If you look at the efforts that the United States Navy is going through in terms of the increasing automation, an introduction of artificial intelligence into war-fighting capabilities. And I think we see that over the longer term. As I said, there are several orders of magnitude of growth left in demand. In terms of length of deployment, it varies. And I would put it into two buckets. There is the long-term supply of vehicles to customers, on either a take or pay or a lease to own structure, which we have in place for some of our customers. And they would typically stretch for, I can say, a year or two. And then you have still a fairly sizable contingent of the market that, particularly at the earlier stages, when they’re taking one or two vehicles, is trying out a vehicle on a job that they’ve got.
But I think as we are showing is that a lot of the larger contracts that I just referred to that stretch over two years or so, they tend to originate from customers who took a vehicle for one or two jobs for maybe two months or three months at a time. And have then converted that into, well, great, I really like what I did with this one vehicle. I’m going to take two next year. And then actually I want to take six or I want to take eight. And I think that’s what excites us. And I think there is a — that length of deployment increasing and the order of magnitude of the demand increase is what’s really helping us grow our profit margin, as you can see in the SEC in Q3 financials.
Shawn Severson: So it’s really the two factors coming together, much more overall demand, right? As time goes on, you expect the length of those contracts to increase, creating this much bigger stream of reoccurring revenue. And obviously that’s great business and good margin. So both of these should be happening at the same time, units and length of contracts, right?
Philipp Stratmann: Yeah. I think you’re right, Shawn. That go hand in hand. There is still a materially untapped part of the industry, let’s call it the ocean industry in general, where vehicles aren’t being used. And to tap into that market doesn’t require us to do any material R&D. It requires us to just integrate different deployment tools on our platforms. And I think that’s what’s exciting. And you saw that with the demonstrations that our team did at Oceanology in London this week. And those different types of sonars and sensing equipment that can be deployed on the same platform that, might have done a work with an aerial during a couple of weeks beforehand, or that might have deployed a radio for a military customer at a different time.
Shawn Severson: Okay, thanks for that, Philipp. Another question, and I won’t say too much about it. But for modeling our growth in commercial versus military, should we think about differences in margins, and is military or commercial more likely to have more contracts, right, longer term contracts? I’m just trying to understand the dynamics of the margin growth as these two businesses grow at different rates or separately.
Philipp Stratmann: I think the margins are pretty similar on both sides. And we’re starting to see an increase in the duration of the terms that our commercial customers are wanting to sign up for, which is something in the past we’ve seen primarily from defense and national security customers. I think the other bit that is starting to really gain traction is the interest in the buoy side of the business, which is then longer — those are definitely longer term deployments. And almost all of that is sitting in the defense and national security space.
Shawn Severson: Yeah. And then my last question is, on the commercial side, talking about Latin America whatever might be, are you seeing a — are most of these projects that you’re working on new projects, or are you coming in and displacing conventional practices or conventional solutions with your solution, or are you being deployed more on new things that are going on and new projects that are going on?
Philipp Stratmann: Both. It is often — in certain cases, it is a new project, but it’s a new project that may have originally envisaged using a traditional tool of doing the work, but they’re now open to using different tools. Or it is an existing project where a customer is looking for alternative ways of doing the work, and therefore, we’re displacing, let’s say, a much larger carbon emitting, fully crude vessel, which then has, obviously, all the benefits that we would provide in terms of lower cost points and lower emissions. So it’s definitely a mix of both.
