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spk00: Good day and take the stand by. Welcome to Sierra Wireless third quarter earnings call and Q&A. At this time, all participants are in listen only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one on your telephone. If you require any further assistance, please press star zero. As a reminder, this conference call is being recorded. I would now like to turn the call over to Mr. David Climey, Vice President, Investor Relations. Please go ahead.
spk01: Thanks and good afternoon, everybody. Thank you for joining today's conference call and webcast. On the call today are Phil Brace, President and CEO, and Sam Cochran, our CFO. As a reminder, today's call is being webcast and will be available on our website following the call. Today's call contains certain statements and information that are not based on historical facts and constitute forward-looking statements within the meaning of securities laws. These statements include strategies, goals, objectives, expectations, and commentary regarding the outlook for our business. Our forward-looking statements are based on a number of material assumptions which could prove to be significantly incorrect. Additionally, forward-looking statements are based on management's current expectations, and we caution investors that forward-looking statements, particularly those that relate to longer periods of time, are subject to substantial known and unknown material risks and uncertainty that could cause actual events or results to differ significantly from those expressed or implied by our forward-looking statements. I draw your attention to a longer discussion of our risk factors in our annual information form and management's discussion and analysis, which can be found on CDAR and EDGAR, as well as other regulatory filings and our quarterly earnings release. With that, I will now turn the call over to Phil for his quarterly updates.
spk09: Thanks, David, and thank you, everyone, for joining us on the call today. Total revenue in the third quarter was $82.5 million, and GAAP gross margin was 29.3%. As we discussed during our Q2 earnings call, Q3 was negatively impacted by manufacturing capacity constraints due to the COVID-19 pandemic in Vietnam, as well as some well-publicized supply chain issues such as shipping and customs and continued tightness in the availability of components. Before I turn the call over to Sam for more details on the third quarter financials, I would like to talk about our current demand environment, how we're doing on the five-point operating plan that I outlined on last quarter's earnings call, and the recent changes I've made to our executive team, which we announced publicly yesterday. Regarding the current environment, we are continuing to experience very strong customer demand for our devices and services. We are seeing more customers in industrial enterprise and infrastructure markets wanting to deploy IoT solutions. And at the end of Q3, we had record backlog for our devices based on orders from existing and new customers. We strongly believe the macro trends for LPWA, 5G, and private networks are positive, and we expect these technologies to ramp in 2022 and 2023. We also continue to see supply constraints, particularly in semiconductors, and we expect those constraints to continue throughout 2022. Regarding the five-point plan I laid out in early August, let me provide you with a short update on each item. The first action item was to work very closely with our contract manufacturing partner in Vietnam with the goal of resuming full production as soon as possible. Over the last three months, we have made steady progress in restoring manufacturing capacity at the Ho Chi Minh City facility. It was at its lowest level in July and has gradually improved since then. This improvement has continued into the fourth quarter, and we are now running at full capacity. Our partner has done an excellent job managing the COVID-19 protocols, And I very much want to thank all the employees in that location for their diligent work through a difficult situation. The second action item was to have two additional manufacturing sites up and running as quickly as possible to diversify our geographic production and increase our manufacturing resiliency. I'm glad to say that we have now reestablished capacity at a facility in China and are ramping new production lines at a facility in Mexico. With this North American facility, we can ship to our enterprise router customers in the U.S. much faster while reducing some of the global complexity associated with overseas manufacturing. The third action item was to use our balance sheet to play offense and invest in parts that will enable us to fulfill our customers' orders as soon as possible. These investments were made in Q3, and inventory levels increased, as you can see on the balance sheet. Now that we had ramped back up our manufacturing capacity, we had been converting our raw material component inventory into finished goods. The fourth item was to undertake strategic price increases to offset some of the additional costs and investments we were making, balanced with the need to remain competitive in the market. Our approach is to be strategic on pricing, not opportunistic, as we need to be able to meet our customers' IOT requirements over the long term, while allowing us to earn proper return on investment and recoup the increases in costs that we are experiencing. We expect the impact of these pricing changes to occur gradually over time, starting in the fourth quarter. And the fifth and final item was to control the company's OpEx. Our OpEx has declined sequentially, and we have been very careful in managing our expenses, balancing the need for continued investment while allocating as much as possible to production. Sam has been doing a great job with his team, ensuring that we are only spending in areas where we absolutely have to. Moving on to the executive management changes that we announced yesterday, I'm very pleased to say that Praveen Dasal has joined us as Senior Vice President of Engineering. Praveen and I have worked together at multiple companies, including Veritas, Seagate, and LSI, so we know each other well, and he has consistently delivered high-quality hardware and software solutions. So we're glad to have him on board, and he'll be ramping up quickly here in the fourth quarter. In an effort to streamline the organization and also provide better focus for each of the teams, I have made the following key changes. Roy McLean is reporting to me as Senior Vice President of Operations, overseeing manufacturing, procurement, and quality. Joining Roy's team will be a new Vice President of Supply Chain, who comes to us with more than 25 years of supply chain experience in Silicon Valley, including Lumentum and Seagate. I've asked Jim Ryan to take on the role of Senior Vice President Product Partnerships and Marketing. The product management team at Sierra will now be consolidated under his leadership. Steve Harmon is moving to a new role as Senior Vice President of Global Sales. Steve will be adding the European and Asian regions together with his America sales team, so that will streamline and improve our go-to-market efforts worldwide. As a result of these changes, the new leadership at Sierra is smaller, more efficient, and with clear roles and responsibilities. I would like to take the opportunity to thank those leaving the company for their contributions and service. In conclusion, our demand remains very strong across our product lines, and we expect again to be supply constrained in 2022. We have made significant progress getting the manufacturing lines back up and running with increased geographic diversity, including a new facility in North America. We have a new leaner management structure with clearly defined roles and responsibilities that enables a clear focus on profitable growth in 2022. I would once again like to thank our employees, our customers, our suppliers, as we collectively work through the challenges of the COVID-19 pandemic and the tight global supply chain. Together, we will thrive. With that, I will turn the call over to Sam for his review of the third quarter results.
spk05: Thank you, Phil. Good afternoon, everyone. Note that we report our financial results in US dollars and on a US GAAP basis. We also present non-GAAP results to provide a better understanding of our operating performance. A full reconciliation between our GAAP and non-GAAP results is available on our website. Total revenue in the third quarter was $82.5 million compared to $113.4 million in the same period last year. Connectivity, software and services revenue was 35.2 million in Q3, up 5.4 million or 18.2% year over year. Gross profit in the third quarter was 24.1 million or 29.3%, lower sequentially by approximately 5.5 percentage points. Our performance in the third quarter was primarily impacted by our manufacturing capacity being significantly reduced in Q3 due to the COVID-19 related production interruptions in Vietnam. And this significantly impacted our revenue and gross profit in the quarter. Gross profit margin was lower due to the absorption of fixed costs spread across lower production volumes due to the production interruption and higher component costs as a result of continuing supply chain constraints. Our non-GAAP operating expenses in the third quarter were $44.7 million, down $6.2 million, or negative 12.2% year over year. This reflects our cost efficiency initiative that we've been undertaking. Sequentially, OpEx decreased $1.6 million, or negative 3.5%, as we've been tightly managing expenses in several areas this past quarter. Also, note our GAAP OpEx and Q3s reflects an 11.5 million impairment charge related to the intangible assets of Maingate that was acquired in 2015 in Sweden. In the third quarter, our adjusted EBITDA was negative 15 million compared to an adjusted EBITDA of negative 7.1 million a year ago. Moving to the balance sheet, we ended the third quarter with 75.5 million of cash. including $9.9 million in attractive long-term debt that we obtained during the quarter. Cash flow from operations was negative $48.4 million, and capital spending was $4.3 million, which was expected in Q3. During the quarter, we continued our strategy of investing in inventory to secure the supply of components. So you can see that inventory increased to $71.2 million from 46.9 million at the end of Q2 this year. Over the next two quarters, we expect working capital to normalize as we experience improved production in Q4, and we'll be shipping more products to our customers. Regarding guidance for the fourth quarter, the impact of the COVID-19 pandemic and on our global business continues to remain uncertain. While we continue to experience and evaluate the effects on our business, The overall severity and duration of adverse impacts related to COVID-19 on our business, financial condition, cash flows, and operating results for the remainder of 2021 and beyond cannot be reasonably estimated at this time. As Phil mentioned, global demand for our products remains very strong. Given this landscape, we are providing revenue guidance for Q4 of $120 million to $135 million, with a midpoint of $127.5 million. We are experiencing very strong customer demand and orders for our products and solutions, and we believe the macro trends of IoT, private networks, and 5G are accelerating. With that, I will now turn the call over to questions. Operator, please open the lines.
spk00: Sure, sir. As a reminder, if you have a question at this time, please press the star one on your telephone keypad and wait for your name to be announced. If your question has been answered or you wish to remove yourself from the queue, press the pound key. Your first question comes from the lineup, Josh Nichols with B. Riley Securities. Please go ahead.
spk10: Hey, guys. This is actually Amman jumping in for Josh, but congratulations on a better than expected quarter here. My first question is, what type of rampant demand for high-margin 5G products is the company experiencing, and when do you think will that have a favorable impact on gross margin?
spk09: Hi there, this is Phil. You know, we're actually seeing very strong demand for our 5G products. I think what we've said historically is we expect to see that really ramp and have an impact probably towards the second half of 2022 into 2022. I mean, we're ramping very strong, but in terms of percentage of overall volume, it's still not a big enough percentage. But suffice to say, they're ramping and we're getting very good traction on our customers. That's helpful.
spk10: And then, you know, with the strong end market demand, do you anticipate backlog growth? Would that potentially fleshing out in 2022 as production improves?
spk09: um yeah i mean right now i mean our backlog frankly is as strong as we've ever seen it um from that side and i think we can going to continue to work it as i mentioned i we expect to continue to be have more demand than we can fulfill certainly well into 2022 if not all of 2022 and that's a function of our strong demand but also a function of our supply chain constraints on the semiconductor side got it last question from me
spk10: So I know you've been ramping up your production facility in Mexico. Can you talk about how that's progressing and where you are to getting that close to, you know, max capacity?
spk09: Yeah, we've actually started, you know, ramping up production for enterprise products. Some of the first products came off the line earlier this month, so into the fourth quarter. And, you know, I think that we're continuing to ramp that. So I think we've been pleased with that ramp up. And at this point now, we are, in fact, shipping production-level units of various sorts out of three different facilities around the globe.
spk10: Thank you. I'll pass it on.
spk00: Thank you. Thank you. Your next question comes from the line up, Thanos Mishopoulos with BMO Capital Markets. Please go ahead.
spk06: Hi. Good afternoon. Good afternoon. How should we think about gross margins? So, for example, if Q4 revenue were to kind of rebound to Q2 levels, which I guess would be at the upper end, would the gross margin profile look similar? Or are there some dynamic associated with supply constraints that would lead to a different gross margin profile even if the revenue recovers?
spk09: Yeah, Thanos, this is Phil. You know, look, I think that we do expect gross margin to recover some into the fourth quarter. You know, really two factors. One, we expect the volume to increase. And second is we'll start to see some of the effect of the pricing increases we made. So we do expect to see some of that. You know, offsetting that will be a little bit of mix-related issues because where we're farthest behind is on the module side. So you might expect us to try and recover from the module backlog and then, you know, also additional continued cost increases. So I would expect the gross margins to improve into the fourth quarter. We're not guiding that, but we've got some headwinds and tailwinds that are kind of offsetting a little bit there. But net, we should see some improvement into the fourth quarter.
spk06: Okay. And maybe a bit early to ask this, but just as far as seasonality, normally you have a seasonal dip in Q1, but just given the dynamic year of the supply constraints and the backlog, may it be different this time around, or what would be your thoughts on that?
spk09: Yeah, that's a good question. I mean, historically, we do see some seasonality into Q1 from Q4. Obviously, we're not guiding Q1 at this point. So, you know, it's a little bit premature. But I will say, I mean, I think we expect to be component constrained again here fairly soon before long. So I think that... You know, I think Q4 here is probably going to be a bit of a bounce back quarter, just us burning through some of the component inventory that we had on the balance sheet, and we're going to likely be supply constrained again here in the first quarter.
spk06: Okay. And then finally, as far as OpEx, and given some of the cost actions, would it be fair to think of OpEx being down a little bit sequentially in Q4 versus Q3, or how do we think about that?
spk09: Yeah, I think it may be, I mean, it may be slightly up. I mean, we're doing everything we can to control it. I mean, I think in the Q3 timeframe, we really worked hard to make sure that, obviously, that was a pretty challenging situation. We delayed some stuff that we actually need to get done from a certification perspective. I'm not expecting, you know, a lot of movement, but it may be up a little bit, but we're not really guiding that. It's kind of in and around there.
spk07: Okay.
spk09: I already think some of the points.
spk00: Thank you. Your next question comes from the line at Todd Copeland with CIBC. Please go ahead.
spk07: Yeah, good evening, everyone. I was curious on what is the expected cash burn in the fourth quarter? And if you're going to unwind the inventory, will you not have to make further inventory investments as you go into 2022 so the burn rate picks up again? So, some color on that would be helpful. Thanks a lot.
spk09: Yeah, thanks, Phil. Sam, I'll try a little bit, and then maybe you dig in with the details. I mean, I do expect our inventory to go down in the fourth quarter as we continue to burn, kind of make our component inventory into finished goods. Cash on the balance sheet will really depend on a number of other factors in terms of you know, working capital and timing of APAR and a bunch of things like that. And we expect the working capital as a result of that to normalize over the last next couple of quarters. But we do expect inventory to go down here in the fourth quarter. And Sam, do you want to make any additional color on that?
spk05: Yeah, sure. If you look at the revenue guidance we provided, you know, it's kind of going to be flattish cash from operations. So then you have really working capital should improve a little bit offset by Some restructuring costs, you saw the announcement of management changes yesterday, also offset by a little bit of cap back. So I think cash would be flattish to plus or minus $5 million would be a good range.
spk07: Okay. But then if you burn the components and your supply constraint in 2022, do you have to start to dip back in and drive inventory up throughout 2022? How should we think about that? Thanks a lot.
spk05: Well, Todd, I mean, we're at an elevated level right now with the factory being interrupted with what was happening in Vietnam, which we previously disclosed. So I think we've seen a high in our inventory levels given our relative size. That being said, obviously, we will continue to invest into the supply constraints throughout 2022. I just don't think you'll see it quite at these levels because we'll be turning it quicker with our factories on. So that investment will continue, and overall we'll have to make those investments in working capital. But I see this closer to the ceiling on the inventory side. Great.
spk07: Appreciate it. Thanks a lot.
spk00: Thank you. Your next question comes from the line up, Anthony Stoss with Craig Helm. Please go ahead.
spk04: Phil Kleisler- hey guys say Phil and Sam a couple of couple of questions here so. Phil Kleisler- So I understand the component charges, but from a production standpoint if you've got two additional facilities coming in line in in the December quarter. Phil Kleisler- Are you capable in Q1 from a production basis to handle kind of the influx of orders, I know you probably won't with component in terms of production and then secondly. So you were brought in to really make some pretty significant operational changes, and I know you got hit right out of the gate with COVID issues in Vietnam. With the new management team, can you now hit the ground running and start to focus on those operational issues and maybe give us a sense of what OPEX might look like, say, a year from now? Yeah.
spk09: Hi, Tony. Thanks. I mean, well, just a couple of quick comments on that. In terms of the manufacturing output and things like that, one of the things to keep in mind, what we've tried to do with our manufacturing is actually increase resiliency because we knew we are going to be relatively component constrained. We didn't want to bring on enough capacity and have it stranded. So what we've been doing is actually moving text fixtures, moving component supply, doing things like that. So While we may end up with a little bit extra capacity in general, what we've been trying to do is just increase our ability to manufacture at different sites and give us some more resiliency. So it's not like I've got triple the capacity online. So that's one thing to keep in mind. You know, in terms of some of the operational changes, I think you've seen, you know, I've taken a pretty big change in terms of clarifying the staff, in terms of the organization, the roles and responsibilities. You know, you see us kind of turning around and getting the manufacturing recovered. You're going to start to see recovering gross margins. And, you know, where it goes into 2022, I would expect to, you know, we're not guiding that at this point, but I certainly think the backlog and the business conditions continue to be strong, and you should expect to see significantly improved financial results from this company in 2022. Okay.
spk04: And then if I could just ask one more. And I think you commented about this in the last quarterly conference call, just increasing visibility from your customers. Everybody wants to get ahead of continuing component shortages. Are you into kind of 2023 yet with your customers and you have a good sense of what they're willing to pay and what your ASPs might look like and hopefully gross margins improving?
spk09: Yeah, we are not into 2023 yet. I would say we're probably out into Q3 of 2022. And, you know, I think, yeah, the gross margin question is obviously we're going to try and do what we can to improve that across the board. There's going to be multiple factors that drive that, right? Mix, component increase, price increases, all the rest of it. So I think that what I would say is rest assured that myself and my management team are keenly focused on improving all elements of the P&L. Okay.
spk04: Best of luck, guys. Thank you.
spk00: Thank you. Thank you. Your next question comes from the line of Derek Futterberg with Collier Securities. Please go ahead.
spk08: Hey, guys. Thanks for taking my questions. I wanted to start with monthly recurring revenue, sort of flat again, quarter over quarter. You know, I understand you guys have some month-to-month fluctuations. I was hoping if you can sort of explain that a bit more, why that's the case, and maybe explain it as it relates to attach rates of connectivity and software. on your devices, you know, how that's trending, that'd be great.
spk09: Yeah, that's a good question. Thanks, Phil. I mean, I do think that, you know, we kind of guided that to be, you know, relatively, you know, flattish, I guess, and we kind of came in there. I think the delay in production of both modules and routers has caused a bit of delay in terms of deployment, which in turn has affected that growth. It has grown nicely year over year, um and i would uh expect uh that to grow into 2022 uh from that side so i think that um you know that's that's where we're looking at that point i think your question on attach rate is in fact a good one um you know i'm not prepared to um you know frankly answer that today because i think there's a lot of moving parts in and out of that and we've been just frankly trying to figure out how to make sure we get the manufacturing up and running but I think what you should walk away with is that the key part of the business, we do expect it to grow into 2022. And I am focused on growing the entire company as well.
spk08: Got it. Got it. And then you guys have been sort of going to the gray market for components. You're still in a component constrained environment broadly, but has your ability to sort of use the gray market for additional components. Has that changed at all? You sort of, navigated the supply constraints pretty well throughout COVID. Has that market deteriorated or, you know, can the gray market sort of serve as a decent level of support on the component side in 2022?
spk09: You know, as you might imagine, the gray market spot market changes daily. And so in some cases, the price premiums that we see out there for certain constraint components are frankly way out of reach. And, you know, we have not been able to get all of our components satisfied on the gray market. So I don't expect that to be the case in 2022. So what we try and do is work as best we can with our partners. are trying to build all the various different kits that we can, and when it comes down to the very last minute, then we look to see what's available on the grand market, and if we can get enough at a reasonable enough price, then depending on the situations, we'll do it, and depending on the situations, we won't. So I would say it's a case-by-case basis that we manage daily, and we'll likely be in that situation through 2022. Got it. Very helpful. Thanks, guys.
spk00: Thank you. Your next question comes from the line of Paul Traber with RBC Custom Markets. Please go ahead.
spk03: Thanks very much and good afternoon. Just following up on the supply chain constraints that you're seeing, with the changes in your manufacturing footprint, is there an opportunity or what timeframe do you see as an opportunity to make changes to try to mitigate some of the supply constraints in terms of reengineering your products? you know, over what timeframe do you think that's possible?
spk09: You know, most of 2021, a lot of 2021 from an engineering capacity perspective has been actually spent doing redesign of components. And we are actually continuing to do that on that front. What's interesting there is, I mean, we really... Take an approach to try and increase the diversity of components that we use versus what has historically been engineering dogma to try and use the same components and increase reuse for actually going out and trying to Get multiple different products to make sure we've got diversity in place. So we're continuing to do that. I expect that certain percentage of the engineering capacity we have will be focused on doing that kind of development, certainly through the first half of 2022
spk03: And, you know, I mean, if you can throw over some rough numbers, it would be helpful. But, like, the environment is, you know, likely to be challenging. To what extent, like, from a proportion point of view, I don't know if it's 50% or whatnot, do you think you can mitigate those challenges through improved engineering of products, you know, just diversifying component supplies?
spk09: Yeah. Yeah, I mean, we definitely are trying that. In some cases, right, obviously it's easier, for example, you can, it's easier to swap out memories or it's easier to swap out passive components and do some other things. When you've got some more complicated logic that requires software and firmware changes, we want to be really careful because it involves a requal with some of our, some of our, you know, network operators, right, which is, which is obviously a painful situation. So, you know, it's hard to, it's hard to give a blank an answer to that. Obviously, we try and minimize the amount of downstream impact that we can. Oftentimes, these replacements are not pin-for-pin compatible, and so it takes a little more work to do so.
spk03: And then just one last one for me. Just in terms of the cash and the cash flow, on the balance sheet, you have a reasonable amount of cash. I mean, how much of that is either – you know, either stranded in certain geographies or there's some sort of restrictions on it or you need it for the operations of the business.
spk09: Sam, I'll let you answer that one in terms of location and cash.
spk05: Yeah, Sam here. Yeah, we don't have a ton of restricted cash, but obviously as a global company, we do operate in Asia Pacific and North America. So a certain amount of cash is needed, you know, to operate in those regions. But there's no restricted cash or any cash stuck in an area. Like, for instance, when we had automotive, we had cash in China, which is very difficult to move and get out, right? But we're no longer in any of those jurisdictions, so our cash can move relatively freely.
spk03: Okay. Thank you. I'll pass on.
spk00: Thank you. As a reminder, if you need to ask a question, please press the star 1 on your telephone keypad. Your next question comes from the line of Scott Searle with Roth Capital. Please go ahead.
spk02: Hey, good afternoon. Thanks for taking my questions. Nice job out of the gate in the outlook into the fourth quarter. Hey, maybe just to quickly dig in on that front, Phil, the guidance of 120 to 135, it doesn't sound like demand and backlog are the problem. I'm wondering if you could address what you've got covered from a component supply availability standpoint at the current time into that fourth quarter outlook. And also, at what revenue level do the real supply constraints start to kick in? And I've got a couple of follow-ups.
spk09: Yeah, Scott, thanks. Look, I think you might imagine that last quarter I didn't guide, right, given the uncertainty for all that. And I think it's reasonable to assume that the guidance range that we have, I have, a certain degree of confidence, a high degree of confidence that I have the supply to build the range, the products in the range we talk about.
spk02: Okay.
spk09: You know, maybe... Sorry, you had a second question going forward.
spk02: Well, just in terms of where those supply constraints really start to kick in. You've talked about, you know, this fixing Vietnam, you'd quickly move from being production constrained to being supply constrained. And I'm wondering if you could just kind of help us understand at what revenue level, and I know it's going to vary depending on the mix between modules and gateways, et cetera, but kind of roughly where we are today and where you think we are as we kind of move into the first half of this year or next year.
spk09: Yeah, that's kind of a tricky one to answer. I guess what I'd say to you, the way you want to think about it is, I mean, we've kind of ramped up to nominally full production at this point in the quarter, you know, in early November we did, and probably by the end of the fourth quarter, we will be back in a supply component constraint environment. So it's kind of a situation where if we need 20 parts to build something, we get 19 and we miss one of them, then you still can't build. So it's difficult to answer that question. But I would say lead times with semiconductors are not decreasing. In fact, they're increasing. And I think our procurement team is doing as good a job as possible managing all these situations. You know, I would expect this to be, again, component supply constraints and demand far exceed our supply, even in a Q1.
spk02: Okay. That's helpful. And maybe if I could, I know the revenue categories have shifted around a little bit, but looking at connectivity software and services, traditionally the type of gross margins in the mid to low 40s relative to, I guess, the rest of the comps out there, it's a low gross margin figure. There's a lot of data traffic, I think, that goes through that And it's also been an unprofitable business. I know it's early, but I'm wondering if you could give us kind of your thoughts on that front in terms of what that business should look like as we start to look out to the second half of next year.
spk09: Well, I think it's fair to assume that we can do better. I think there are multiple comparisons on multiple different of our businesses where I'm not satisfied with the results and I'd expect us to do better, not just on the gross margin side, but on the overall profitability of that business and other businesses. So I don't want to get into specific things here, but you might imagine that I'm not leaving any stone unturned in that area.
spk02: Okay. Fair enough. And one last one, if I could, kind of falls into the category of probably premature and unfair. But on the enterprise business, it's been a nice business for you guys. It's been a good business from a gross margin profitability standpoint. There have been some moves within the industry, whether it's Ericsson and Cradlepoint or more recently with Digi and Ventus. I'm wondering if you're seeing a push from your customer base to push more to more of a recurring revenue model there and what your early thoughts are on that front. Thanks.
spk09: Yeah, I mean, look, I think the enterprise business is a very strong part of the portfolio. We've got a very good presence in first responders, public safety, industrial, oil and gas, infrastructure markets, very strong feedback on our product line. And, yes, I think we are looking at different ways that we can attach connectivity business to that, including some things like managed connectivity services and the like. So that would be an area that we are definitely – focused on growing. Great. Thanks so much. Thank you.
spk00: Thank you. As a reminder, if you need to ask a question, please press the star 1 on your telephone keypad. And we have no further questions at this time. Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.
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