Martin Kits van Heyningen - Chairman, President, CEO Peter Rendall - CFO.

Rich Valera - Needham & Company Chris Quilty - Raymond James Jim McIlree - Chardan Capital.

Good day and welcome to the KVH Quarter Four 2014 Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Peter Rendall, Chief Financial Officer. Please go ahead..

Good afternoon. Thank you for joining us today to discuss KVH Industries fourth quarter results and 2015 guidance. With me on this call is Martin Kits van Heyningen, the company's Chief Executive Officer.

We should have fourth quarter earnings and 2015 guidance press release this afternoon which is available on our Web site and also from our Investor Relations department. If you would like to listen to a recording of today's call you can access a webcast replay on our Web site.

If you are listening via the Web, feel free to submit questions to ir@kvh.com and we will answer them following this call. This conference call will contain certain forward-looking statements that are subject to a number of assumptions and uncertainties that may cause our actual results to differ materially from those expressed in these statements.

And we undertake no obligation to update or revise any forward-looking statements. We would also discuss certain non-GAAP financial measures and you will find definitions of these measures as well as reconciliations of these non-GAAP measures to comparable GAAP measures in our earnings press release.

We encourage you to review the cautionary statements and other disclosures made in our SEC filings specifically those under the heading “Risk Factors.” The company's SEC filings are directly available from us, from the SEC or from our Investor Information section of our Web site. At this time, I'd like to turn the call over to Martin..

Thank you, Peter. Good afternoon and thank you all for joining us today. 2014 was an incredibly productive and successful year for KVH both in terms of our operating results and in our progress to position the company for future growth.

We continue to grow our mobile broadband business and have added important new services that both contribute to revenue and help provide a solid differentiating advantage that we believe will contribute to our momentum in the market.

Our guidance and stabilization business has a great portfolio of new products and a pipeline of significant sales opportunities as well as foothold to new markets that could contribute to significant future growth.

From a financial perspective, the fourth quarter was another record-setting period with an all time record revenues of $50.4 million up 29% year-over-year and diluted earnings of $0.06 per share up from a loss of $0.02 per diluted share from the same period of 2013. Now, Peter will cover the numbers in more detail shortly.

But first, let's take a look at our key business areas. We now fielded over 5,000 mini-VSAT broadband systems and have a market share which has nearly doubled the share of our closest competitor according to the latest numbers released last month from the market research firm Comsys.

In 2014, our global network delivered over 500 terabytes of data and 25 million minutes of voice calls. Our network is fully deployed and provides the widest coverage of any maritime VSAT service.

We have also invested in both terrestrial and satellite infrastructure upgrades this past year that have really enhanced our ability to officially manage our customers bandwidth use, which will in the long-term both improve the quality of the service we deliver and allow us to improve our airtime margins.

From our customers' perspective, we are adding a lot of useful capabilities to allow them to monitor and manage the use of connectivity services on their vessels. This will help them provide our faster and higher quality services to crew members onboard their vessels while also managing their cost, which is critically important to them.

Within the upcoming months, we will be rolling out a new customer portal, a new crew morale service called CREWlink that will enable ship owners to provide a full calling card based Internet cafe and VoIP service for their crew members and new usage based rate plans that we believe will enable us to continue to deliver a superior value, connectivity service to our maritime customers.

We are very excited about our new IP-MobileCast content delivery service, which is fully operational and now delivering over 500 gigabytes per month of content to every vessel from exciting entertainment content to digital charts, detailed weather forecast and training materials.

We are getting great feedback from our early customers not only our people signing up for the service, but we recently won several fleet deals where the customers bought IP-MobileCast as well as mini-VSAT service citing IP-MobileCast as the key reason they selected KVH for their comp solution.

Crew turnover on ships is typically around 35% and the cost of recruiting and training is significant. Our products really have a positive impact on crew welfare. In fact in one of the early trials, officers and crew were trying to get transferred to the vessel that had our media server on board.

I'm confident that we are really starting to build sales momentums as we get more units in the field and we start benefiting from positive word of mouth advertising we are sure to enjoy.

Our KVH Media Group is the largest supplier of commercially licensed media content to the maritime industry including news, sports, TV, movies and music providing an attractive subscription based service business for KVH and a great selection of entertainment for IP-MobileCast customers.

Videotel is now fully integrated with KVH and making a very strong contribution. Videotel's credibility as a maritime training market leader was the initial traction from KVH's point of view.

But now that we have their team onboard, we are really excited about the depth of their knowledge of the commercial shipping industry and their close relationships with many major shipping company customers.

We have already benefited from cross-selling mini-VSAT service to Videotel customers and have been able to get our mini-VSAT into large fleets that we otherwise would have been able to.

On the operational side of the IP-MobileCast service, we are working with two of the market leading providers of digital charts, Jeppesen and Transas as well as the leading maritime weather forecasting AWT, which is now part of the Norwegian company's StormGeo. These relationships with market-leading application providers help KVH in several ways.

First and foremost, they enable us to work together to assure the customers application or work extremely well over the IP-MobileCast service. This is an important benefit for our customers who are often resource constrained shipping IT managers that don't have the time or people to troubleshoot integration problems on new communication systems.

Secondly, we get great cross-marketing and sales support and leaders from other segments of the market are promoting the efficiency of using KVH's service and automatically delivering their content to their customers' vessels.

We are planning a series of ten events in major shipping centers around the world in 2015 to allow our various sales groups to cross-sell our products and services.

Our application partners are also excited to participate both by inviting their customers to attend the events and to present who KVH's enhanced connectivity and content delivery service will be the enabling technology for future enhanced versions of their applications.

KVH and our partners enjoy the credibility of being the thought-leaders in the future direction of the maritime broadband market.

Altogether, we have an extremely attractive sales pitch for shipping company managers as we save their money of the communication costs with mini-VSAT and also help to enhance the efficiency of their operations by saving the fuel with better voyage planning, reduce their training costs and improving their crew morale through IP-MobileCast entertainment service.

It truly is a very compelling value proposition. Our airtime content delivery and content services are all subscription base and they all offer significant leverage opportunities as we add subscribers, what is in large part a fixed cost basis.

The new value added services and our media business have excellent gross margins and have a tremendous ability to scale.

Moving to our guidance and stabilization business, the guidance and stabilization fourth quarter revenues were $15.4 million that's up 55% year-over-year driven by strong shipments of our TACNAV products, which were up over 300% to 9 million and the fiber optic gyros sales that were up 12%.

In Q4, we announced two significant TACNAV orders totaling more than 23 million of which only 4 million shipped in the current quarter – in last quarter.

We feel as if we are getting good traction in our guidance and stabilization business from the new products we have introduced this past year, our recently announced TACNAV 3D system will be best performing military navigation product we have ever introduced and we are receiving very good feedback from potential customers.

We believe the contract wins we have seen in recent years are the sign of building momentum in the military land vehicle markets around the world and we are even in a better position to pursue these opportunities with the enhanced performance of our new TACNAV 3D product.

In addition to the $19 million order we announced last quarter, which we will begin shipping at the end of 2015. We have a number of ongoing tests with customers including the U.S.

army was a new initiative to assure the availability of position, navigation and timing or PNT data in the event that their GPS service is interrupted as well as trials with significant customers in Europe, Middle East and Asia. We were recently designed into a new U.S.

army vehicle program and we are optimistic that we will see a substantial order related to this in the coming year.

The military business has long sales cycles, so we may not see the revenue benefit of many of these initiatives until 2016 and later, but we are very encouraged about the number of our [indiscernible] receiving and the activity in the sales pipeline. We also have some exciting opportunities in the fiber market gyro market.

Our 1750 IMU is starting to get traction in the drone market for a number of both military and commercial applications. Every drone has inertial sensors used for flight controls, autopilots, or stabilized optics radars and other sensors or weapon pay loads. It was great to see our IMUs being used in these applications.

In addition to the drone market, we are winning early business in projects to retrofit our IMUs in the stabilized optics in the military aircraft.

A lot of the budget turmoil that has caused military customers to cancel new aircraft programs created a good upgrade market for older aircraft and the performance and price of our inertial measurement unit seems to be hitting a sweet spot in that market. We currently have our 1750 fiber optic gyro designed into our retrofit projects on a major U.S.

military fighter aircraft that could result in sizable future orders. In addition to this military business, we are doing well in our efforts to get an early foothold in some emerging commercial applications that could grow to be very big markets.

In the self-driving car market, we are working with several of these early market leaders including OEMs and Tier-1 suppliers to define our new generation of inertial measurement units and sensors that can be produced in very high volumes and in order of magnitude lower costs than our current products.

The self-driving car technology has been demonstrated to be viable and the number of the world's largest technology companies are now jumping in. So we are working hard to stand top of the opportunities by staying actively engaged with our customers. So in summary, 2014 was a great year for KVH.

Our mini-VSAT broadband network is performing well and continues to hold a clear market leadership position. And we have continued to enhance the network to improve the quality of the service we deliver to our customers and enable us to manage our traffic more efficiently.

Our new IP-MobileCast service is getting a great reception from customers and have it onboard their vessels and we feel if we are approaching a tipping point for our earlier customers will become evangelists for other vessels in their fleets.

The content we are delivering sourced by our media group and the world's largest producers and studios is unmatched in the market. And our network efficiency in delivering this content is second to none.

And we are forming strong alliances with other market leaders, who see the benefit of connecting their applications in the IP-MobileCast onboard cloud.

Our acquisition of Videotel went extremely well and our new colleagues are great addition and really help to strengthen the KVH team with their extensive experience in the commercial maritime market all of this synergy will help us sell more mini-VSAT systems and every mini-VSAT customer should be a good prospect for our new content and value-added services.

KVH's TACNAV business is very healthy with a good pipeline and exciting new products, and finally we are getting into some great applications with our fiber optic gyros both retrofitting existing military systems to improve their performance at lower cost and a several emerging applications that could be quite large including drones self-driving cars and next generation robots.

KVH is financially strong, offers products and services that provide a unique value proposition for our customers. But we believe we are in excellent position to continue our successful growth and deliver long-term shareholder value. Now, I would like to turn the call over Peter, who will review the numbers in more detail.

Peter?.

Thank you, Martin. Overall, we were very pleased with our fourth quarter financial results. Our fourth quarter revenues of $50.4 million were a record high and 29% higher than from a year ago and we are at the high-end of the range from our previous guidance.

Looking at our service revenues more closely, our airtime revenues in the fourth quarter which includes both VSAT and Inmarsat subscription revenues were up 14% from the prior year at $15.2 million.

The year-over-year growth in the VSAT airtime revenues was 16% and our VSAT ARPUs during the fourth quarter for fixed rate plans was solid with ARPUs of approximately $1900 to $2000 per month, while the ARPUs for our metered plans were between $500 and $600 per month.

Our content and services revenue in the quarter which includes subscription revenues from the entertainment and e-Learning content as well as any professional service fees was almost $10 million, which was 44% higher than a year ago.

Almost all of this increase was attributed to revenues from our Videotel e-Learning business, which was acquired in July last year offset by a reduction in the non-recurring engineering primarily related to the Saudi Arabia National Guard contract which was completed in the first half of 2014.

Our subscription base service revenues for the quarter were 47% to total revenues compared to 43% in the prior fourth quarter.

Our product revenues in the fourth quarter were $25.3 million, which was 34% higher than the same period last year and 50% higher sequentially both of these increases were primarily attributable to high TACNAV revenues which has been factored into our fourth quarter guidance.

The impact of this was that guidance stabilization product revenues for the quarter of $14.6 million would double that from a year ago. As it relates to trends, as we have seen in the last several quarters, the majority of our fiber optic gyro revenues were shifted for use in commercial applications.

Our mobile broadband product revenues, which includes VSAT together with our marine and land TV products was 10.7 million during the fourth quarter, which was 8% lower year-over-year or 4% higher sequentially. The majority of the year-over-year decline was attributed to anticipated lower -based TV product sales.

Our VSAT unit sales during the quarter were in the range of 250 to 275 units. Turning to our gross profit margins in the fourth quarter, our consolidated gross profit margin was 45%, which was inline with our expectations and higher than the 40% we reported in the fourth quarter of 2013.

And our overall service margin was 48% compared to 40% in the fourth quarter last year. VSAT airtime gross profit margin was 33% in the fourth quarter which was down from the quarter – down from the 37% we had reported in the fourth quarter of last year primarily because we have added some additional bandwidth capacity.

For product hardware, we recorded a gross profit margin of 42% compared to 39% a year earlier, again, reflecting the significantly higher TACNAV sales.

As it relates to our fourth quarter operating expenses, we recorded $20.1 million in the fourth quarter, which was up 25% year-over-year and almost all of this increase was attributed to the addition of Videotel operating expenses, Videotel purchase accounting expenses including intangible amortization together with higher commissions related to the increased TACNAV shipments.

Our non-GAAP EPS for the fourth quarter which excludes discrete tax items, acquisition related adjustments and stock-based compensation expense was $0.29, this compared favorably to the $0.06 comparative non-GAAP EPS recorded in the fourth quarter last year. For the full year, the non-GAAP EPS was $0.62 compared to $0.61 for the whole of 2013.

For a complete reconciliation between GAAP and non-GAAP measures, please refer to our earnings press release that was published earlier this afternoon. Our adjusted EBITDA for the fourth quarter and the respective components that comprise that number was $7.4 million compared to $2.4 million recorded in the same period last year.

For the full year, our adjusted EBITDA was $18.2 million up from $17.7 million recorded in 2013. Now, moving on the balance sheet, at December 31, we had cash and marketable securities of $49.8 million, a decrease of approximately 600,000 from the end of the prior quarter.

It should be noted that approximately $6 million of this cash balance is due to be transferred into an escrow account related to the Videotel acquisition shortly. Total debt outstanding at the end of December was approximately $71 million.

At quarter-end, our inventory balance stood at $17.4 million which was 15% lower than that on hand as of September 30. Capital expenditures during the fourth quarter were $1.6 million making the total expenditures for 2014, $5.1 million.

Backlog for our guidance and stabilization products and services at the end of December was approximately $25.1 million up by approximately $5 million from September 30. Now, I will turn to our outlook for the first quarter and for 2015.

We anticipate that TACNAV shipments will be significantly skewed towards the backend of 2015 in a similar way to what we saw in 2014. As a result of this, TACNAV revenues are expected to be less than $1 million in the first quarter and only marginally higher in the second quarter.

Operating expenses are expected to decrease modestly in the first quarter compared to the fourth quarter primarily reflecting less third-party commissions on lower TACNAV revenues. And our guidance also assumes that were no significant fluctuations in exchange rates between the U.S. dollar and the pound sterling.

With this context, our revenue guidance for the first quarter is in the range of $40 million to $44 million. And we expect to have GAAP EPS for the first quarter to be a loss in the range of $0.10 to $0.06 per share and on a non-GAAP EPS; we expect that to be in the range of $0.03 to $0.07.

Non-GAAP EBITDA for the first quarter is expected to be in the range of $2.5 million to $3.4 million. For the full year, our revenue guidance is in the range of $190 million to $210 million and we expect to have GAAP EPS to be in the range of $0.30 to $0.40 per share and the non-GAAP EPS to be in the range of $0.81 to $0.91 per share.

Non-GAAP EBITDA for the year is expected to be in the range of $25 million to $27.5 million. So in wrapping up of my thoughts, our operating results were solid in 2014 and this year has already shaping up to be an exciting year and I certainly look forward to what lies ahead.

So with that, I will turn things back to the operator for the Q&A portion of this afternoon's call..

Thank you. [Operator Instructions] We will take our first question from Rich Valera with Needham & Company..

Thank you. Question on IP-MobileCast, wondering if you could talk about how you expect to see that monetize where it should show up in your income statement, is that going to be in higher ARPU in your airtime revenue, higher sales of your content.

Can you just talk about how you expect to see that monetize? And then if you can talk about what you have actually baked into your 2015 guidance in terms of MobileCast contribution? Thanks..

Right. So I think what we – the way we are going to be reporting the business is, we are going to have the value-added services where IP-MobileCast will be in that part along with the NEWSlink and the other entertainment products as well as Videotel. But also, we might talk about increased APRU's because it also be part of the VSAT airtime.

But, just to be clear, so when we reported that revenue will show up in the value-added services, media services part of the numbers..

Great. That's helpful.

And then just sort of – I want to know what the mini-VSAT hardware sales were you mentioned, I think you mentioned what's your actual unit sales, [I think it] [ph] was 250 to 275 range, could you give a number for mini-VSAT hardware sales for the quarter?.

We haven't historically broken that out Rich..

Fair enough. Okay..

So breaking out the mobile broadband and hardware revenues separate from the guidance and stabilization revenues so that helps you..

Right, okay.

And of your $25 million of G&S backlog, can you say how much of that you expect to be delivered within 2015 and would you further be willing to say what you have actually baked into your, call it $200 million of revenue from the entire G&S segment?.

I think Peter is just looking up a number to help you with that. So generally – just – while he is doing that, let me just say directionally that the TACNAV business of the $19 million order probably the first half of the hardware is expected to ship in 2015.

There is also some engineering component that we will show up in the value-added service line, so that's where we put the non-recurring engineering work. So roughly half of that $18 million in terms of the hardware will go this year and none of it has shipped yet.

So of the $19 million contract there were some NRE that was recognized, but no hardware sales yet..

Got it..

And just a – I don't have the specific number in front of me Rich, but it will be in our 10-K filing that talks about what is going to be recorded in the current year..

So I'm just wondering for guidance and stabilization as a whole, I don't know if you can give a point number or just relative to 2014, do you expect that business to be kind of flat up or down in the guidance that you have given for 2015?.

Approximately flat..

Okay..

So we do see some upside in the back half of the year, but we are guiding to flat..

And that's from the second half of the year it sounds like that you expect a pretty nice bump in TACNAV, how about FOG first half, second half or how would you think about FOG for the entire year?.

I think FOG is less backend loaded than TACNAV is. It is – we do expect it to grow, but basically more through a normal progression of increasing sales recovering from a low base as you know on the FOG business. But the TACNAV, we expect some very strong just like we saw in 2014.

So basically what we are guiding for 2015 is what – quarter we just delivered we ended up with $9 million in TACNAV in Q4, which we don't like it to be spread a little bit more uniformly, but that's just the way the vehicle deliveries are scheduled and the contracts are scheduled though..

Right. Just figuring –.

Rich, if you want to do a follow-up, I don't know if anyone is holding, Rich we may just – let them jump in here..

Sure. Fair enough, I will see in the floor and get back. Thanks..

Operator, please see if some one is hanging?.

We go to our next question with Chris Quilty with Raymond James..

Thanks, Martin. I just wanted to follow-up on the mini-VSAT business, you have been running call it 250 to 300 new vessels every quarter for – almost a couple of years running now.

But, you seem to have some language in your introduction I talked about some sizeable new orders, do you think 2015 could be a year where you can see a breakout from that kind of 1000 net adds a year or is that still further out?.

I think 2015 will be that year. I think we have got some new services that are coming out and we talked a little bit about the CREWlink which is another way to get units on vessels. We are also seeing an increase in V11 sales, so some of that fleet deals that we have just closed are V11s.

And the only cautionary comment is that there is still a disconnect between what we sell and book and what we record as revenue and unit shipped.

So if we say, we sold 250 or 300 in the quarter those are physically left the building revenue recognized units and that's not the same thing as, hey, we signed a fleet deal for 100 units, which might take two years to get those completely installed as recognized. So I just want to clarify that point..

I understand.

And are you still seeing the same paradigm with the shipping companies where they might order some number 50, but the rollout happens over a period of a year or 18 months or are you seeing any deployments where they are going quicker?.

Some people do it quicker and generally the pacing item is the – what else they are doing at the same time.

If the company is rolling it into an IT renovation program or they are putting in servers and computers and new software and a billing platform and I saw an ERP type platform then it takes longer, if they are just putting in our product that can go very quickly. So like the NYK rollout was – they did over 100 vessels, 130 vessels in 6 months.

So it really depends on the customer..

And speaking of billing platforms, I mean right now you are selling into the HR ops budget, are you developing anything that will allow more crew level access where sailor, if he wants to watch particular movie could swipe his credit card, is that something that you could deploy in 2015 or is that longer term development?.

Yes. That's part of what we are working on with this CREWlink platform where we see this as another opportunity to get the equipment onboard more like the Coke machine model, the equipment is provided in [crew phase] [ph] for the drink. So we will be launching that in the coming months..

Okay. And I will pass the floor and circle back in and give Rich his chance..

Great..

And we will take our next question from Jim McIlree with Chardan Capital..

Thanks and good afternoon..

Hi, Jim..

Peter, what tax rate are you assuming in your 2015?.

It's around about 27% to 33%..

Okay.

And is the exclusion could be – reconciliation from GAAP to non-GAAP for 2015, are the major items stock comp and the amortization, is there anything else that we should be aware of?.

In 2015, is your question or for the quarter just ended?.

For the year coming up – for 2015?.

Okay..

Its amortization and cost based comp..

Okay, great. Yes..

And I know that –.

Just one clarification on that. The discrete tax item was a reduction of tax assets based on tax law changes in Rhode Island. So we will actually have a lower tax rate going forward which is the probably because you may recall we were paying a higher tax rate in previous years..

Okay, great. And I think Rich was asking about guidance and stabilization for this year and I believe you said that it's about flat versus 2014.

Is that flat for FOG and flat TACNAV, or is one up and the other is down to get to the flat total?.

Yes. FOG is projected to be up and TACNAV is projected to be down. But I will say that TACNAV has some opportunity for upside in 2015. So we tend to – but those orders tend to be so specific that we generally don't like to forecast them outside of window visibility just because they are binary..

Okay.

And is there – are there any special margin issues with TACNAV that we should be aware of – or is this mostly a – that you are looking mostly a product sales for TACNAV and just a high margin is the only issue we need to be aware of?.

Okay. That's correct. There are large entry non-standard margin programs in 2015. So it's just a normal product margins which are solid..

Okay, great.

And my last one, on operating expenses for this year, are they – can you characterize operating expenses this year versus 2014?.

Sure. I think – I will let Peter answer that. But, I think it's best to look at the run rate starting in Q4 because of the acquisition..

Right. So we will have obviously a full year of Videotel in 2015. And the Q4 run rates as we projected in the first quarter, we are expecting operating expenses to be modestly down because of TACNAV commissions. But, then just to stabilize, so there is no expected significant increase year-over-year..

But in the second half of the year, is TACNAV sales increase, shouldn't you have that increase in OpEx as well to reflect the commissions for the TACNAV?.

In the second half, yes..

Yes, yes..

Year-over-year excluding the impact for full year of Videotel, you won't see significant increases in operating expenses..

Okay. Fantastic. Thank you so much..

Thanks..

And we will take our next question from Rich Valera with Needham & Company..

Thanks.

Peter, it looked like the airtime revenue is actually down a bit quarter-over-quarter, was that seasonal effects, like seasonal deactivation sort of or was that something else going on under the covers there?.

You are absolutely, right. It's seasonal – historically the third quarter is our strongest quarter and then we have seasonal tensions in the fourth quarter then starts to pick up in the first quarter..

Got it.

And can you give us a sense, I mean it sounds like you have got some optimism about maybe seeing an improvement relative to that historical 250 to 300 new ships per quarter on broadband, have you kind of assumed an acceleration in your guidance, or are you still kind of assuming that the same baseline level with maybe some upside if you get above that level in terms of your overall year?.

There is some baked in because if you look at the growth we are projecting solid growth. And it's also some of these new business models where we will be putting units into the field, which might be different revenue recognition model than the current model. So that's all baked into the current guidance.

So there might be a little bit of change between the number of units and the product revenue. But, I don't think it will be significant..

Can you just elaborate on the new business model for deploying units in the field, is this more of a sort of leased model?.

Well, it's getting back to I think it was Chris' question about is there an opportunity to sell some of these services directly to the crew and we have been experimenting over the last six months with some methods, but we put the equipment on board, free of charge and then we charged the crew on a pay per used basis a bit of no obligation model.

And that's been working out pretty well and we probably will expand that program somewhat in 2015..

So would that be effectively a capitalized expense for you and then you kind of amortize that over the life of the contract or…?.

Yes, right. That show up a service revenue then..

Sure. That makes sense..

But just to be clear that we don't see that being a significant portion of units in 2015, I don't want to give the wrong impression. But that is part of what we are seeing as the opportunity to increase units deployed in 2015..

Great. And then just from a competitive differentiation standpoint, so you obviously got your MobileCast network with a lot of proprietary content, Inmarsat has kind of their own broadcast network if you will with some content that got sort of some movie content and some other stuff.

How differentiated are you seeing this offering, are you seeing, it sounds like you have actually seeing some deals where it was the sort of deal closer if you will, but how differentiated do you see your content and the combination of the content in MobileCast?.

It's pretty dramatic. So first of all, there approaches a broadcast service, it's primarily stored on the box. So then the titles get unlocked over time, so the old titles they get released. And they do have some unicast news service like 20 minutes per week of news where we have 24 hours of live news per day.

It's really a dramatic difference in terms of the amount of content that's being delivered. So in some ways we think it's actually good that they are following our lead and recognizing the importance of entertainment because when you compare the two, it's really a dramatic difference..

And am I correct in understanding that you are not letting them sort of have access to your proprietary content for their service, you kind of keeping that as a proprietary to your customers and network?.

Yes. They have access of a lot of content through some deals that they have done. So they have the access to movies and things like that. Where we have proprietary content like our training linked service or like our news linked service, those might be opportunities to sell content to their customers in the future.

But, I think the IP-MobileCast service itself is just too rich in terms of the amount of bandwidth that it would take for them and to sell through their network. But, our NEWSlink product today we are on about 8000 ships, almost a 100% of those are being delivered over Inmarsat. So we sell content today over Inmarsat --.

Got it. Thank you. That's all for me..

With low bandwidth..

Okay. Got it. Thanks very much..

At this time, there are no further questions over the phone lines..

Okay. That's great. And we will be available to answer any questions over the phone or via email. Thanks for your time..

This now concludes the presentation. Thank you for your participation..