Earnings Transcript for COMSW - Q3 Fiscal Year 2021

Operator: Good afternoon, and welcome to COMSovereign Third Quarter Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Steve Gersten, Director of Investor Relations. Please go ahead.

Steve Gersten: Good afternoon, everyone and welcome to COMSovereign Holding Corp’s 2021 third quarter earnings call. My name is Steve Gersten and I'm the Director of Investor Relations for COMSovereign. Joining us today is Daniel Hodges, Chairman and CEO; and Fran Jandjel, Chief Financial Officer, both of whom will provide prepared remarks and then we'll open the call up for questions. Before we begin, I'd like to remind everyone that certain statements made during this call that are not historical facts, are forward-looking statements that reflect management's current expectations, assumptions and estimates of future performance and economic conditions and involve risks and uncertainties that could cause actual results to differ materially from those anticipated by the statements made herein. The forward-looking statements contained in this call are made as of the date of this call, and the company disclaims any intention or obligation other than imposed by law to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. We encourage you to review our publicly filed documents, including our SEC filings, news releases and websites for more information about the company. With that, I'll turn the call over to Dan.

Daniel Hodges: Thanks Steve. Good afternoon, everyone. Welcome to third quarter 2021 conference call and for today's call, I'm going to make a few brief opening remarks and then turn the call over to Fran, our CFO, who will run through the third quarter financial highlights. We'll try to keep it clear, concise, and pertinent. After Fran's presentation, I'll discuss what we as a company are doing to address the ongoing supply chain and chip shortage issues that are impacting not just our industry, but across the nation and highlight a number of important developments occurring in the business. After that, we'll open the call for Q&A, should you have any questions after this call or if you don't already receive our news releases and SEC filings, please contact Steve Gersten, he'll put you on a list. Probably looking at third quarter’s financial results, as we see significant increases in year-over-year revenue and a continued upswing sequentially with higher margins, the results are shy of expectations due to ongoing global supply chain disruption, chip shortages, and lingering impact to COVID. These are the same worldwide challenges facing nearly every business today. Additionally, third quarter performance was impacted by the delay on two significant government contract awards, which have shifted to the right, indications are we did not lose those awards. They've simply experienced a short delay before contracts. Based on current trends, our production capacity, supply parts and on-hand inventory, we now believe we're positioned to grow our top line results by 75% in 2021 versus full year over 2020. After Fran speaks, I'll touch on our proactive approach to addressing supply chain issues. As I said, including a good investments in inventory and employing our internal capabilities to redesign some of the radio products to lessen or eliminate the impacts plaguing our peers. Through these actions, we're confident we can deliver improved results in this quarter, as we already are experiencing and throughout 2022. With that, I’ll turn it over to the CFO, Fran Jandjel.

Fran Jandjel: Thanks to the introduction, Dan. We're getting with an overview of the income statements, for the three months ended September 30, 2021 total revenues were approximately $4.1 million driven by sales in our Global Telecom unit led by Fastback, DragonWave and VNC with contributions from Sovereign Plastics. This compares $2 million in 2020, represents an improvement over 100% versus a year ago. This is also up sequentially from $3.6 million reported in Q2 2021, a 15% increase. As Dan previously communicated, revenue growth has been impacted by several factors in particular, the continued shortage of key components and tight supply chain conditions, especially related to DragonWave. Production at Fastback has resumed and we have successfully addressing part constraints, gross profit for the three months ended September 30, 2021 stood at approximately $2.3 million, representing our gross margin of 55%. This is up significantly from a gross margin to 48% reported a year ago, and a sequential improvement from the 50% recorded in the second quarter of this year. This improvement was due to product mix, the contribution of services revenue, and increased manufacturing efficiency of Sovereign Plastics. Looking ahead, we believe this level of gross margin is sustainable and it's quite high in contrast to our competitors. Operating expenses in the quarter increased to approximately $12.7 million, up from approximately $7.9 million reported a year ago. This was expected to see expand the size of the business, including five acquisitions. Increases in R&D expenses reflect ongoing technology advancements as well as supply chain related re-engineering activities. Third quarter 2021 expenses are slightly down from second quarter 2021 expense levels, which we believe represented a high watermark this year. As part of ongoing integration activities, there are three core business units, Global Telecom, Sky Sovereign and Power Supplies. We have implemented a number of business process improvements, staff realignment, and cost-cutting programs we believe will reduce total operating expenses already underway in the current quarter. Looking at our balance sheet as of September 30, 2021, the company ended the quarter with $2.9 million in cash and approximately $10.8 million invested in inventory and $6.7 million in prepaid expenses. This significant increase was planned and reflects inventory builds to meet customer demands primarily for radios and related hardware for the remainder of the year and into 2022. As noted in the earnings press release earlier today. Earlier today in October, the company completed an offering of 9.25% Series A Preferred Stock raising $8 million in gross proceeds. Following this transaction, the company paid down approximately $2.75 million in outstanding debt. At this point, I will now turn the call back over to Dan.

Daniel Hodges: Thanks, Fran. Fran is not only the best CFO I've ever worked with today, folks, but you just got to love that British lilt. It's a bonus on top of everything. So let me start by discussing the current macro environment of supply chain and chip shortages. And more importantly, what are we doing about it. First, as others in our industry have already reported, supply chain disruptions and chip shortages are having a major impact on their ability to source parts and manufacturing their telecom products. This also means at the end customers, including network operators will have challenges implementing their network upgrades and may face inventory shortages when it comes to maintaining their networks, should radio line go down. This scarcity is creating unique demand opportunities though, for companies with flexible U.S.-based production and design capabilities like COMSovereign and for the basics of supply and demand is as all of us know from first quarter college courses, limited supply equals price elevations, not just in components, but in products as well. Most of our competitors have raised prices by 20% or more. We've increased pricing as well that's still making demand for our systems, even higher. Due to our agility, we can redesign our radio products down to the board level to eliminate troublesome components and we are doing just that. Using our internal top-notch radio engineering team, we've already begun redesigning certain elements of our products to eliminate many of these components and chip issues that the broader market is suffering with. Against this backdrop, I'm proud that our team's been able to produce significant year-over-year in sequential growth revenue with higher margin amongst the highest in the industry, but our entire team recognizes there's more to be done. And that brings me to my second point. As we said in past calls, we have been aggressively investing in parts and components since early this year, as we anticipated our needs ahead of plan production increases. This investment follows our clearly defined approach to supply chain management, which includes leveraging our Tier 1 and 2 contract manufacturers while standing up in-house manufacturing capabilities, leveraging our direct relationships with U.S. component suppliers and leveraging our direct relationships with oversee compliers of integrated circuits. While this investment has required significant cash, as you can see on our balance sheet, it has provided us with a cushion that we're converting into product revenue. While we're not quite where we want to be with all of our products in terms of securing every part needed to support this increased production. We're in a much better position now to control product costs. We have either identified additional components sources or have begun the re-engineering activities, I just mentioned to design out what we can’t readily procure. Third, as a team we’re focused and committed to improving our operating results in particular taking costs out of the business through continued integration of our operations into three units, Global Telecom, Sky Sovereign and Power Supplies. Our integration activities combined with our ability to maintain industry-leading gross margins and supported by increasing revenue levels, such as those now occurring in the fourth quarter are critical factors in our ability to get the business to a positive EBIT level during the first quarter of 2022. In terms of generating additional cash for operations, we plan to monetize several of our assets in the near-term to meaningfully bolster our cash reserves without having to issue common shares. I expect to give you all more detail on these efforts in the days ahead and I think the market will be very pleased to start seeing the positive effects of our discipline strategy that we’ve maintained to this day. Let me now recap just a few of the milestones of the third quarter. We announced the resumption of volume production at Fastback, as we commenced initial shipments under multi-year Master Supply Agreement with a Tier 1 mobile provider. I’m pleased to note that deliveries under these POs expected to be completed at the end of the year are now proceeding ahead of schedule and we’ll ship all of them by the end of this month to that single customer. Our team has been working with various units within the customer to expand purchases under the existing multi-year master vendor agreement in line with increased production capacity we now have in place. We announced the closing as well of our acquisition of Saguna and its innovative 5G mobile edge computing software. As we’ve said in the past and repeat now, and I can’t give enough significance to this, edge compute is perhaps the most important fundamental technology required for 5G to operate as expected. To date, Saguna is already powering the fastest 5G network on the planet and has a series of development deployments underway with major enterprises and operators worldwide. You may have recently seen a press announcement from StarHub and Saguna’s strategic partner Hewlett Packard who have launched a new solution called StarHub 5G multi-access edge computing powered by Saguna’s vEdge+, Hewlett Packard and StarHub are helping enterprise and government clients move time critical workloads near to the source wherever customers require this ultra low latency performance. This is just one example of a number of programs with top level communication providers where Saguna and its mech technology are playing a critical role and the capabilities of forthcoming 5G systems. And I expect to report more in the months ahead, please research it for yourself, I think you’ll see the value proposition as orders of magnitude greater than you expect. At DragonWave, we announced the North American launch of the Extend multi-gig E-Band solution with our partner Siklu, one of the world’s leading providers of E-Band radio hardware. Extend combines DragonWave’s Harmony product, the industry’s highest power packet microwave technology with a market leading performance of Siklu’s EtherHaul E-Band radios. With Extend, we have introduced a single solution designed to deliver long range ultra high capacity cost-effective and ultra reliable wireless connectivity. This unique solution is ideal for mobile network operators, rural broadband and wireless internet service providers. Public safety organizations, as well as city, state and local municipalities also benefit firsthand. This launch followed a series of customer and distribution channel presentations and webinars conducted earlier this year. In our Drone business Sky Sovereign, we held a series of 10 live flight demonstrations of the HoverMast tethered drone system for members of state and federal government, national security, law enforcement and first responders throughout late summer and into October. These demos occurred both at the Tucson facility and in the field along the Southern border and in the D.C. capital area. Response to these demos was stunning highlighting the unique capabilities of the HoverMast to those in attendance. We have 15 plus follow-up demos back in the capital area in the very near future. Now for some recent business updates. In the Global Telecom unit, the Fastback team is finishing up works on the remaining links under that $8.7 million PO for the Tier 1 and we’re focused on securing the next set as I said. We have several large new telecom customers, which demand has been enormous and even some niche ones, including hospitality industry customers like the Switzerland. At DragonWave, we are working with numerous new customers, including a new Tier 1 operator who is wrapping up in the field testing of our radios. We’re working on initiating POs now with them. We also delivered a 5G open RAN system to the National Institute of Standards and Technology. Engineers in this will work with COMSovereign to evaluate and demonstrate the applicability of converged 5G and next systems and use cases for mission critical public safety and other programs utilizing our standalone 5G system that includes both core and radio technology as well as our Saguna advanced mobile components. At RF Engineering, we entered the IPTV market with a new set top box replacement called Symphony Allegro, Pik, Roku or many of the others after receiving Google’s Android TV operator tier certification a qualification reserved for only a select number of providers. We are now preparing to bring this customized solution to large potential customers, including communication service providers, such as cable and fiber network operators, digital content owners and large hospitality and residential facility. At Sky Sovereign, the highlights include the work on several domestic and international sales opportunities, including foreign programs in Israel, Eastern Europe and in Asia, in addition to the U.S. where we are waiting acceptance of a proposal for significant multi-year service agreement. At Drone, we’re working on a number of additional programs for our WASP tethered aerostat system with both military and Homeland agencies. We’re optimistic about the closing of those two delayed awards I mentioned earlier, and I believe that will happen very soon. Our vision has entered into several teaming agreements and is in late stage negotiations for new product design and deliveries ranging from a large international environmental sensor and government programs, including a sizeable contract with record. We expect to announce developments on these efforts again shortly. In our Power Systems business with production underway on the 120 and 108 batteries sales and marketing activities are quite well underway, targeting verticals, including consumer on and off roads as well as commercial fleets. We’re also near production of a 130T heavy duty system designed for EV, Marine and over the road transportation applications and have begun discussions with potential international license source of this battery technology, both to produce and to accept and distribute. Finally, in our R&D and technology efforts. At Lextrum, we have completed over the air testing of the In-Band Full-Duplex technology. The better than expected results of which you have confirmed that the technology delivers roughly double the efficiency of wireless signals. We are now ready to begin sales and licensing of the first phase of this technology, which is a standalone electronically reconfigurable antenna system. We’re excited about this one because it enables some wireless network operators to quickly benefit from Lextrum’s IBFD technology with up to 100% increase in simultaneous bandwidth without having to replace the radio hardware. This kind of capability will be critical to the success of 5G systems, such as integrated access and backhaul, and will allow operators to begin reaping the investment of the billions of dollars in spectrum they own. We expect to announce the introduction of this new product later this month. Additionally, a white paper entitled In-Band Full-Duplex communications using a novel adaptive reconfigurable antenna detailing the over air – over the air testing and the electronically antenna configured technologies it’s been submitted to go GumaTech 2022. That’s scheduled for March 21st, where we look to have the opportunity of presenting more of this detail and signing up with potential military and government customers. We believe that Lextrum is uniquely valuable technology, a key differentiator in the marketplace and is an integral part of our product roadmap as we commercialize our next generation of 5G radios, including Polaris G2 scheduled for introduction in the next few quarters. VEO continues to advance development of its novel silicon photonics technology, completing additional tape outs, the production of the semiconductor designs. It was also recently awarded a critical new patent grant. We believe it a quantum leap forward in silicon photonics technology. At this point, I’d like to open the call for any questions. Operator?

Operator: [Operator Instructions] The next question comes from Theodore O’Neill from Litchfield Hills Research. Please go ahead.

Theodore O’Neill: Thank you very much. In Fran’s remarks, she said that you were seeing key components shortages, especially, and I couldn’t make out what that component was. Would you mind repeating it?

Daniel Hodges: No, I don’t think Theodore that I named a specific component. But I can tell you there are a couple of amplifiers and there’s another one made by Qualcomm, a very difficult to find. In some cases, what we’re seeing is for instance, today we were quoted $100 for a part that a year ago was $0.70. We’re not going to do that. So we’re designing the parts. And when we design a part, which is very – it’s difficult to do and get done in a short period of time. But we are very agile team. So what we do is we run through and design at the board level. We pull the part, we look very carefully across the landscape of components worldwide. We select several that may or may not work. We take those, we put them into the board level with a fairly high assurance that it will work. And then we’d have to test it. And we test it across a wide range of conditions. Once that’s done, we then go ahead and produce that board, put it into the radio set, and then test the radio set. We can do that in a very minimal time period where others cannot. And I think that’s a – definitely a kudo to our engineering team led by Dustin McIntire and Bud Patterson. Hope that answers that.

Theodore O’Neill: Okay. I thought Fran mentioned something specifically. But yes, I was going to ask about if there were pricing increases that you just wouldn’t cotton. Two more questions. One is, can you give us an idea of what revenue would have been if you hadn’t had supply chain issues in the quarter? And are you still seeing these same issues here in Q4?

Daniel Hodges: Sure. First question is what would we have had, I think we would have had somewhere on the order of 15 to 17 total that could have been as low as 11. And it was really is kind of dependent on some of those contracts that I mentioned. There were a couple of military contracts that were sizable that would have done a pre-pay if you will, an earned amount, which is calculable as revenue. So I do believe not only are the – have those shifted roughly maybe a quarter to the right, but we have seen additional opportunities come in, which we thought we would have, and they’re starting to produce now this quarter. We think again, this quarter is extremely significant. We do still see some of the impingements but we’ve flexed left and right, I guess you could say to try and push those negative impactors out of the way. We will still see some issues with supply chain and some of the components. But we’re designing those out as fast as we can and we’re seeing a quick turnaround time. So it will impact us. I think it’ll impact the broader markets clear through May or June of next year before the supply actually comes back to meet demand. And I say that based off of some optics we have into other production facilities that are working furiously around the clock to ameliorate these impacts. But that’s my response.

Theodore O’Neill: Okay. All right. Thanks very much.

Daniel Hodges: Yes.

Operator: The next question comes from Jeff Rubin of JCR Trading Corporation. Please go ahead.

Jeff Rubin: Hey guys, thanks for making my call. Great job on navigating in these challenging business times. My questions, can you go a little bit more details about the ways you were exploring to raise cash without issuing any additional shares?

Daniel Hodges: Yes, sure. I can only comment there are several assets in the business, some inventory and some others, we believe we can monetize in the near-future and by the near-future, I mean immediately. There are – the potential of spinning out a couple of the units we acquired to fill strategic holes, if you will. And again, you’ve heard me say in the past, do we want to do this organically or do we do it via acquisition? Well, some of these via acquisition that we’ve done might not have an otherwise direct impact on telecom. We believe that there were certain aspects of those units that did. So probably we’ll see in the coming six months a couple of the units that we’re going to spin out or let go of, but we keep the exclusivity of those components that we acquire them for in the first place. So if they have an applicability to telecom that is critical, which we believe they did, but they have a broader market that is not related to telecom. Those were the ones you could probably expect to see some spinning out of those. And that’s all been part of our strategy from day one. So as we spend those out a, we get a lot of cash back in and we retain exclusivity on what it is we bought them for. And that’s the important part. Furthermore, we’re working with industry partners on a few programs, which we believe will allow us to not only extract value from the inventory, but allow us to tap existing partner inventories as well to bolster our sales pipeline. So I hope that answers that.

Jeff Rubin: Great. Thank you.

Daniel Hodges: You bet.

Operator: The next question comes from David Lavigne of Trickle Research. Please go ahead.

David Lavigne: Hi, all. So I just want to make sure that I understand the supply chain issues are largely on the telecom side. Have – did those impact any of the drone business?

Daniel Hodges: Yes. For instance, in Sky Sapience – has as somebody has their mic on and it’s repeating. There we go. Sorry about that, David. For instance, in Sky Sapience, the motors that we have on our quadrotor those runs sometimes between 2,400, 2,700 volts, they are very specific motor and the windings of which were custom designed by our own teams. So it’s been difficult for instance, to procure those. So we’re having to buy – I guess, you could say inventory of those ahead of what we expect sales to be. But we’ve got to buy them now because they’re longer lead time. So do they impact the business? Well, yes, of course. Are they going to prevent the business or the sales? Not, not in the least. It’s just a matter of proper planning ahead of time. So where you could have gotten components in 60 days, sometimes they’re six months out now, so we have to purchase them ahead of time or put money down on them and commit to them. And that’s what we’re doing. So other than telecom, there are a few sticklers, but we’re dealing with those we believe in adequate fashion.

David Lavigne: So on the drone side as well, is the – I think obviously with respect to delayed rewards, I mean, I suppose that that probably sort of has to do with kind of just the chaos on the Southern border without waiting into that. But is that been the essence of the delayed rewards? And I guess what I’m also wondering is initially I sort of envisioned you selling drones kind of into the telecom space in terms of maybe temporary towers and those kinds of things. Is that still something that we should be – is that still something that is out there maybe more than just conceptually? Are there things going on that’s sort of suggests that you’ll sell drones into that space as well? I mean, I get the government thing is kind of hard to get your arms around in terms of timing and so on and so forth. I’m kind of wondering what the drone business looks like in the telecom space.

Daniel Hodges: Yes. Let me address that in two areas. Number one, in the idea of selling a drone, let’s just take an example. If you sell a drone, again, I’m using hypothetical crazy number. You sell a drone for $5 or you could run a three-year program on a leasing basis where you retain ownership of the drone, you operate the thing on a lease. And you can make that lease $17 or $18 over a 36 month period with set number of hours. And when you go over that, you charge more. That is a far, far better business model for us. That is actually has what’s being demanded right now by several customers. So we are scrambling fast to put together these systems and these types of arrangements that we can deliver to customers and start the operation for them immediately. Now, the second part of that question on telecom, yes, absolutely, we're working with a single customer right now. It's a fairly advanced and we are actually have a boot on it, our new upgraded, I guess you could say FeatherLite radio system. The FeatherLite is a 4G and 5G system that if you look on the website, you can see what it is made by VNC. So we actually – we can mount that up top. If it's a 4G, we mounted at the base, if it's 5G and use an antenna, but it actually, we do have fiber optic in that tether. So it is immune to RF interference. We have a GPS denied environment capability up at the radio airborne unit. So it's a very unique capability that you don't see much from others. There are other tethered systems, but nothing is like this HoverMast, it's like an aircraft as compared to a model. It's incredibly different. And that's why the government is so interested in it and why even some of the Tier 1 telecoms are going, wow, I guess we under shop that one. Maybe we should look at this HoverMast because it's really what we need. So yes, to answer your question more succinctly, we are working with that and we expect some good sales into that.

David Lavigne: Okay. So that's helpful at a number of levels. So let me – if I could just ask one more question. So I was a little confused because you brought this up actually at our conference tonight and I haven't quite wrapped my head around it. So I wonder if you could just provide a little clarity. So it sounds to me like you're saying that one of the ways you intend to address the supply chain issues is to potentially produce some of the items that sure having trouble in the supply chain procuring, produce them yourself. Is that – do I have that right or is that, am I not understanding that properly?

Daniel Hodges: No. You got that wrong. We're not going to produce silicon chips or you don't try to compete with Qualcomm, Intel, TSMC, all the others. We're not going to get into that. What I'm saying is we're actually designing out those hard to find parts and we're designing in an easy to find parts that are more reasonable. I'm not going to pay a $100 for a 70% part, both of my revenues will be really high, sold a unit for 10 grand, but we'd make a minus 5,000, we're just not going to do that. So we are designing out those components quickly, testing them, make sure that the equipment still functions as good or better than it did before. That's what I mean by we are producing a different way of doing that and dealing with the supply chain that we don't see others quite able to do, because they're not quite as agile.

David Lavigne: Any of those components that you've been able to develop internally?

Daniel Hodges: No, I mean, there are ways of dealing with, when you get transforms in the middle of the silicon, and they're very simple, there are other ways of dealing with, by not going to that level. You can – we started to get into intellectual property. I'll do it on the phone, David, but we're not designing components. We are designing new systems, new board level capabilities that design out those difficult components and designing new ones. We're not producing the components, but they're readily available one.

David Lavigne: That makes more sense. That's helpful. Thank you.

Daniel Hodges: You bet.

Operator: The next question comes from Lee Harper of Hammock Investments [ph]. Please go ahead.

Unidentified Analyst: All right. I think you said – if I got it right, that you're looking to be EBITDA positive in early 2022, can you go over some of the specifics how you think you're going to get there?

Daniel Hodges: Yes. Thanks. So the question is EBITDA positive. How am I going to get there? How am I going to achieve it? As we noted in our remarks, we continue to implement this company-wide cost-cutting effort. And that's normal. When you aggregate 15 businesses, there's going to be a lot of redundancies and overlap, and that just is a waste. So we are continuing to integrate these activities, turn things down, consolidate our business, which we've done into three main units, Global Telecom, Sky Sovereign and Power Supplies. These efforts along with a higher sale levels that we're looking at that are already underway this quarter, along with the high expected margins, our internal projections for the significant top line growth in 2022 is quite reasonable and easily foreseeable. From my point of view, obviously there are things, I can say and I can’t say, from my point of view, this is one of those, of course, things, but I understand, I can't necessarily convey to you every view that I have, A, it hampers our competitiveness and B, I’m not allowed to, but all I can say is it's reasonable and foreseeable based on both the cost-cutting efforts, the higher sales and the higher margins. It's just a natural evolution.

Unidentified Analyst: Okay. Thanks.

Daniel Hodges: Thank you. Maybe one more.

Operator: The next question comes from Larry Holub of Holub Family Offices. Please go ahead.

Larry Holub: Hi, Dan. My question is if supply chain and logistics issues continue through 2022 or get worse, do you believe you can still support a sequential growth?

Daniel Hodges: As I see it today, absolutely yes. As I noted earlier and is echoed by most suppliers and vendors in our industry, the supply chain disruption has gotten worse than expected and the supply and pricing of key components has gotten worse, but in our case, we've been addressing those issues through our previous investments and the inventory, as well as this redesigning products to eliminate our reliance on these really hard to find or expensive parts. So through the redesign efforts actions we're pursuing with distribution sales partners, and the new products were expected to launch. And so income, which if we're going to commercialize several projects next year, and just watch the news on those things, it's a very unique business model. We believe there's going to be adequate sales growth, adequate inventory to support the continued growth, as we say, into 2022. And I think again, towards the latter half of 2022, you'll see an easing of the supply issues. I think it'll be an issue for everybody else is, we're going to be done in May. I think it's going to lighten up considerably in May and June. And for those who have planned ahead, I think it's going to be minimal impact, but I think it's still going to be an impact to the larger markets through the end of next year.

Larry Holub: Great. Thank you.

Operator: This concludes the question-and-answer session. I would like to turn the conference back over to Mr. Hodges for closing remarks.

Daniel Hodges: All right. You've probably heard enough of me, but I'm going to conclude today's calls with just a kind of a summary, a few remarks. On the top line performance point of view, at the end of the third quarter, we're not where I want it to be due to supply chain, but based on production capacity and the supply parts and on-hand inventory and the drum I've been beaten about redesign, I believe well positioned, very well positioned to grow the top line results by approximately 75% or more this year over the $9.4 million reported for the full year 2020, and the explosive performance predicted has merely slid into the right a bit. And we're starting to experience that already this quarter. So to repeat as a team, we are laser focused and committed to improving op results in particular taking costs out of the business to the continued integration of ops and continuing to turn line up and production to meet the overwhelming demand. We believe these will have a positive, very positive impact on the business, which will show up in our results from the current quarter. We have a strategic approach to maximizing the cash available in the business to support our continued growth. And we intend to do this, as I said, as we've committed to do in the past without diluting common stockholders. From a product and technology perspective, we've made significant progress over the business. Over the last few months or the next few months, rather we plan on introducing new hardware and software offerings, as well as anticipate adding to our growing list of new partnerships in both commercial and government markets. So in summary, despite headwinds impacting our entire industry, we've been able to significantly grow our revenues year-over-year and sequentially with strong margins. We're adapting to the challenges ahead by utilizing our internal engineering capabilities to lessen the impact of global supply issues on the business, increased production and accelerate commercialization and sale of unique and valuable technologies were protected on them by more than 180 patents. Although, the remain global challenges, we intend to continue the business on the investments we've made honoring our Made in America commitment and participating in the 5G revolution now underway. All this supports our view that 2022 is going to be the large, the year of the largest growth for COMSovereign. We're beating our competitors on growth during a very difficult time. And it's on me, I wish we hadn't – I wish I hadn't given you my optimistic approach back in the first quarter, but I'm telling you it's slid and right, and it's going to happen. I want to thank everyone for their support. Thanks for joining us today. Have a great week.

Fran Jandjel: Thank you.

Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.