Iridium Communications Inc. (IRDM) Earnings Call Transcript & Summary

All right, everyone, thank you very much for coming. I want to extend my thanks to everyone for being part of day 2 here at DB's Media, Internet and Telecom Conference. My name is Anthony Klarman. I'm on the fixed income research side, for those of you who I don't know, and I've covered Iridium here for a long time. I want to thank the company's CFO, Tom Fitzpatrick, for being with us here today. So Tom, thanks again for coming.

My pleasure, Anthony.

So maybe the right place to start, given that there may be varying levels of experience in the room with respect to knowledge of the company. You just reported really solid fourth quarter results, and you introduced '23 guidance to the market. I thought maybe we would start by giving you a chance to kind of recap the year you had in '22 and talk a little bit about the guidance you introduced for '23, which actually shows accelerating growth for the company in a few different areas.

Right. So yes, we reported year-end results in February, and it was really incredibly strong revenue growth here. We grew our revenues by 17%. I can't remember doing that in my 13-year tenure at the company. So very strong top line growth. And I think EBITDA grew about 12%. What was atypical in the year was we had equipment sales that were up 50% year-over-year on the strength of shipping chipsets to Garmin and things like that, but also a really strong handset sale year. It's really kind of owing to a couple of things. Our primary competitor was out of stock. They -- so they didn't have phones to sell, and so we -- that was -- came to our benefit. So that was the equipment story. And then we signed a really important contract with the Space Development Agency to help them with that endeavor, and that boosted our engineering revenues. But as you know, Anthony, we're -- we think that what drives the profitability of our company is the recurring service revenue. And then we guide on that every year, and that was really strong. We grew -- I think our original guide on service revenue was 6% to 8%, as I recall, and we actually finished at 9% growth in service revenues. And so where that growth came from, as we've been saying for some time that our broadband product, our service product is superior to the competition and we price them aggressively. And we have been expecting really good growth with that. But got off to a slow start in COVID because we couldn't get access to ships. But what you saw in 2022 was we were accessing ships, and I think we grew the broadband business by 20%-ish in the year. So kind of a proof of concept that our product is a better mousetrap. IoT continues strong growth, right? I think IoT grew 14%, something like that. And we think that is what -- that area of our business is going to be represented. We think it's going to be a double-digit grower in 2023. And that -- for things like telemetry on Caterpillar heavy equipment, those sort of things in terms of industrial applications, but where we're seeing the outsized growth is in personal communications, these devices like inReach from Garmin, and other companies as well that do sell personal communications. In that line of business, we have a 50% CAGR in revenue for the last 5 years. So you saw a continuation of what has been strong growth. And we think that, that is a really strong grower as we look out. Even over the long term, when you consider there's, what, 6 billion smartphones that don't work on 90% of the globe, that these personal communication devices are very useful. And so what was really atypical is our traditional satellite phone business, which as we -- we sold debt over the past years in equity. We had characterized that, and that's our single business -- the single largest revenue item it's called commercial voice and data, but it's our satellite phone business, we had characterized it as slow growing but highly defensible. Because we knew that people have tried to undercut us on price with an inferior product and it didn't resonate. What we saw in commercial voice and data this year was actually 10% growth, which was the surprise, right, which we would model. And there were really a couple of drivers for that. We've introduced some new products, Push-to-Talk product and Iridium GO!, which is a mobile hotspot. That is within that sector, that is growing much faster than the rest of that portfolio, over 30% growth in those 2 new product lines that is propping up commercial voice and data. And a couple of other factors. The fact that the competition didn't have phones, that benefited us not just in equipment revenues but also in our access in air time revenues. And finally, conflict. When there's conflict, as there was in the Iraq war for example, when there's conflict, military equipment, the war fighter, has usually kicked it up with satellite equipment. And that kind of causes our revenues to grow as well. So all in all, that was a really, really strong year. And you're right, we finished at 9% in service revenue in 2022. Our guide for 2023 is actually 9% to 11%, so an acceleration.

And to be clear, because I had an investor ask the question, so I'll let you highlight the point here, that's inclusive of government service revenue, which is contractually flat. All the other segments are growing even faster?

Right. So the 2 areas that are contractual are: Government, which is flat at $106 million; and hosted payloads. There's not much, that -- hosted payload and other is like $60 million, it's kind of flat. So that's why we wind up with kind of a 9% to 11% when you have growers like 20% in broadband and much faster growth in IoT. And so -- and which we don't think that's a flash in the pan. We think IoT is a grower for a long time, broadband the same way. Sorry, so '23 accelerating growth from '22, and growth in free cash flow, too. So we did about $280 million in pro forma free cash flow last year, and we see that accelerating to about $300 million in 2023. So continuation of the story, we -- even as strong as our equipment revenues were in 2022, we think that 2023 they're going to be in line, because the competitor still doesn't have a product to sell, and that enters to our benefit.

And what's the lag effect around the equipment sale? Like the book-to-bill from when you sell the equipment to when you start billing the service revenue.

It's really hard to find a correlation thereon. If you do it over time, you can't really -- you can't come up with an algorithm of how one relates to the other. It's generally positive. If you sell more, it will be positive, but it's really hard to say. It's what the equation is.

Yes. I mean they're clearly not buying equipment to put it on their shelf.

Yes, exactly. Right, exactly.

Could you talk a little bit about the macro backdrop? There's concerns about inflationary pressure, global macro weakness. But yet you're calling for -- you're one of the few companies at this conference who's calling for growth pretty much across every business segment they have. Where is the growth coming from? Is it from greater adoption of some of these newer services, like growth in IoT and personal devices? What are the kind of end markets that are fueling that growth?

So exactly what you said. IoT is going to -- it grew 14%. It's going to grow double digits in 2023 as well. In the commercial voice and data area, we have pricing power, we've said that for years. And so I think that's going to benefit us. Broadband, we just flat out have a better product than the competition. We knew it during COVID, but we couldn't put up the numbers because we couldn't get on the ship. Now we're getting on ships, and we're displacing the competition, and that's how we were able to put up 20% growth year-over-year last year. So the business has done really well through cyclical downturns historically. If you think about our government business, that's completely unaffected by a cyclical downturn. Satellite phones are used by first responders. It's -- that is not -- it's not affected by cyclicality. So maybe personal communications on the margin, right, will be affected. But heck, you got something that's grown 50% CAGR over the last 5 years. What is it, back up to 40%? It's not going to be stark, we don't say.

I do want to talk -- you mentioned getting the ability to get back on the ships. I do want to talk about Maritime because it's -- when you had your Analyst Day a couple of years back, you talked about the CAGR and a lot of it being driven by growth in Maritime. You got the GMDSS certification. You have some positive underlying growth trends. How large is the opportunity for you in Maritime? Because there's a big broadband provider that's doing VSAT on a lot of the big ships.

Right.

And you're often on those ships as a complementary feature. How big is that market opportunity now in Maritime?

So it's largely taking share away from the incumbent, right? The incumbent has been around for years. They had a better mousetrap than we did prior to us launching our new network. We've now leapfrogged them on data speeds. They're 200 to 400 kilobits per second, we're 350 to 700. Our equipment is smaller and it's more economical. So -- but it is a share takeaway. We estimate $400 million, $500 million of their installed base, and we're just trying to take share. We're about displacing them on vessels.

And what do you think your share is today? Just the -- I don't even know how you would define the TAM, because...

Less than 20%.

Less than 20%. Okay.

Less than 20%. So -- and the typical application is if it's a fishing vessel or a smaller ship, the Iridium service device will be the primary communications on the ship. And in larger ships, large Maersk ships that have a very small aperture terminal on them, as their primary communications vehicle, those terminals are susceptible to rain fade because they're Ka-band. The L-band were not susceptible to rain fade. And so we go on those ships as a backup, right? And that's why we're certified for safety services, so-called GMDSS, and there's only 2 of us that are certified: us and Inmarsat. And the reason is we're in the L-band. So the Ka-band could not get the safety certification like that because of the rain fade susceptibility.

Yes. I do want to talk just a little bit about Aireon. They're -- you mentioned the hosting revenues that you get. Aireon is an important hosting partner on your network and an asset that you have a significant ownership stake in. Their whole business model hinges upon the coverage and reliability of your network. They've announced some deals recently. I think Hong Kong is doing some stuff with some of their data as well. Can you remind us of what just your financial interest is in Aireon at this point? And I think there are some future milestones upon certain things that Aireon achieves where not only you get some additional monies back, but there's also been a sell-down of the stake at some point?

Right. So we're both a vendor to Aireon and a partner on -- with Aireon. So in our capacity as a vendor, there's 2 revenue streams that are in our hosted payload revenues. There's $16 million a year in hosting. And they're paying us currently, annually, that $16 million. And then there's 25-ish in data that they pay us annually. So that's in our capacity as a vendor. We also are a part owner and we currently own about 39% of that company. There's a pre-wired transaction wherein we would sell back certain of our interest to buy our interest to 27%. That transaction happens when Aireon can undertake a refinancing so they have the money to pay us that, okay? And it's a similar provision relative to the hosting. So right now, they're paying us the hosting annually, but they have a duty to pay us basically the balance when they can. So when they grow their business big enough as you know, debt guide, that you can -- they can put debt based on the EBITDA that they have, they're going to pay us that bullet on the hosting. And so what we think happens is they pay the hosting fee first and then they pay the share buyback.

Share buyback.

Lagging that.

And the share buyback is interesting, because I'm sure it was prewired at a time when you thought you might need money. But you're generating a lot of free cash flow now.

Yes, but that was a different time. I remember -- we had a $1.8 billion credit facility, and we couldn't do anything, right? So we -- and it was really key. There was 3 investors that expressed an interest in coming in to the company. And the money that they invested, it was the Irish, Italians and the Danes, the money that they invested is $120 million, that got the payload constructed, right?

Sure.

And so we didn't -- back in those days, we could not have done anything to contribute money. And so it was -- but at the time, NAV CANADA wanted to be the control equity in the venture, and then the math didn't work. So we said fine, we'll sell you back certain of our interest such that they keep their majority and allows these investors to come in. So it worked out.

Yes. I do want to talk a little bit about the big topic du jour in the industry, SATCOM and the smartphone. You hinted at it a little bit. You made your -- you didn't actually make it. And, as you always say, you let your partners do the announcing. But Qualcomm announced that they would have SATCOM to the smartphone and the Snapdragon chipset. And I think this week, Ken pointed out to me that they had released some of the models that were going to be inclusive in that. Can you maybe just highlight for people what that relationship looks like for you? How you monetize that relationship over time? And then maybe I have a few follow-ups on what we think kind of the size of the market opportunity can be.

Right. So our relationship is with Qualcomm. And Qualcomm turns around and sells the Snapdragon to manufacturers. And they named 6 of them, OPPO and several. So that's going to be the model, right? And so our revenues from Qualcomm will be -- they pay us for the development of the functionality. They pay us a royalty. And then they pay us, think of it as service revenues access in air, right? So what you think is our satellite functionality goes into a smartphone, Iridium gets paid, whether it gets used or not, okay? Because that's just like the model in terrestrial access. So we're going to get paid for the ability to have satellite connectivity, and then we'll get paid when you use it. So there'll be 2 dimensions of it. But what's exciting is it's just the addressable market. If you consider there's 80 million high-end and call it shipped every year, so that's just the high end. And there's more than that on the lower end, right? And then there's possibility to widen the footprint to laptops and vehicles. And so there's -- this could be a really large opportunity just because the addressable market is so large.

And I guess if you're talking about high-end Android devices, I mean, just like by Apple device, those are probably also getting refreshed every 2 or 3 years.

Exactly. That's why there's 80 million shipments a year of the high end, right? People turning back their smartphones. And I envision that you're going to go in to a Verizon, AT&T store looking for an upgrade, and that rep is going to say, "Have you ever wanted to send a text and couldn't"? And you say, yes. Well, if you get this, you'll never be off the grid. And so we're the beneficiary of that. We don't have anything to do with that sale, but we get paid when you have the ability to make a satellite connection, which is great.

And then again, when you use it?

And when you use it, yes.

So a reasonable question that an investor asked me, that I'll pose to you, is you already talked about you have a pretty decent sized phone business, which is an access airtime usage business. And it has been, what, the industry has used forever since the start of the first constellation to be in touch in remote areas. How much of this could potentially cannibalize that, such that perhaps some of the things that are getting used on your current generation of phones could actually then be somewhat replaced by the ability to put just SATCOM in the smartphone?

Right. So think about who the users are of our satellite phones. So we have 400,000-ish subscribers of satellite phones and related terminals. That's after 20-some years in business. This is a very niche market. It's great. It's our biggest single revenue line, but we get $45 something like that, $46 a month per user there. So these users are first responders, U.S. military, policemen, that sort of thing, that have a need for a ruggedized device. It's voice. There's no voice in the Qualcomm chip, right? It's text only.

And SMS.

SMS and text and -- safety. So voice is important to a first responder because there's all kinds of studies that say you can't get the urgency of the matter or the inflection from a voice into a text. It's -- and so a first responder is not going to want to limit themselves to text, for one. But the whole point is, that is just really niche, a very small, 400,000. The smartphone connections are going to be tens of millions, right? And -- but at a much smaller ARPU. So if you think of where our business is growing, right? It's in the personal communication devices. That's -- I said, it's grown by 50% CAGR over the last 5 years. We have 750,000 subs. It took Iridium 18 years to get to 1 million subs. We got to 2 million subs in 4 years. And we said we're going to get to 3 million subs in less than 4 years. And that's driven by this phenomenon of personal communications. It's -- yes, it's low ARPU. It's $4 to $5. We'll take it all day long because it uses very little network resource, and it's a very fast-growing market because there's 6 billion smartphones. We see the direct connectivity to smartphone as just being the next kind of evolution of that connectivity. Will the ARPU be less? Yes, it probably will be less because it's much more of an insurance policy. Somebody that's buying the Garmin device knows that they're going to be hiking the Appalachian Trail, and they want to get this device. It's ruggedized, they have maps, et cetera. And so there, it's purposeful. They're going to go get it because they know they need it. The average smartphone user is going to get pitched this capability as an insurance policy of, "Hey, I don't know when I'm going to be off the grid and want to text, but I want that capability". And we love that with it because it's insurance, right? And they use it when they need it. And maybe they never need it. We don't really care because we get paid for the right to use it.

So maybe a way to summarize it is, you're collecting dollars on what is a relatively narrow niche. But you're going to be collecting cents on a market opportunity that is multiples the size?

That's -- yes. Yes.

One of the things I wanted to talk about is other ways that you can kind of utilize or drive capacity on the network. Could you talk a little bit about the constellation, kind of how much spare capacity you have during peak periods and what this kind of growth in lots of additional units using the network might do with respect to network capacity and utilization?

Right. So, our usage is spread around the globe, right? And so it's a different satellite that is absorbing a different load. So it's because of that distribution around the globe, you don't have bottlenecks. You might have a bottleneck in -- if you have a bunch of ships doing broadband in a port, right? That could happen. It happens occasionally. But this new line of business is the most efficient. This is text. This is very small bits being transported. So what we like about it is, where we see the outsized growth over the long term is in this personal communications and it's the most efficient use of our network.

Yes. Well, you're in a unique position right now relative to everybody else, kind of, in the satellite industry because you're generating significant free cash flow. You don't have meaningful CapEx needs. I know you took CapEx up a little bit just to make some sort of investments for future growth. But what other types of opportunities are there that you would consider that are sort of within your knitting, that might represent other uses of cash? And then we'll sort of talk a little bit later about your buybacks and some of the other things. But what are the strategic investments? I know we've talked in the past about things like spectrum and other things that you might want to try to get your hands on over time now that you have kind of cash to deploy.

Right. So we think about the primary place that we're spending our free cash flows is in buybacks and dividends. So we're -- we've had two $300 million authorizations of buybacks. We bought back $420 million worth of our shares. We see ourselves doing that continually here over the intermediate term. And again, we introduced a dividend for the first time in the country's history. So those are uses of cash that will continue, right? But then on the strategic area, we're not spectrum-rich, right? We have less than 9 megahertz of spectrum. We're not spectrum-rich. We'd love to get our hands on some additional spectrum. There's not a lot of it out there, but there are some. And we certainly -- we keep tabs on developments there. We also would think that there could be a play for us in IoT on the low end. And so that would be -- that might be something we'd make a move in there.

So I wanted to talk a little bit -- you talked about the buyback. The stock is -- again, you're going to have a lot of envy from other companies at this conference. The stock is, I think, just cents off of a 52-week and an all-time high. You were up 25% in a bad, kind of, NASDAQ market last year. How do you think about -- and the Board, think about scaling that buyback, just given what maybe some of the other opportunities are for investment? Or should we just think of it as kind of drag it out to the right and you're kind of committed to the same pacing in the same level, almost irrespective of where the market might be trading the stock?

So they've authorized two $300 million authorization, right? So that seems like that's 2 pace. An example of 2 paces, right? So they're going to offer -- we'll exhaust this authorization, and we'll come with another one. So we'll comment on the side, but they've authorized $300 million 2x. So -- but for sure, we're going to be buyers of the shares.

But I guess what I'm asking more is do you weigh the value of buying back the stock at current levels, versus I could take $100 million and make an investment in the next area on, whatever kind of that is called or...

Yes, sure. So yes, we want -- when we were buying the shares, we believe that we're going to get a return on our investment. It's better than our cost of capital. That's what we -- but when you say calculate intrinsic value, it's a what if -- what do you believe the penetration of smartphone is going to be? That does -- has a big impact on your calculation of intrinsic value. So we look -- we consider all those variables, just because the addressable market is so big.

And just to go back to that point because I forgot to ask it as a follow-up. I think the Qualcomm release said that it expected some of the first units to be in service in the back half of this year.

Yes.

I don't think any of that is incorporated into your guidance in any way, correct?

No, because we didn't have visibility on shipment -- quantity of shipments, so we weren't going to just make a swag. When we get clarity on what these shipment levels are, we'll adjust accordingly. But no, our 9% to 11% does not -- is not affected by smartphones.

And to the extent a unit is shipped, that is one of the things that triggers the first kind of revenue monetization.

Yes.

It doesn't necessarily need to be sold to an end user?

No. If it's provisioned with satellite connectivity.

So -- and where will that -- I know that you were asked this on the call, but maybe so folks in the room have it too. Where will these new revenue streams come into in your current kind of reporting format?

So a little bit of it will be in engineering and support. But over time, the vast majority is going to be in service revenues, okay? And it will be grouped with hosted payload and other.

Got it, okay. And so that is the -- and I think you gave guidance for the service revenue of...

9% to 11%.

And that would be, again, exclusive of any of the monies that you might get in, in the back half of this year of units shipped?

Yes. Our 9% to 11% is not materially affected by Qualcomm.

I'm going to probably frighten my bankers who are in the audience when I ask this question. But you actually prepaid $100 million of fairly cheap debt during 4Q to further advance your leverage reduction. You're already within your target leverage range. I guess, how do you think about the optimization of the capital structure? You're relatively low levered. And I think maybe some of that is from prior lessons learned of when you had leveraged much higher and things were harder. But relative to the EV at which your stock trades, your leverage is fairly low. How does the Board think about what the right optimal leverage is for the company over the cycle of -- my next question is going to be when you have to start thinking about investment for the next constellation?

Right. So we've said for some time, we like leveraged between 2.5 to 3.5x of EBITDA. And if you just look at the free cash flow that the company throws off, we would delever much lower than that because we've thrown up so much cash. And so what we've said is we'll intervene with share buybacks to keep the leverage in that 2.5 to 3.5x. So that's how we view it. The repurchase of the debt, or the payoff of the debt, was simply we have a $1 billion cap of our $1.5 billion, right? So we had -- we were exposed to $500 million. We just thought, hey, knock out $100 million of it just because you have -- we have the negative interest carry, because we can't invest at the rates that we're paying. So it just made sense to us to clip off a little bit of that because it was unhedged.

Got it. So in essence, you're now even more hedged against interest rate volatility...

Yes.

Because your -- I think your cap, you said was about $1 billion?

$1 billion.

And so now the term loan is $100 million less.

Yes.

What kind of payback or growth characteristic is management and the Board looking at as they try to weigh other forms of investment other than buying back the stock? You talked about the intrinsic value. And you have a pretty observable multiple that the stock trades at, which is, relative to its peers, has done very well. What type of payback or return criteria are you and the Board looking at as you take a look at what other types of investment opportunities might be?

We want to clear our weighted average cost of capital, right? I mean, that's how we look at it. And any undertaking, whether it's buying in the shares, buying another company.

But that's capital. Your weighted average cost of capital because the stock has done very well and your debt is pretty hedged, and your WACC is actually pretty low relative to your peer group probably.

Well, if you consider our peer group to be satellite company, we don't, right? I mean we are -- we're called satellite, but we don't consider them as being our circumstance.

Yes. Infrastructure would be your peer group.

Right. Right.

There are 2 kind of big items for the company that I think you always will have to visit on in every 7- to 10-year cycle. One is the government contract, which is really good, steady revenue. I know that was really important for fixed income investors when we did a prior financial, because it gave a lot of certainty of revenue. When does that contract come up for renewal? And when do the renegotiations kind of start happening with the government around that?

Well, so I've been here for 2 renewals, right? Both times it comes down to the wire, like you can talk to them a year in advance. Doesn't like -- they don't make a move. Like the last time we gave them an extension -- so contract expired, we gave them extension, we jacked the price, like the monthly price, we jacked it. And they didn't get it done, and then we jacked it again, and we jacked it again. I was like, come on you got us, so -- if history was any guide, I bet you that's what happens. And I think it's up in '26, right? So that's what's happening. But so -- that's when we'll get down to the negotiation of that certain contract that will be [indiscernible]. But every day, our government team is making us more relevant to the U.S. DoD, in our satellite, time and location business at Thales, integrating that into DoD, a host of different initiatives that make us more strategically relevant to the DoD. And we're working on that all the time.

And that agreement, I don't think even covers things like Certus and some of the other enhanced features that they could use that are outside the scope of the fixed take-or-pay deal that you have.

That's right. It doesn't include Certus.

So the other big topic that kind of has a cycle to it is CapEx. You're in a really nice CapEx holiday right now. That's what's contributing to a lot of the free cash flow in addition to the growth in EBITDA. There will come a time when you have to start at least planning around the next generation of network. Satellite companies are always launching satellites almost before they even finish getting up the current one. How long is the planning cycle for the development of the next constellation? And when would we see any meaningful dollars start to come in the form of CapEx?

Right. So just if you consider, our original constellation was launched in late '90s, right? It lasted until 2020, it was working fine. So 20 years, right? So what we've said is, hey, it's a 10-year CapEx holiday. We think that's conservative, right? Because we -- you can observe that the last one lasted 20 years. This went out to last just as long, because it's later generation technology, et cetera, we haven't lost satellite. We haven't -- we launched our first ones, 2017 right? So we haven't had a failure. So...

You have been launching the spares now? You haven't needed them.

That's right. We're launching the spares probably this year. So we haven't needed them. But it's better that -- that's just an insurance policy, too, right? Because you have them in space. If a satellite fails 10 years from now, you've got them in the space. So it feels to us like the CapEx holiday last between 2020 and 2030. Might we be doing some planning and network architecting before that? Yes. But we're not going to be spending material amounts with a Thales like we did starting in 2010 until 2030 is our estimate.

And would you -- you talked about not necessarily being very spectrum-rich. Would you think that getting your hands on additional spectrum to kind of build that into the framework of the next constellation might be also an important strategic initiative?

So the network design is going to be done based on what our spectrum position is, right? So if it is our current spectrum position, which hasn't been augmented, perhaps there's more satellites than the 66 generation 2, get additional capacity out of that spectrum that we have, right? So there's -- that's very much the topic of conversation about what spectrum might we be able to get. And -- because you have to engineer that into whatever your network design is.

Yes. So I know we're getting close to the end of the time. I thought maybe I would kind of try to wrap it up and get your views on this. You have a very high fixed cost asset that took you years and years and years to build and to launch, and it has very low variable costs. So now you're sort of trying to find ways to leverage that asset that you've got for revenue growth. And I think the SATCOM and the smartphone is one incremental opportunity that isn't in the model yet. But if you were to sort of give the audience a view as to some of the things that you and Matt and the Board think about, what are some of the other growth levers that you think are sort of out there in the realm of things that are possible, that really could kind of fit into your network and maybe even sort of further juice some of the longer-term growth that some in the market have talked about as a possibility?

So satellite connectivity to vehicles, we talked about that. That's going be huge, right? That would be a huge market. Completely doable, right? It's a very similar technology to laptops, continuing to...

That could even be a Snapdragon chipset.

Yes.

It would just have to be in the OEM kind of cycle of putting it in the auto.

Yes, right, Snapdragon or a modified Snapdragon for the application. So we think this whole -- it's the Internet of Things, right, satellite connectivity to things more broadly. Look at the personal communications growth, 50% CAGR in the last 5 years. There's going to be a tipping point in my view, where a user of a smartphone is going to say, why -- what do you mean you're off the grid? There's no reason to ever be off the grid, right? So -- we're not there yet. I mean I think if you went out and just talked to a guy on the street and said, can you -- is it possible to text if you don't have cellular signals? I think the average person would say no, people don't know about that Garmin device. Yes, there's 750,000 of them, but if they did a marketing survey to say what's the degree of knowledge of that capability, it would be very small. Well, 10 years from now, it's not going to be like that. 10 years from now, it's going to be expected. Well, I think that's good for us because if it's expected, we're going to go to the satellite provider.

Yes. And I guess until then, you have the fallback of being able to constantly buy back your shares and increase the free cash flow per share, given what the business is throwing off.

Exactly.

Well, Tom, we have run -- just about run out of time, but I want to thank you very much for being with us here today, and thanks to everyone in the audience and online for listening in. So thank you.

Thanks, Anthony.