Robert Balog: I would echo all I can add to that is I can echo exactly what Brent just said, we’re more focused, we’re delivering products unscheduled. We’re pretty comfortable about that going forward. Yes, we’re in pretty good shape.
Ryan Koontz: Okay. Great. And on the competitive front, you talked about leisure that just coming from some of the larger players like Inmarsat and Marlink and guys like this. Or is it new entrants?
Roger Kuebel: It’s more new entrants.
Ryan Koontz: Got it. Helpful. And then in terms of €“ last question, in terms of the macro, like how should we €“ how should investors think about the macro impact on the, I guess, specifically leisure probably is the most impacted by potential macro headwinds, whether that’s inflation or just recessional type impacts?
Roger Kuebel: Yes. I think when you talk about inflation and recession, which we’re not in one yet, and hopefully, we don’t go into one. The leisure marine market is definitely impacted, right? Because these are for entertainment and leisure by definition, is monies that are spent to for recreation. The nice thing about our business is the vast majority of our revenues are generated through both commercial and then we talked about the Coast Guard with our military and government business. So, although we’re very focused on that piece of the business. It’s a very small portion of our overall revenue or small portion, I would say variable, but a small portion.
Ryan Koontz: Got it.
Operator: Thank you. We’ll now take our last question from Chris Quilty at Quilty Analytics. Your line is open. Please go ahead.
Christopher Quilty: Thanks, Brent. I just want to follow up on that last point. You used to report the mix of commercial versus €“ well, I should say, commercial as a percentage of many VSAT shipments. And if I remember the last time you reported, it was order of magnitude, 65%. Does that mix €“ that’s still indicative of the mix you’re seeing today?
Brent Bruun: We’ve €“ 65% is probably a bit low for merchant. It’s probably closer to €“ I don’t have the exact numbers. So Roger, maybe you do, but I know it’s
Roger Kuebel: It’s over 80%.
Brent Bruun: The last quarter. Well, the Agile has a percentage…
Roger Kuebel: Yes, because it’s Agile’s too, the Agile shipments are almost all predominantly commercial.
Christopher Quilty: Right. And when you talk about the Baltic Index being down and obviously that’s an indication of some commercial market weakness shipping market. Are you still seeing the same number of RFPs out there? Or have you seen that come down how in any way, has the competitive market changed for those larger deals?
Brent Bruun: I’d say it’s pretty consistent on a year-over-year basis. RFPs have actually come down quite a bit over the last five years or so. But on a year-over-year basis, I’d say it’s pretty consistent.
Christopher Quilty: Great. And the overall guidance for mobile connectivity taking it down, is that primarily product? Or is it evenly split between product and service?
Brent Bruun: Well, here again, when we talk about product sales, that’s truly units that we’ve sold, right? Many of our product shipments are Agile based and they’re included within our airtime components. But to answer your question concisely, it would be both, but €“ and it’s just a slight decrease, not a significant decrease.
Christopher Quilty: Great. And your network operating costs, having made the crossover here? Or do you see those being relatively stable or growing in accordance with new customer ads? Or do you have large block buys that are planned? How should we think about that on a go-forward basis?
Brent Bruun: We’d be pulling down bandwidth proportionate with customer requirements, not in big…
Roger Kuebel: No large block-wise.
Christopher Quilty: Great. And I missed on the very front end of the call. Did you provide the gross margin specifically for the mini-VSAT service?
Roger Kuebel: The airtime gross margin is 44%.
Christopher Quilty: Got it. And that’s why you were indicating that airtime margin should return back to more of the high 30s?
Roger Kuebel: Right. Yes. We…
Brent Bruun: Yes, over time. It won’t be this quarter.
Christopher Quilty: Good. And I guess final question here. When you think about some of the strategic alternatives at hand. Obviously, there’s a lot of smaller maritime service providers out there that’s one path. But you’ve historically been more focused on product line extensions, things like KVH Watch. Is there a philosophical preference for one direction over another?
Brent Bruun: Our philosophical direction right now is that we’ve built this new H Series, we have a KVH ONE hybrid network, which we have on our own dedicated 5G/LTE capacity, as I indicated from a cost perspective, a customer can go buy a local SIM, and many times that could be very competitive. But we feel we have the right data pipe, the rate tools internally with what we’re rolling out to expand those, whether it be through internal development efforts or through working with other third-party value-added service providers.
Roger Kuebel: I think with regard to your question about a philosophical preference, it’s really around what’s going to maximize value, where can we create value. And I think one of the things that we’re looking at is the suite of value-added services that we provide which are sort of more or less unique to us and where we have a competitive, a strong competitive advantage and enhancing that suite of value-added services.
Christopher Quilty: Great. Appreciate the feedback. Thank you.
Roger Kuebel: Okay. Great.
Operator: Thank you. There are no further questions in queue. I will now hand it back to Roger Kuebel for any additional or closing remarks.
Roger Kuebel: I think that’s all. Thank you. I appreciate everyone joining the call. I appreciate the questions and look forward to continuing to deliver great value for shareholders. Thanks all.
Brent Bruun: Thank you very much.
Operator: Thank you. Ladies and gentlemen, this concludes today’s call. Thank you for your participation. Stay safe. You may now disconnect.
