish the loss of net profit that ultimately comes from shrinkage of the consumer business. So, we actually like the enterprise business, we think you have got to scale faster. We think we can do that. I think we can diversify using the enterprise business, which has a very large TAM to account for that. But in the short-term, obviously, you will see some EBITDA shrinkage as we are in the midst of that transition. I hope that answers – I mean I blended a number. I think I answered your question, but I also wanted to make sure that we are just not looking at EBITDA margin, we are also looking at the net income at the bottom.

Right. And I think the consumer business consumes around $40 million or $50 million a quarter in CapEx just for the CPE-related piece, is that correct?

I don’t have that – Terry, do you have the number at hand?

Yes. Chris, this is Terry. I think that’s relatively in the ballpark. And I can follow-up with you on that to double-check it.

Yes. I think the consumer CPE – yes. Go ahead, please.

No, I was going to say on the enterprise business, that’s not a CapEx cost, it’s a hardware revenue.

Our enterprise business has a number of factors in it. Our enterprise business is not pure connectivity. We have a lot of services in the enterprise business. We have manufacturing in the enterprise business, some of the enterprise services. Pradman referred to a number of deals that he has mentioned. And so the connectivity piece, obviously, does include CapEx for equipment, but not for the services. And for the manufacturing, we generally recover the cost for material pretty quickly and is not capitalized.

Got it. And just to circle back on the – what we call the enterprise business, if we put aside the Hughes gateway business, that business had been sort of a slow bleed for several years, no growth or shrinking slightly. And it looks like in the past year or 2 years, put COVID aside, you have actually started to see organic growth in that business. And again, the traditional business was sort of hooking up lottery terminals and gas stations. How do you see the growth of the enterprise market aside from acquisitions on a go-forward basis? And what contributes to the growth of that business? Is it just underlying satellite capacity is so much better, or is it more the managed services you are layering on top?

Pradman, please go ahead.

Yes. Thanks. I think the enterprise business consists of two parts, right, the services part and the product delivery part. There is a significant role of this business that we actually ship both VSATs and gateways for building networks for different operators all over the world. I think one of the items that has accelerated that is the technology of Jupiter 3. That’s become the de facto standard pretty much all over the world. So, we have had large volume sales in that area, just plain product sales in countries like Indonesia, Europe, India, Brazil and so that has contributed very nicely to our – both our new order input and our backlog. And then if you look at some real big system jobs that we have won, OneWeb, for example, is a huge job where we are not really supplying gateways, we are supplying terminals, we are supplying services. And they have come alive in the last 3 years to 5 years – 3 years to 4 years. So, it’s a good part of our strategy. But the one thing, of course, as you noted, is the margins are much lower, as Hamid mentioned earlier. You don’t get the margins that you get in the pure service business, the gross margins. But then you take it all the way down to net income, and the difference is not as significant as it is by itself as a service opportunity.

Great.

Did I answer your question?

Yes. I think that gets us closer to the answer. But if I were to switch – final subject, OneWeb launching again. If we assume that they are full service launch sometime next year, hopefully mid-year or something, what does that do to your business and specifically your business in India? And can you remind us, is that an exclusive distribution?

Yes. We have an exclusive distribution agreement in India with OneWeb. And that’s – it’s going to make us very powerful in India. Because not only will we have the existing Ku and Ka business, but we also have the LEO business with OneWeb. And we will be able to implement our GEO/LEO strategy in a much more significant way. Very excited about it. The whole satellite market in India is just beginning to take off. They launched the last constellation of 36 satellites on an Indian rocket very successfully. So, the whole Indian telecom business structure is excited, and we hope to participate in that excitement and in this business growth there.

Great. Thank you very much.

Thank you. Please standby for our next question. Our next question comes from the line of Ric Prentiss of Raymond James. Your line is now open.

Yes. Thanks for taking the follow-up. I think that you had some open time. I mean I think one of the top questions we get from investors is S-band. You touched on it briefly. I want to make sure if it didn’t come up on your other questions that came up, but that’s in Horizon 3. But I think investors are trying to figure out how should they think about this raw asset that you have put together there? How should we think about what your thoughts are, what the potential for partner is or what the potential timeline for – information to the Street and what you are going to do with the S-band services? So, can you frame us any more color on S-band? How should we be thinking about it, developing that raw asset information into the Street?

Yes. That’s a great question. So, the S-band story has evolved for the world, not just for EchoStar. If you think about it all the way till about, I don’t know, a year ago or so, there was no standardization around connectivity to the satellite from direct device, from handsets, from 5G NTN, etcetera. So, the business model for S-band would have been – that’s exciting, significantly smaller, perhaps not even exciting in many ways, given the cost of the launch and maintenance of the LEO system for specialized devices. But as the 5G NTN standardization has happened, that restriction, that limitation has been moved and in fact now looks very exciting. If you could just come to the devices – the consumer devices that are just normal devices that consumers have in their pockets, it’s exciting from the perspective of the end customer basis perspective. They use in normal device, they don’t carry a specialized device. They don’t have to have a second device. And also it’s very exciting from the perspective of a supplier and provider of the service where you don’t have to subsidize, you don’t have to design, develop, manufacture, distribute specialized terminals. So, the game has changed. But remember, that game has only changed in the past 12 months. That game – that’s a new game. Now, if one wants to bring a service based on 5G NTN to the market, it requires the ecosystem of the 5G NTN. I just mentioned that the devices would have to come from the device manufacturers and they would have to be sold and populated in the market. We are just a couple or 3 years away from those devices being in significant proliferation, right. I mean the standard is just set. It will take a couple of years for the – chips has to be manufactured, to the chipsets to make it to the terminals and terminals to be populated through sales. I mean the existing devices would not work, you need the next-generation ramp up. So, when you look at all that, that kind of drives the timing and you have an element of ecosystem. You can’t – no player, no single player in the market can walk in and say, I have it all. There is no single player. It doesn’t matter who you look at, handset manufacturer, satellite manufacturer, service provider, carrier, operator, you can’t, you get none. So, it will require the collaboration and partnership of a number of players to make that work. That’s why it takes time. And that’s why it also is not prudent to make announcements unilaterally when you don’t have all of the elements that is required to develop that ecosystem and all the agreements and financials in place were it to become a reality. That’s why you are not going to hear from us any sort of premature announcements, any announcements that will just give you one angle of the picture, but not the full picture. But having said that, I want to mention that we are very focused on it. We understand the opportunity. We understand the size of the market perhaps better than anybody else, even – that we have manufactured terminals for almost every satellite manufacturer provider out there. We have been in satellite to handset connectivity in Europe in our EML, European mobile business. We have done that. We are doing it today to specialized devices in LoRa. And we understand the space, but we don’t want to come in with premature information releases which is not helpful neither for investors nor for our ultimate customers. I hope that answers your question to some degree.

Yes. No, that’s – because there has been a lot of other announcements out there, Apple with Globalstar, Iridium with an unnamed partner, T-Mobile with SpaceX Starlink. There is a lot happening in the communication world and with satellite companies. So, my interpretation is, suffice it to say, you are in talks, discussions, you know what’s happening out there and you are not on the sidelines, you are just not ready to put it on the field?

I would say that’s a fair conclusion. If I were sitting on the other side, that would be my conclusion. I would also say the announcements made today are not game-changers. We are not seeing any of those announcements as the ultimate answer here. None of those are based on 5G. None of those are based on a greater service or a product breadth that we think will change the behavior or the economics of the industry. We think the real solution of direct to handset would have to bring capabilities similar to what people use today on a normal basis. They should be able to make voice calls, data calls and just a pure emergency messaging or provide limited service over a small geography, which we don’t even think it’s viable commercially to build the whole LEO system to provide patchwork of coverage in one country or another. We just don’t think those things are, first of all, viable or game-changers. And also, we think that nobody is ahead of anybody else when it comes to providing a 5G-based system, which we believe – we continue to believe is the right answer.

That’s very helpful. Thanks.

At this time, I am showing no further questions. So, I would now like to turn it back to Terry Brown for closing remarks. End of Q&A:

Okay. Thank you everybody for joining the call today and we look forward to talking to you at our next call.

Thank you for your participation in today’s conference. This does conclude the program. You may now disconnect.