Good morning, and welcome to the Iridium Communications Second Quarter Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Ken Levy, VP of Investor Relations. Please go ahead.

Thank you, Anthony. Good morning, and welcome to Iridium's second quarter 2022 earnings call. Joining me on this morning's call are our CEO Matt Desch; and our CFO, Tom Fitzpatrick. Today's call will begin with a discussion of our second quarter results followed by Q&A. I trust you've had an opportunity to review this morning's earnings release, which is available on the Investor Relations section of Iridium's website. Before I turn things over to Matt, I'd like to caution all participants that our call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements that are not historical fact and include statements about our future expectations, plans and prospects. Such forward-looking statements are based upon our current beliefs and expectations and are subject to risks, which could cause actual results to differ from forward-looking statements. Such risks are more fully discussed in our filings with the Securities and Exchange Commission. Our remarks today should be considered in light of such risks. Any forward-looking statements represent our views only as of today, and while we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so even if our views or expectations change. During the call, we'll also be referring to certain non-GAAP financial measures, including operational EBITDA, pro forma free cash flow, free cash flow yield and free cash flow conversion. These non-GAAP financial measures are not prepared in accordance with generally accepted accounting principles. Please refer to today's earnings release and the Investor Relations section of our website for further explanation of these non-GAAP financial measures and a reconciliation to the most directly comparable GAAP measures. With that, let me turn things over to Matt.

Thanks, Ken, and good morning, everyone. Well, we all saw, Iridium's business outperform nicely in the quarter, recording record revenue and operational EBITDA. This momentum gives us confidence to raise our top and bottom line guidance for the year. We're seeing sustained strength from our partner channel in signing up new customers and purchasing equipment, which is the result of Iridium’s strong competitive position and unique offerings. This underlying strength helps to shield us against changes in the global financial environment. We believe we're positioned well to grow just as we have through past cycles, even if recent concerns of an economic downturn come to fruition. Our business remains vibrant and resilient. This is owed to the unique business Iridium is focused on, characterized by safety services and mission-critical applications, as well as the durability of our business model. While no business is recession-proof, we've grown nicely through past downturns in large part due to the diversity of our customer base and the industries that we serve. Iridium continues to occupy a unique lane, even among satellite companies. And today that lane is characterized by its strong demand, growth opportunities and some pronounced areas of upside, which I'd like to call accelerators. Let me speak to each of these three areas. First, demand for Iridium equipment and services has never been stronger. This has been driving hardware sales over the last 12 months and kept net subscriber additions near all-time highs in our commercial business. In the second quarter, we added 95,000 net subscribers, which means over the last year we've grown our subscriber base by 16% to almost 1.9 million users. I can't think of another satellite communications company that makes more connections to things from space than Iridium. We've continued to see momentum in our core handset business,…

Thanks, Matt, and good morning, everyone. I'll get started by summarizing our key financial metrics for the quarter and providing some color on the trends we're seeing in our business lines. Now I'll recap our increased guidance for 2022 and close with a review of our liquidity position and capital structure. Iridium continued to execute well in the second quarter in an environment characterized by robust equipment demand and meaningful subscriber growth. We generated total revenue of $174.9 million in the second quarter, which was up 17% from last year's comparable quarter. The improvement reflects ongoing strength in our commercial business lines, a pickup in engineering and support work and unprecedented demand for subscriber equipment. Operational EBITDA hit a record $105.9 million in the second quarter, this was up 12% from the prior year's quarter and supported by strength across all business lines. These trends give us confidence in raising our full year outlook to better reflect the ongoing demand for our L-band services, which we expect to continue in the second half of the year and drive incremental subscriber growth. On the commercial side of our business, service revenue was up 11% this quarter to $106.4 million. This increase reflected continued strength in voice services, IoT and broadband. Commercial voice and data revenue grew by $5.2 million or 12% in the second quarter. As you know, we have historically characterized this business as a low single-digit grower. As Matt noted, there were two contributors to this outsized growth this quarter. First, our newer service offerings, Iridium GO! and push-to-talk are really hitting their stride. We experienced combined growth of about 50% on these two products in the second quarter. Together they accounted for about a third of the growth in the voice and data business line. We expect continued…

We will now begin the question-and-answer session. [Operator Instructions] Our first question will come from Ric Prentiss with Raymond James. You may now go ahead.

Thanks. Good morning, everyone.

Hi, Ric.

Obviously, we'd like to see the guidance raise, particularly in this economic environment. Matt, you talked a little bit about how you guys had whether different economic situations. Help us understand where you are at today? And looking into this current environment, how you see it playing out into, like, your mid-term guidance? Any thoughts about updating that guidance or how this current market conditions are affecting that.

Well, I think we've been looking carefully at trends and everything and just haven't really seen much yet. You have to expect that there is -- some potential impact is, perhaps more on equipment than anything else, just as people be more careful about purchases, though, we're not seeing that at this time yet, but kind of considering that going forward. I remember, the 2008-2009 period, we weren't public until 2019, but even looking at 2008, we had -- we really grew, our service revenue continued to grow well through that whole period, we had a down year one year in terms of equipment, I think in 2009, but it really pop back up in 2010 quickly too. And I think it's all just due to the nature of the highly diversified business that we have, the fact that most of our services are pretty life critical and important in industries that they are. And so, we are not currently really expecting to change sort of our mid-term or even long term look right now on any reason right now. Those aren’t just aren’t clear at this point.

And you mentioned on your long-term accelerants, in 8-K you talking about the development agreement to bring your technology into smartphones. I know you can say a lot about that, but any thought about timeframe we should be thinking about that? And we do not have enough time to get all through the 8-K and the extra language there that we should be particularly looking for?

Well, you're right, there's not much more we can say about that, which I'm sure it’s a little frustrating, but certainly we wanted to -- we thought it was important to show some progress that we're making in that area. Obviously, and important strategic relationship and excited about the potential there, but the timing really is not something I can speak to. I think you’ll just have to wait until products are introduced. Mainly in some ways, we can talk about it, because it's not really that much within our control at this point. We have some work to do ourselves, but it's really up to our partner and others to execute on that.

And, obviously, some big news in satellite and over the last two days was LEO operators start up OneWeb now officially, announced the merger with GEO operator Eutelsat, any thoughts about what that says for the industry or anything that it means for Iridium?

Well, I don't think it means much for Iridium. I think it speaks to the competitive dynamics in that commodity broadband space that we've long talked about. It’s kind of ancillary to our business. There is a lot of competition in that space, there's a lot of concern about the future environments. I think there is a realignment of partners that we saw from Inmarsat and ViaSat. I think perhaps there is some choosing of -- there is some consolidation, I guess, this would be continued consolidation in sort of that market segment. I don't know that it speak so much to orbital dynamics as it does the competition and other aspects there. but that's a story for others to really speak to besides us.

Okay. Thanks guys. Stay well.

Thanks Ric.

Thanks Ric.

The next question will come from Landon Park with Morgan Stanley. You may now go ahead.

Great. Thanks for taking my questions. Everyone, good morning. I'll take one more swing at the smartphone announcement. Can you say anything about what type of company you're partnering with on this agreement? And I guess if we're looking out five, 10 years, do you think that this has the potential to be -- you're seeing the largest revenue bucket over time if the technology is successful. And I guess what is your confidence level in being able to develop a successful integration of your technology in the smartphones?

Well, that was a good swing Landon. I’m not sure I can help much with either of those questions. And I'm sorry for that. But we've been -- we've been talking a little bit about this opportunity over the last couple of quarters. This is a good milestone, but it's not definitive, nor we represent it in any specific way at this time as to what it means, when it means and who it means with at this time. But I say there is over 1 billion new smart phones a year. There is some like 7 billion smartphones out there in the coming years. Obviously, making a connection of those is something that others have hinted and expect we'll try to do. I think it's a -- it's going to be a sizable market to make any kind of connection to devices like smartphones. And I wouldn't even limited to smartphones. I mean, we're talking about sort of things that consumers might have or might be contained in many other kinds of consumer devices. We believe that's our vision, that's what our network is very well suited for. It’s -- I think what we've been doing over the last 23 years has prepared us for this kind of market. And I don't want to speak to the size, but obviously, we don't think it's insignificant.

Great. I appreciate that. And can you speak at all to the timeline that we should be looking for? I guess, 8-K references from our agreement by the end of the year, is that sort of the next milestone we should be looking at?

I mean, yes, we do need to complete a service provider agreement that's -- and even the development agreement is sort of subject to that agreement and -- but in terms of when this will affect our business, obviously, that's out in the future. And it's really, like I said, not in our control. So I just don't want to -- I don't want to set any specific expectations about that, which I appreciate is frustrating and it won't help your models much, but believe we at least needed to announce that that we're making definitive steps here.

Understood. And then just last one on the settlement. How should we think about the capacity in the next network in terms of, if you do end uploading on a lot more sort of low usage subs here and how should we think about what does the capacity of your network really allow for over the next decade? And then just on a separate item, I'd love for you to opine just on the area on investment and how you're thinking about the TAM there and the type of value, you think you can create out of your holdings?

Yes, I mean, our network is built for extreme -- very efficient forward communications, which IoT is, as you can see by just sort of our performance is the key area of growth -- is a key area of growth in our area. And what we do delivering to even more devices, there is a lot more capacity still to be utilized through that because those are very efficient uses of our network. So kind of will break the model of how many millions of subscribers we would have on our network, obviously, with that, but it's more about the kind of amount of messages or data transmissions they'd have through it, which our network is well suited to support. So, as far as Aireon in terms of the addressable market. Yeah, I mean, obviously, we're -- we believe Aireon is expanding their addressable market, which we already thought was pretty significant in managing the air traffic management aspect of it. The surveillance which, frankly, with people back on airplanes, flying internationally is growing again and their revenues, I think, internally are growing and that area as they recover back to pre-pandemic levels and beyond, as they continue to expand their subscribers there. But as I've said in the past, we were really quite interested in the progress that they're making monetizing their dataset in this commercial data services area. They've already got a number of wins. They have a number of new products that they have developed and they're marketing, and with this additional investment, we saw them able to further out the offerings that they could make in terms of exploiting that dataset in a number of new interesting ways. So it is expanding the addressable market. I can't speak to exactly the numbers, I know we've talked to the surveillance market in the past, there is a couple of others out there that are also trying to get in this market, but they don't have the same dataset we do. They certainly talk pretty big potential for the market and I can't speed that, but it's still early days and we think there's a lot of -- I think there's a lot of growth potential there. It's the reason why we kind of doubled-down here and we're able to sort of expand our investment in this because we really think over the next couple of years that's really going to pay off.

Just in terms of size, Aireon has estimated their TAM to be $750 million a year. So they've said that for some time and we've said that we expect our dividends from Aireon to exceed what we get out of them from hosting, so we get $37 million in hosting and data out of Aireon. And so we expected dividends to eventually be greater than that. So we're not excited by this opportunity.

I would only say that $750 million was sort of a pre-commercial data services sort of TAM, but it's hard to say exactly how much that adds to it in this case, so --

And on the dividends, when should we expect those to start flowing?

We said eventually, We have --

Fair enough. [indiscernible] the questions.

Our next question will come from Walter Piecyk with LightShed. You may now go ahead.

Thanks. So what is the process for, I guess, how a technology gets enabled in smartphones? Meaning that, does the ultimate demand have to come from the device maker that who drives it, whether the agreements with the device maker and some of our component guy or whatever it is, like, how does that typically manifest itself? Because I wouldn't imagine that if it's not the device maker that someone else would expend development dollars unless they knew that at the end of the day there was going to be a device maker that would actually wanted to put it in their phone.

Yes. I mean answering that question, Walt. And it's a good one, but this is not something I can kind of go into at this time. I mean, that really goes beyond what we're really capable of saying today. But I don't disagree with you that they're -- obviously, we wouldn't sign agreements unless there were -- everyone viewed there to be a sizable opportunity in the future.

Thanks. So why does someone need a service provider agreement, because if I'm thinking about my AT&T phone, then I have got a soft SIM I can be using AT&T in my terrestrial network, I go to Utah, whatever, and I can just flip to a soft SIM, that's another service provider. So why is there a need in this case for a service provider agreement?

Yes. So I'm not going to go into the business model that we are anticipating for this, but we are not the service provider. So any time we provide service through others there has to be sort of an agreement on how it would be priced and how it would be delivered and that sort of thing. So it's more of our agreement with them about how it would be delivered --

I understand that, but presumably a device maker themselves could say, hey, buy my phone and then when it doesn't -- when it roams off of the cellular provider that you're using it, then me, Apple, me Samsung, whoever can say this phone's going to work in more places. So I don’t understand why you would need a service provider in that context?

Sure. We need a service provider agreement and so that's why we're negotiating it.

Okay. Just last question. And the share repurchase, it was down, obviously, given the quarterly results and this announcement, is the reason you didn't buy as much stock back this quarter because you’d knew this announcement was coming or is there other kind of factors that went into this share repurchase activity this quarter?

I don't think we're going to go into exactly why and how we do that, obviously, that's sort of disclosing, but I think that's probably all we can say about that.

Okay.

Well, the reason wasn't that that we would have liked to buy -- bought the stock at the levels that we saw in June, but that wasn't feasible.

Why wasn't it feasible though?

We're not going to go into that.

Okay. Thank you.

Our next question will come from Hamed Khorsand with BWS Financial. You may now go ahead.

Good morning. I just wanted to see how comfortable are you with channel inventory? How are you managing and making sure partners aren't pre-ordering too much ahead of expected installs?

Yes, that's been an ongoing sort of process that we've -- our sales and marketing team have done in conjunction with our almost 500 partners. There's obviously been a lot of demand out there for us, as you can see, much higher than we were expecting at the beginning of the year and we've been -- we've been on sort of allocations for a number of our components, a number of our devices really for the last 12 months or so here. And while we're catching up, we've had to go back and kind of work with each of them individually, understanding, because a lot of them have supply issues of their own and everything. So trying to make sure that we allocated our devices to places that could matter the most has been sort of a bit of an art, some science, but a lot of art and a lot of discussions. I feel good about how it's gone, because our partners are telling us that they feel that it's been an open, transparent and productive sort of process. We've been catching-up in some areas here, still behind in some others, but had even better second quarter. But I think that we'll be catching-up a lot of this through the rest of the year, assuming we don't have any other big supply chain shocks or anything, but we seem to -- I mean, I really -- outstanding supply chain team who has done a -- I think an amazing job over the last year of managing quite a complex environment here to be able to continue equipment level growth through this sort of unprecedented demand and manage through all the kinds of little issues that keep sort of popping up just due to the normal environment everybody is having to go through.

Okay. And then my other question was on the personal devices. Is this predominantly still a North America sales process? Are you seeing partners come on board from different geographies?

Well, it's never been just North America. I mean, obviously, North America is been a strong market for us, but we have partners in Europe, Asia, really everywhere around the world. I was just in a partner conference in Europe and we have a strong group of -- and growing group of partners in Europe, Middle East, definitely have quite a few, and have been growing nicely in Asia. I forget how many, I just saw the number that we added last year in Asia alone, which is across the region there too. So no, it's a global phenomenon of the partner base that we have.

Okay, great. Thank you.

Next question will come from Greg Burns with Sidoti & Co. You may now go ahead.

Good morning. The hosted and data payload was up a little bit this quarter, and it sound like it was from growth from Certus. So is this like a new -- is there new growth opportunities emerging for Certus? Should we expect that line item to continue to grow? Thank you.

Yes. Greg. We expect that to grow over time.

Okay. And then in terms of the SDA contract. What is the timing of -- it sounds like it's not like a straight line revenue realization there, but what is the timing of when revenue -- we should start to see revenue from that hitting the P&L?

It will be heavier in the first two years then it will decrease for the final five years. It gets sort of -- there is heavy lift in the first couple of years and then it just goes to maintenance in the back five.

And revenues should start flowing this quarter, like in the third quarter?

Yes.

Okay. And then in terms of the timing on Certus-100, it sounds like you're making progress there, bringing some new applications to market. When should we expect to see revenue start picking up from those new applications?

Yeah. I mean you're going to see the -- you're going to see that flow into both voice and data line, as well as the IoT line depending upon sort of the applications. I'm seeing there's a whole bunch of new products that are getting announced all the time. In fact, I just know Oshkosh is starting this week and there is a couple of our partners are announcing some products for the general aviation market built on Certus-100 technology. I think you're going to see some consumer devices in the coming quarters that are sort of built around that technology that apply both voice and higher speed data services. Like I said, UAV market is -- number of different partners are going after that, but that all depends on how the growth of their individual markets go, but there's a lot of excitement about that. Now we see surveillance devices out there, just a bunch of applications, also a lot of interest in the government for applications that -- for the state and military kind of applications as well. So it's a broad range. We're starting to see the first revenues already. I think that's going to build over time like anything because there is often a lot of other development required for a very tailored development around a technology like this has never existed before. I mean, we've notice this in other technologies like push-to-talk and other things that kind of grows slowly in the first year or two year and then kind of gathers momentum and then really kind of take off as the solutions are well established and the sales channels are well established. So I'm expecting this will just be a -- it will kind of follow that same trajectory.

Okay. Okay, great. Thank you.

Our next question will come from Caleb Henry with Quilty Analytics. You may now go ahead.

Thank you. Hi guys. I just had a couple of questions about the relativity launch deal. I think it's been a couple of years since it was announced. So you said the launches there happening in 2023. How many missions do you expect? I think this is all their smaller rocket. I think you said Terrain 1, and then the original announcement was for up to six and you said on the call this will be five satellites that of launching. So I'm just curious what the logic was behind launching five and keeping one ground spare? Thanks.

Hi, Caleb. Yes, I think you're assuming a little too much there. We do have an arrangement with Relativity for future launches that have been prescribed, but the vehicle that we were talking about there can only launch really one of our satellites. We haven't named the launch provider for our launch in '23, but you can probably figure out, it's five satellites instead of one and that wouldn't necessarily fit the current profile for the launch provider you just suggested.

Okay. So the spare launches are not going to involve Relativity then?

Well, I said we haven't named the launch provider, but I've given you a lot of information to figure that out. Okay. Just haven't decided the name of launch provider yet.

Okay. And I guess just one follow-up and then I'll let it go. Do you still have an arrangement with Relativity to launch spares or has that been replaced by this future agreement?

We do have an arrangement still. I mean, that hasn't been terminated, it provides for the ability to launch satellites in the future at our discretion, but it was never -- it offered the opportunity to launch but didn't require a specific number of satellite to launch and we'll still have a spare left after this launch, so we'll see.

Okay, thanks.

Okay.

Our next question will come from Louie DiPalma with William Blair. You may now go ahead.

Good morning, Matt, Tom and Ken, what an action packed earnings call.

Thank you, Louie. I agree.

First, I just wanted to commend Tom for hedging the floating rate debt. And then I cover another company, it was downgraded recently because of floating rate debt exposure. So that was very savvy Tom and your team.

I have to pay him more if he keeps that up, Louie.

Second, related to the smartphone announcement and the seven or eight questions that followed. Are you looking to be exclusive with the smartphone OEM or you going to be open to several smartphone OEMs?

A great question and one I can't really answer at this time. But, obviously, our goal long term is to address the market as broadly as we can.

It sounds good. And in response to, I think, Ric's question, you mentioned other consumer devices potentially as part of the agreement. Just broadly, is it feasible for the Iridium technology to be embedded in a device as small as a smart watch?

Yes. First of all, this development agreement doesn't cover anything, but smartphones as you can read in the 8-K, but it doesn't preclude us addressing other applications and other devices. And while I can't say definitively because we have not tested it specifically yet, that's still to come. But it would be -- the physic seem to suggest with the right antenna et cetera and with the integration that we see in smart watches is that, yes, our technology is -- I mean from a LEO orbit using L-band and technology we're aware of we would be able to address -- should be able to address smart watches and other very small application. Really if it's in a smart enough chip and the rest of the components allow it, it's obviously a low data rate you can make a connection with us. And the nice thing is, I don't have to build a new network to do it either.

Right. And in terms of the term service provider agreement, you already have service provider agreements with Garmin, ZOLEO and other partners such that they pay you either a wholesale rate per message, per byte or per month, and then the service provider actually charges their end customers whatever economic arrangement they've set, right?

Yeah, that's right. I mean, that's how we go to market. I mean, obviously, as a wholesale supplier we don't -- really don't develop retail prices and we don't deliver the market to end consumers. So we always go to market through what we call our service provider agreement. And doing so in this kind of area would require the same thing. So it's an arrangement by which how is it that we would price, what it is that we would be delivering and on what terms and that's just a natural evolution we do it all the time, we just have to do it in this case as well.

Thanks, Matt, Tom and Ken.

Okay. Thanks, Louie.

Thanks, Louie.

Our last question will come from Chris Quilty with Quilty Analytics. You may now go ahead.

Thanks, Matt. Can you give us the first letter or the name?

Well, that was -- that's an appropriate question anyway, Chris, thank you.

Second letter, you just -- you didn't think somebody could come up with an original way to ask the question, right?

You can do better.

I actually I did have a legitimate technology question. So one of the reasons you've been so successful integrating with Garmin and GPS devices is because the location of your spectrum and its adjacency to GPS signals and the ability to integrate with internal antennas. And so from a technical perspective, as you look at smartphones, you have the same ability is sort of the existing hardware, their chipsets or antennas, which are kind of the two critical components for you to work with another device? Or does a device manufacturer, more likely the not, have to do some significant or even minor hardware adjustments to the existing --

Yeah, it goes in a little bit too much detail. Chris, it was a good try though.

But it’s a technical question.

It is a technical question. I would just say that this is something, because as you recognize, because I've been talking about this for the last three quarters or so, at least. There's been a lot of work done at this point and we feel confident that you can make a connection, usable connection between smartphones and low earth orbiting satellites. And obviously that shouldn't be a total surprise based on sort of a lot of others who would love to be in this market as well. And by the way, I really do expect this will not be something exclusive to Iridium. I mean, others will want to be in this market, but it's such a huge market that if you can address it in multiple ways, there is a lot of opportunities to build new network to support this, which I don't know if that will occur, but some of -- some expect to try or even use other existing technologies. But what I feel good about is, with a truly global network and one in which is a very flexible system that can be demonstrated over many years to be very adaptable and with sort of the physics are really pretty good about this right now. So it obviously won't be a stock device, but I think the changes, obviously, must be manageable, because they look very promising.

So I'll just add a couple of real quick questions. Commercial broadband ARPUs have been marching up, but you have some mix change in the few products. Tom, should we generally expect ARPU, given your expectation of product shipments to kind of trend up or flat or down just generically?

So the Certus-100, right, that's going to go into commercial voice and data and that should be accretive to those ARPUs, obviously, right, because it's more data used. So we think in broadband the addition of -- additional Certus and the replacement of the legacy product, OpenPort should be accretive to those ARPUs as well.

A lot of movers in that whole broadband area, there is higher ARPU applications coming and like commercial aviation and some areas that we see there are lower price products like Certus-200 that might go into lower applications that might not have ever wanted this high as ARPUs. I think that there is a broad range of ARPUs. But obviously, as we moved up from sort of traditional OpenPort lower speeds stuff to higher speeds stuff, that typically drives higher usage, and I think we're going to see broad-based continued -- I can't tell you exactly where the ARPUs will end up in that whole area, because it's still seems to be fairly early in that whole stage, but we like the trends we're seeing.

And I know this doesn't really impact revenues, but your subs, you're government subs have been kind of trending down. And you mentioned the Space Force transition, do you see a resolution in that and that being a potential driver for equipment sales looking out over the next year?

Well, we've had a lot of positive discussions and know that it's a recognized issue. It is being worked to be addressed. It's complicated like anything within a complicated environment like the U.S. government, but they are -- they see that they want to take more advantage of the contract that they have right now and just have to make some changes to ensure the incentives and other things internally sort of support that. They recognize that it's not really demand going down at all, there is now a lot of applications and there's some really big programs coming that could drive significant volumes depending upon their success and how fast they rollout and that sort of thing. So, we're still very bullish long term on our relationship through this contract and through eventually, another contract out in the future on sort of our core business, as well as continued growth in broadband and other applications as well. Big demonstration coming out sort of in Asia this summer, I am excited to sort of showcase the applications. It's really a broad-based set of applications that potentially support them as well as many other allied -- many other of their allies and everything. So it's still a very long-term strategic relationship, just doesn’t going up in subscriber numbers, but fortunately, we have the right contractual environment that it really doesn't sort of effect the revenue numbers much.

And are you still discussing a separate service contract and is that something we should expect in the near to medium-term?

Well, we really -- it's not a specific -- the service will be delivered separately through a number of partners we've signed up now, I forget, it's six or so. Around six, somewhere between five and seven of our partners who are now going after sort of a number of different broadband applications, some of which we've already being come through on our commercial gateway, as the government gateway, they'll be increasingly coming through the government gateway, but those will really be per terminal, per pricing kind of applications as it goes. So you'll see government broadband revenues, I think, grow over the coming years here and add to our broadband revenues that way. But it's not going to be like a contract for a specific thing with the government, they won't be directly from us or the government, they will go through those designated government service partners.

Got you. So right now anytime you do international business it flows through your commercial line, because that's where your partners operate through. So you're saying any Certus business, at least for now, where the business is running, is also -- relatively would flow through the commercial line and those partners?

Yes, that's correct. It goes through our commercial broadband revenue line.

And I do have one other clarification question on the handset thing in the FD disclosure. Tom had indicated that there is some reimbursement for expenses. So are we do assume that on a P&L basis it sort of looks like revenue goes up and R&D goes up and they offset.

Are you talking about the SDA?

No, no, this is for the handset.

8-K.

8-K.

So that's going to be -- that will be in engineering and support revenues and engineering and support costs. So, that's the line -- they are the lines that will be affected by what the 8-K references.

Understand. Okay, great. Appreciate the color and congrats on a great quarter.

Thanks, Chris. Appreciate it.

This concludes our question-and-answer session. I would like to turn the conference back over to management for any closing remarks.

Well, it has been an action packed quarter. I appreciate that. So it's great to be in a good environment. We really are enjoying some strong demand and love the opportunities we're working on and we'll keep you updated on the progress of those accelerators as we've described them as. And I appreciate you being on the call. See you in the third quarter. Thanks.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.