ORBCOMM, Inc. (NASDAQ:ORBC) Q2 2019 Earnings Conference Call July 31, 2019 8:30 AM ET
Aly Bonilla - VP, IR
Marc Eisenberg - CEO, President & Director
Constantine Milcos - EVP & CFO
- Aly Bonilla - IR副总裁
- Marc Eisenberg - 首席执行官，总裁兼董事
- Constantine Milcos - 执行副总裁兼首席财务官
Richard Prentiss - Raymond James & Associates
Thomas Walkley - Canaccord Genuity Corp.
David Gearhart - First Analysis Securities Corporation
Scott Searle - Roth Capital Partners
Michael Malouf - Craig-Hallum Capital Group
Chris Quilty - Quilty Analytics
- Richard Prentiss - Raymond James＆Associates
- Thomas Walkley - Canaccord Genuity Corp.
- David Gearhart - First Analysis Securities Corporation
- Scott Searle - Roth Capital Partners
- Michael Malouf - Craig-Hallum Capital Group
- Chris Quilty - Quilty Analytics
Good morning, ladies and gentlemen, and welcome to ORBCOMM's Second Quarter 2019 Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remark, there will be a question-and-answer period. [Operator Instructions]. Please note this event is being recorded and a replay of this conference call will be available from approximately 11:30 a.m. Eastern Time today through Aug 14, 2019. The replay service details can be found in today's press release. Additionally, ORBCOMM will have a webcast available in the Investors' section of its website at www.orbcomm.com. I would now like to turn the call over to Aly Bonilla, ORBCOMM's Vice President of Investor Relations. Please go ahead, Aly.
女士们，先生们，早上好，欢迎参加ORBCOMM 2019年第二季度业绩电话会议。 所有线路都已静音以防止任何背景噪音。 在发言者的发言之后，会有一个问答时期。 [操作员说明]。 请注意，此活动正在录制，并且将在美国东部时间今天上午11点30分至2019年8月14日期间重播此电话会议。重播服务详情可在今天的新闻稿中找到。 此外，ORBCOMM将在其网站www.orbcomm.com的投资者部分提供网络广播。 我现在想把这个电话转给ORBCOMM的投资者关系副总裁Aly Bonilla。 请继续，Aly。
Good morning and thank you for joining us. Today, I'm here with Marc Eisenberg, ORBCOMM's Chief Executive Officer and Dean Milcos, ORBCOMM's Chief Financial Officer. On today's call, Marc will provide some highlights on the quarter and give an update on the business. Dean will then review the company's quarterly financial results and outlook for the remainder of the year. Following our prepared remarks, we will open the line for your questions.
Before we begin, let me remind you that today's conference call includes forward-looking statements and that actual results may differ from the expectations reflected in these statements. We encourage you to review our press release and SEC filings for a full discussion of the risks and uncertainties that pertain to these statements. ORBCOMM assumes no duty to update forward-looking statements. Furthermore, the financial information we will discuss includes non-GAAP financial measures, a reconciliation of these non-GAAP measures to GAAP measures is included in our press release.
At this point, I'll turn the call over to Marc Eisenberg.
早上好，谢谢你加入我们。今天，我和ORBCOMM首席执行官Marc Eisenberg以及ORBCOMM首席财务官Dean Milcos在这里。在今天的电话会议上，Marc将提供本季度的一些亮点，并提供有关业务的最新信息。然后，迪恩将审查公司的季度财务业绩和今年剩余时间的前景。在我们准备好的评论之后，我们将为您提出问题。
Thanks, Aly, and good morning, everyone. Earlier this morning, we issued a press release announcing our financial results for the second quarter ending June 30, 2019. While revenues were within range, adjusted EBITDA margin came in slightly lower than we anticipated by just under 0.5 point. While it would seem straightforward, there were a lot of varying trends. Let's start with the revenue. Total revenue for the quarter was $67.1 million, down $3.7 million from last year, most of the decline continues to be J.B. Hunt. Even though we completed our portion of their installation process in Q1 last year, we continue to ship large quantities of product into the second and third quarters of 2018. Excluding the hardware revenue impact of the $2.9 million from J.B. Hunt, total revenues were down $800,000, comprised entirely of product sales.
We were pleased with the new customer engagements we made during Q2 and thus far in Q3, having closed approximately 15 in-cab opportunities with fleets ranging in size from 50 to 500. A small portion of these devices were delivered in the quarter with the majority to ship in the near future. In addition to delivering a record number of in-cab products, we shipped the highest quarterly number of our IsatData Pro or IDP satellite products. This was, however, offset by recent industry trends affecting our base business in the transportation cargo markets. With the number of orders OEMs are receiving for both dry and reefer trailers in Q2 were at their lowest levels in several years.
To give you a better idea, the industry wide trailer shipments from OEMs to transportation companies in May and June, were reported to be down over 50%. While the comparisons are off a record year in 2018, 50% is a significant number as truckers are experiencing softer than anticipated freight rates.
As a result, when many of our base customers in the transportation business push out their trailer or reefer builds, the corresponding IoT deployments get pushed as well. On a positive note, despite revenues in our US transportation business being a few million dollars lower than anticipated, our international business in Q2 exceeded our expectations, bringing us back within our revenue range. With many industry analysts expecting demand for new trailer orders to improve over time, our current thought is that this is a short to medium-term correction, as they work through inventory as opposed to a longer term trend. We continue to anticipate a large step up in revenues in Q3, as the momentum continues in our international business and we kick off new deployments that I'll talk about in a few moments less any continued shortfall from the transportation trends.
During these lower sales -- I'm sorry, despite the lower sales volume in Q2, the company achieved adjusted EBITDA of $14.2 million, an increase of over $1 million or up 9% compared to last year. Our continued focus on managing costs and reducing expenses across the company contributed to an adjusted EBITDA margin of 21.1% in the quarter, just a little bit lower than our expectations, entirely due to product margin.
谢谢，阿莉，大家早上好。今天上午早些时候，我们发布了一份新闻稿，宣布截至2019年6月30日的第二季度财务业绩。虽然收入在范围内，调整后的EBITDA利润率略低于我们的预期，略低于0.5点。虽然看起来很简单，但有很多不同的趋势。让我们从收入开始吧。该季度的总收入为6710万美元，比去年减少370万美元，其中大部分下降仍为J.B. Hunt。尽管我们在去年第一季度完成了部分安装过程，但我们继续将大量产品运送到2018年的第二季度和第三季度。不包括JB Hunt的290万美元的硬件收入影响，总收入减少了800,000美元，完全由产品销售组成。
在这些较低的销售期间 - 对不起，尽管第二季度的销量较低，该公司的调整后EBITDA为1420万美元，比去年增加了100多万美元或增长了9％。我们继续专注于管理成本和降低整个公司的开支，导致本季度的EBITDA调整后利润率为21.1％，略低于我们的预期，完全归因于产品利润率。
Looking at cash flow, the company generated about $2 million in operating cash flow in the quarter, an increase of $13 million compared to last year. Keep in mind, the second quarter in both years included a $10 million semiannual interest payment on our debt. We continue to focus on improving our liquidity position and our performance demonstrates our commitment to sustainable cash flow generation for the company.
Let's move on to our business highlights starting with our in-cab programs, where we're experiencing significant momentum. Our Pro-400 Fleet Management Solution has been independently verified by third-party authority to be fully compliant with the ELD mandate in advance of the December 2019 deadline. The mandate requires carriers to replace all non-compliant recording devices with ELD devices, creating a safer driving environment and making it easier and faster to track, manage and share our service records. Our Pro-400 is part of an elite group of fleet management solutions in the industry to receive third-party ELD certification, which requires passing 314 technical points of thorough unbiased testing. This is a unique differentiator for ORBCOMM, which sets us above other providers, who are self-certified and ensures our customers are deploying a compliant solution at the highest level of performance and safety.
In addition, we're in the process of certifying our solution with Canada's ELD standards, which were released last month and expect to be in place in 2021. In Q2, we delivered about 1,000 in-cab units to a large global mining company to improve driver safety and vehicle management at their mining sites. We signed a teaming agreement with McNeil Insurance, a leading provider in specialized insurance services for ambulances and first responder vehicle operators to provide enhanced analytics and report for the driver behavior of their clients. McNeil's clients will be encouraged to purchase fleet safety solutions in return for better insurance rates, enhancing the market opportunity.
Overall, between our safety and tracking solutions, we delivered over 3,500 in-cab devices in Q2 and expect to ramp to over 4,500 in Q3, which over time should lead to stronger service revenue growth as they get installed. While our base cargo business struggled in Q2 due to slower trailer deliveries, we see momentum in acquiring new customers, who are continuing to choose ORBCOMM for our ability to deliver solutions for multiple asset classes utilizing a single integrated platform.
We're working through the contract with one of America's largest grocery retailers, who has selected ORBCOMM's track and monitor 5,000 dry and 5,000 refrigerated trailers with great double-play opportunity. ORBCOMM will enable the customer to gain real-time visibility and control of their transport assets across the United States. We expect to start shipping the first units in Q3 and complete the deployment in early next year. In addition, Agropur, a North American industry leader in dairy products is leveraging our triple play bundle, including our refrigerated, dry and in-cab solutions to streamline their operations, comply with the ELD mandate and ensure the quality and integrity of their cargo throughout the supply chain. We shipped 500 units in Q2 and expect to ship the remaining 500 in Q3. These customer wins reaffirm our unique competitive advantage and leadership position, serving transportation companies.
此外，我们正在使用加拿大的ELD标准对我们的解决方案进行认证，该标准于上个月发布，预计将于2021年实施。在第二季度，我们向一家大型全球矿业公司交付了约1,000个驾驶室内单元改善矿区的驾驶员安全和车辆管理。我们与McNeil Insurance签署了一项团队协议，McNeil Insurance是救护车和急救车辆运营商专业保险服务的领先提供商，为客户的驾驶员行为提供增强的分析和报告。我们鼓励麦克尼尔的客户购买车队安全解决方案，以换取更高的保险费率，增加市场机会。
We've got some great news to share on our container programs. Last quarter, we announced an order of 20,000 devices from a leading OEM to support one of the industry's top shipping companies.
We're excited to report that this project has been expanded to a fleet wide deployment of 150,000. We expect to ship at least 20,000 devices this year across the last two quarters, with the bulk in 2020 and possibly extending into 2021. The full deployment represents hardware revenues of between $4 million and $6 million in the second half of 2019, increasing to $4 million to $6 million a quarter in 2020. This global deployment will leverage our latest refrigerated container monitoring and control solutions, which helps to increase asset utilization and lower operating costs and ensure temperature compliance.
We're continuing to run several additional pilots for containers both on ocean vessels and rail, some of which we expect to win by the end of the year.
On a side note, our CT 3000 product was recently recognized as a transformative innovation in IoT with a Gold Stevie from the American Business Awards, the IoT Innovations Award from Connected World Magazine, the Industrial IoT Product of the Year Award from IoT Evolution World Magazine. Continuing with containers, our program with Maersk through our contract with AT&T will not be extended on their legacy 3G platform and will expire at the end of this year. The contract provides ORBCOMM with about $3 million in annual revenues for engineering support services. The contract and the accounting of revenues was assumed as part of the WAM acquisition.
We do not typically price engineering and support on a per unit basis. If we were to proceed with Maersk on new engineering services, it would be based on build hours and recognized as professional fees under non-recurring service revenue. The approximately 400,000 subs tied to this contract will cease to have recurring service revenue associated with them by the end of the year. So we will report subscribers both with and without these subs through the end of the year and without these subscribers beginning in 2020.
The change to subscriber count should raise ARPUs materially and be more representative of our business. From a strategic perspective, we prefer the model where we transact with transport carriers directly or -- either directly or in coordination with OEMs, allowing ORBCOMM to manage the customer relationship more effectively and be adequately compensated for our efforts.
Turning to AIS, Q2 marked our highest quarter with over $3.1 million in revenue, up about 9% year-over-year, driven by several new commercial and government customers as well as contract renewals. We were awarded a new contract with the US Customs & Border Protection to provide AIS data to enhance border, security and increased domain awareness at sea.
Moving to our IoT satellite offerings. We shipped a record 35,000 IDP devices in Q2. We're experiencing significant demand for IDP products in Latin America, driven by our largest partners in Brazil, as well as in the Middle East, where a large telecom provider is using our IDP service to track and monitor Border Patrol vehicles to increase security and border protection throughout the region.
另一方面，我们的CT 3000产品最近被认为是物联网的变革性创新，其中包括来自美国商业奖的Gold Stevie，来自Connected World Magazine的物联网创新奖，来自IoT Evolution World杂志的年度工业物联网产品奖。 。继续使用集装箱，我们与马士基通过与AT＆T签订的合同计划将不会扩展到他们的传统3G平台，并将在今年年底到期。该合同为ORBCOMM提供了约300万美元的年度收入，用于工程支持服务。合同和收入核算被假定为WAM收购的一部分。
订户数量的变化应该会大幅提高ARPU，并更能代表我们的业务。从战略角度来看，我们更倾向于直接或直接与运输公司进行交易的模式 - 或者直接或与OEM协调，允许ORBCOMM更有效地管理客户关系并为我们的努力得到充分补偿。
Moving on to operations, we're continuing to make solid progress on consolidating our existing products and platforms, deploying our [indiscernible] feature-rich products and moving through older inventory that is in the process of being discontinued. ORBCOMM has acquired 13 companies since 2011, making it difficult to scale with so many products and platforms. We've significantly consolidated the number of hardware SKUs from 243 down to 53 and in the process reduced inventory levels by 27%. We expect further consolidation in 2020, leading to just 40 SKUs, an astounding 84% reduction.
We continued converging the 25 web platforms across our various solutions with the goal of just two, thereby reducing integrations across multiple platforms and better utilizing our resources. Similarly, we've gone from closing the financials from each of these 13 acquisitions to three with the implementation of a global ERP system and expecting to be leveraging just one in 2020, enabling a faster financial close process and simplified billing. All of this effort historically showed up purely as cost, but we're now starting to see the improved inventory levels, higher margins and better customer service.
Over time, we expect to achieve further benefits with lower costs, increased scale and quicker time to market. These operational improvements are absolutely key to the scaling and future success of the company as we transition to a fully integrated, cash generating business. Summing up, we've made positive strides in the quarter. We successfully grew adjusted EBITDA by 9% and increased operating cash flow by $13 million over the prior year. We see momentum growing in the second half of the year led by our in-cabin container programs. I'm pleased with where the business is heading and look forward to finishing 2019 strong.
With that, I'll turn the call over to Dean and take you through the financials.
Thank you, Marc, and good morning, everyone. Let's start with the company's second quarter financial results. Total revenue for Q2 was $67.1 million, down $3.7 million compared to the same period last year. As Marc mentioned earlier, Q2 revenues were down $800,000, excluding the $2.9 million realized through hardware revenue from the J.B. Hunt last year. Total revenues in Q2 were in line with the midpoint of our revenue outlook flat in the last earnings call. We anticipate revenues to grow in the second half this year, fueled by many of the opportunities discussed earlier.
Product sales in the second quarter were $27.4 million similar to the prior quarter's revenues, we achieved positive revenue growth in our in-cab hardware as shipments have accelerated and many of our customers continue to purchase devices to meet the ELD mandate deadline. Q2 service revenues were $39.7 million, up 3.3% compared to the prior year period. Recurrent service revenues in the quarter grew by 3.8% over the prior year period and up sequentially from Q1. Contributing to this improvement was an addition of about 70,000 net subscribers in the quarter, bringing our total subscriber base to 2.51 million at the end of June 2019.
Considering the anticipated change in subscriber count leads to Maersk, which Marc discussed earlier. Our total subscriber base would have been about 2.11 million as of the end of Q2, excluding these Maersk related subs. This change increased total company ARPUs by as much as 15% in 2020. As mentioned on last quarter's call, there are a few factors creating headwinds in recurring service revenue growth. Let me provide with an update on those factors.
First, the deferred revenue upfront license fees from the Maersk implementation that began several years ago has just about been fully amortized. In Q2, we recorded another $60,000 in deferred revenue compared to about $170,000 recognized in the prior year. This year-over-year effect has diminished and translate into a 30 basis point impact to recurring service revenue growth in Q2. The second factor contributing to lower rates in current service revenue growth [indiscernible] service revenues from pre-acquisition legacy issues.
For Q2, the service revenue decline was over $700,000 when compared to the prior year period. This lower service revenue resulted in negative impact to recurring service revenue growth in Q2 of about 190 basis points. We believe the year-over-year impact has now bottomed out and are expected to bounce back a couple hundred thousand dollars in Q3 with further improvements in Q4 and into 2020. Combined, these two factors impacted Q2 recurring service revenues by over $800,000 year-over-year. Excluding the impact from these two factors, our recurring service revenue in the quarter grew by about 6% over Q2 2018.
Looking at gross profit margin, the company realized a margin of 50.7% in Q2 compared to 46.9% last year, driven largely by improvements in product gross margin. Product margin in Q2 was 28.4%, an increase of 600 basis points over the prior year. This improvement was primarily driven by a higher percentage mix of sales of our newer cost optimized products in the current period versus last year. Approximately 15,000 of the 70,000 or about 21% of the devices shipped in the quarter were legacy products. Currently, Q2 product margin was negatively impacted by [indiscernible] $6 million of the older inventory. We have made great strides over the last year in transitioning our product lines to newer products and as a result has significantly reduced our inventory of older products.
对于第二季度，与去年同期相比，服务收入下降超过700,000美元。这一较低的服务收入导致第二季度经常性服务收入增长的负面影响约为190个基点。我们认为今年的同比影响已经触底反弹，预计第三季度将反弹数十万美元，第四季度和2020年将进一步改善。这两个因素共同影响了第二季度经常性服务收入超过80万美元 - 过一年。剔除这两个因素的影响，我们在本季度的经常性服务收入比2018年第二季度增长了约6％。
Q2 service margin was 66% compared to 67.8% in the prior year period due to higher terrestrial costs in the current quarter and a positive one-time adjustment that benefited margins last year. Operating expenses in Q2, were $34.2 million, down approximately $200,000 compared to the same period last year. This year-over-year decrease was primarily due to improved cost management, specifically in selling, general and administrative expenses and more than offset an increase in product development costs waiting for new product lines.
Adjusted EBITDA in Q2 was $14.2 million, an increase of $1.1 million or 9% over the prior year period. The increase was primarily driven by improvements in both service and product gross profit and a reduction in operating expenses. Q2 adjusted EBITDA margin was 21.1%, an increase of 278 basis points over the prior year period and just slightly lower than the 21.5% we fired on last quarter's call. Turning to the balance sheet and cash flows. The company ended Q2, 2019 with approximate $55 million of cash and cash equivalents. Total debt at the end of the second quarter remained at $247 million. Cash flow from operations in Q2 was about $2 million nut keep in mind, this result included the $10 million interest payment in the quarter.
This was our fourth consecutive quarter of positive operating cash flow, it was a significant improvement over last year where reported a negative $11 million in Q2, 2018. CapEx for the quarter was $6 million, slightly higher than our recent trend, as the current quarter include a $600,000 payment for AIS satellite's plan for launch in 2020. The exchange will make cash flow generation for the company a top priority, demonstrates our focus on improving operational results and working capital metrics.
Moving to outlook. We expect total revenues for the second half of 2019 to be between $145 million to $155 million, which is currently in the range of the analyst estimates. This outlook is driven by several large hardware deployments ramping up in Q3. We anticipate adjusted EBITDA margin to be between 23% and 23.5% for the second half of the year. This will push adjusted EBITDA a few million dollars lower than current analyst estimates, probably due to some softness surrounding gross margins and to a lesser extent, slightly higher operating expenses.
In closing, we're pleased with the progress we've made with many of our financial metrics in Q2. Revenue came in about the midpoint of our outlook given last quarter. We continue to make year-over-year improvements in product margin, tighter expense management results and significant cost reductions in SG&A. Adjusted EBITDA grew nearly 9% over the prior year period and we generated our fourth consecutive quarter of positive operating cash flow. This concludes our remarks for the call. We'll now take your questions.
[Operator Instructions]. The first question is from Rick Prentiss of Raymond James. Please go ahead.
[操作员说明]。 第一个问题来自Raymond James的Rick Prentiss。 请继续。
Thanks. Good morning, guys.
Hey, want to follow up on some of your comments there, Dean, about the, guidance to make sure we understand it and Marc, appreciate the color on the in-cab and the container pacing of the orders. But just want to understand as we think through the '19 guidance change, Dean, I think you mentioned some softness in gross margins and higher operating costs. Help us understand, where do you think the components of gross margins are going as we think about the product side and the service side? And where specifically are those higher OpEx that we're looking at?
嘿，想要跟进你在那里的一些评论，Dean，关于，确保我们理解它的指导和Marc，欣赏驾驶室内的颜色和订单的集装箱节奏。 但是我们想通过'19指导变革来思考，Dean，我认为你提到了毛利率和运营成本较高的一些软性。 帮助我们了解，在我们考虑产品方面和服务方面时，您认为毛利润的组成部分在哪里？ 特别是我们正在关注的那些更高的OpEx？
Yes. On the product margin, we do still think we'll get to 30% for the full year product margin. We're looking at roughly 31% product margins in the second half of the year. On service margins, we're thinking between 66^ and 67% is still where we expect to land. Probably second half of the year, roughly 66.5% service margins. And on operating expenses, we're estimating SG&A to be approximately $18 million a quarter in Q3 and Q4. Total operating expenses should be about $34.5 million each quarter.
是。 在产品利润率方面，我们仍然认为全年产品利润率将达到30％。 我们预计今年下半年的产品利润率约为31％。 在服务利润方面，我们认为66％至67％仍然是我们期望降落的地方。 可能是今年下半年，服务利润率约为66.5％。 在运营支出方面，我们估计第三季度和第四季度每季度SG＆A约为1800万美元。 每季度总营业费用约为3450万美元。
Okay. And then on the previous guidance you guys had issued, you talked about recurring service revenue growth in the 5% to 7.5% range for the year, that you will start lower, and you did a good job kind of walking through the two items that said excluding them, you would have done 6% in 2Q. How should we think about recurring service revenue growth in the second half of 2019?
好的。 然后根据您之前发布的指导，您谈到了年度5％到7.5％范围内的经常性服务收入增长，您将从较低的开始，并且您做得很好。 说排除他们，你会在第二季做6％。 我们应该如何看待2019年下半年经常性的服务收入增长？
Yeah, we did see good growth year-over-year in the second half of 2019. We still think we can get to the range of 5% to 7%, probably at the low end of that range for the full year growth year-over-year. I think right now, we expect $800,000 to $900,000 quarter improvement in service revenue each quarter, Q3 and Q4 is probably the range we're looking at.
是的，我们确实在2019年下半年看到了同比增长良好的情况。我们仍然认为我们可以达到5％至7％的范围，可能是全年增长年度范围的低端 - 过一年。 我想现在，我们预计每个季度服务收入的季度改善80万到90万美元，第三季度和第四季度可能是我们正在考虑的范围。
And then Marc you called out the 400,000 subs that with the sun setting of 3G would go away with the Maersk AT&T contract. How much revenue is associated with that contract and what else does the sun setting of AT&T 3G, are there some opportunities out there as well with this one dropping off?
然后Marc你召集了400,000个具有3G日落的潜艇，它将与马士基AT＆T合同一起消失。 与该合同相关的收入多少以及AT＆T 3G的日落设置还有哪些机会，以及这一机会下降？
Yes. So we're not quite sure that this one is dropping off, but we're sure that the accounting of it is dropping off the way it is. So we have a relationship with Maersk and we'll continue to call on them and see where we can play in the next generation projects with them. But if it continues to be engineering like it has been in the past, what we're saying is it's not going to be billed in a subs times ARPU basis. That's something we inherited. That's not the way we do engineering services.
So, there is a change. There's no guarantee that Maersk will use this for the next generation platform. But I don't think that they know exactly what they were going to do with the next generation platform. But what they do know is that does it makes sense with the platform dying to continue to put engineering dollars into building this service up when it's approaching end of life. So that's what we're telling you on this call. The second thing, that we're kind of saying on this call is we've got a handle on -- maybe there's not another 400,000, customer out there. But you could do better on a fleet of 40,000 or 50,000 operating solo than you will just kind of getting these small scraps that we're kind of getting out of this AT&T deal.
And if we were to work ahead in time in three years and take that current model of a couple cents per unit, I think it ends up being $0.68. And take this direct model, the break even is so small in terms of what we had closed, that we choose to go in that direction and we're pretty certain that we're going to end up ahead. So that's what we're going to do. In terms of AT&T 3G, I don't think we have a ton of risk on the AT&T side, our 3G subs are more on the T-Mo side. So what we believe T-Mo is going to do on 3G is what they did on 2G, where they keep a very small slice of their spectrum, dedicated forward for data only. So less of an issue there. But there are thousands of units in AT&T's 3G, not 10s or 100s of 1000s like there is in T-Mobile. I'm hoping, it's going to be, over time, a reasonable hardware opportunity as you swap out these subscribers since the majority of our 3G subs are in the reefer business.
We got into the driving business already in the world of LTE. So there's not a ton of subs at risk there. So I think that there is an opportunity, but I think that's why we keep telling you, I think as we kind of go forward, I mean, look how big this container opportunity is, where it's going to grow to $4 million to $6 million a quarter. I don't see hardware issues over the next couple of years unless the market significantly turns. So I think we may reverse the recent trends where the hardware was less predictable and the service was extremely predictable. And now suddenly you're going to have a bunch of hardware sales, some of them lead to new recurring streams and some will be traded out just to keep the current streams on the service side.
所以，有一个变化。无法保证马士基将其用于下一代平台。但我不认为他们确切知道他们将如何处理下一代平台。但他们所知道的是，平台迫切需要继续投入工程资金来建立这项服务，当它即将结束时，它是否有意义。这就是我们在这次电话会议上告诉你的。第二件事，我们在这个电话会议上说的是我们已经掌握了 - 也许没有另外400,000客户在那里。但是你可以在一个40,000或50,000个单独运营的车队中做得更好，而不仅仅是你能得到这些小碎片，而这些废话让我们有点摆脱AT＆T的交易。
And I think that's good to hear. Visibility may be improving. It's always something the Street likes to see. What do you think organically service revenue or recurring service revenue growth should be as you look out over a medium to long term then for ORBCOMM?
我认为这很好听。 可见性可能正在改善。 这总是街道喜欢看的东西。 对于ORBCOMM，您认为有机服务收入或经常性服务收入增长应该如何从中长期看出来？
We think it should be 9%. And I think the inthic changed that, having $700,000 of negative comps compared to the $700,000 of positive comps that it should be going forward almost gets you to that 9% alone. And you know inthinc is probably the hottest part of our business right now. So we're doing extremely well there, as you heard in some of those, you know, in-cab statistics. But I think if you pulled all that noise out there, you'd see that we'd be probably pretty close to that.
我们认为它应该是9％。 而且我认为这个改变了这一点，有70万美元的负面补偿与700,000美元的积极补偿相比，它应该是前进的，几乎可以让你达到9％。 而且你知道inthinc可能是我们现在最热门的部分。 所以我们在那里做的非常好，正如你在其中一些中所听到的，你知道，驾驶室内的统计数据。 但我想如果你把那些噪音都拉到那里，你会发现我们可能已经非常接近了。
Next question is from Mike Walkley from Canaccord Genuity. Please go ahead.
下一个问题来自Canaccord Genuity的Mike Walkley。 请继续。
Thanks. Marc, thanks for signing the large container deal in the back half of the year in 2020. Can you just update us on the overall opportunity for that market segment, how penetrated it is, what's the market opportunity for ORBCOMM in that market? Thanks.
谢谢。 Marc，感谢您在2020年后半年签署了大型集装箱协议。您能否向我们介绍该市场的整体机会，它是如何渗透的，ORBCOMM在该市场的市场机会是什么？ 谢谢。
Sure. I can tell you exactly, there's about 2.4 million reefer containers in the world and 400,000 of them are Maersk, so you'd say that is the overwhelming majority of the penetration. But all of that stuff is going to hit end of life. So really even Maersk becomes unpenetrated again. So, the stuff that we're rolling out right now with our customer in Europe, that 150,00 all on LTE should have 10 years of life. So that will be part of the penetration. There's a couple of opportunities out there that we did not win, which is roughly about 150,000 subscribers. There's another maybe 300,000, or 400,000 that we are bidding on, that we think in various stages, but less fleet sizes of 150 and more fleet sizes of 20,000, 30,000, 40,000 and 50,000 and we're kind of closing in on them. What you referred to before, the container thing, it is so typical of what happens to us, what happens is, we're working through the contracts, the OEM is working through their contract. They need to get the ball moving. So they write us a purchase order for 10,000. So we go and we start buying components for 10,000 and then they start looking a month later and this stuff takes time and they're like, gee, we're going to have this dry spell, let's go order another 10,000, last quarter reported, 20,000.
And now the realization is that unless you deploy all of these devices, you don't really change your operations. So there's all this pressure to get it done. And now the reason we're so unsure about where the quarter ends up is, we're being asked to pull in as much, -- remember at one point we said, eight quarters and even installations are 16,000 and all of a sudden, if you do the math, you're in the mid 20s. We've been asked to accelerate it as quick as humanly possible. So we're analyzing the costs and whatever we can do to pull in some of Q1 shipments into Q4 and pulling Q2's into Q1, which could be kind of explosive from a revenue perspective. So we're kind of figuring our way around it there. But your simple question is 2.4 million.
现在我们意识到，除非你部署所有这些设备，否则你并没有真正改变你的运营。所以这一切都有压力要做到这一点。而现在我们之所以不确定季度结束的原因是，我们被要求尽可能多地进入， - 记得有一点我们说，八分之三甚至安装都是16,000，而且突然之间，如果你做数学计算，那你就是20多岁。我们被要求尽可能快地加速它。因此，我们正在分析成本以及我们可以做些什么来将第一季度的一些货物拉入第四季度并将第二季度推向第一季度，从收入的角度来看，这可能是一种爆炸性的。所以我们在那里找到解决方法。但你的简单问题是240万。
Okay. Thanks. And with the visibility in the container ramp, maybe offsetting some of the -- somewhat expected weakness in transportation, given some of the earnings from other industrial companies, can you just talk about maybe hardware growth trends you expect in the near term in 2020? And on the transportation side, I know it's in a tough spell now, but how many quarters do you think it's going to take to correct that market or work through some of the inventory you talked about in the channel ?
好的。 谢谢。 随着集装箱坡道的可见度，可能抵消了一些 - 有些预期的运输疲软，考虑到其他工业公司的一些收益，您能否谈谈您在2020年近期预计的硬件增长趋势？ 在运输方面，我知道它现在处于一个艰难的阶段，但是您认为需要多少个季度来纠正该市场或通过您在渠道中谈到的一些库存？
Gee, I've done a lot of work on this in the last week, right. And so to be clear what they're reporting in terms of OEMs building new products is -- what they're reporting is something like a 50% decline in dry van and like an 80% or greater than an 80% decline in reefer. But that is an over representation of transportation, really they're working through all of this massive amounts that were shipped in 2018. And there's kind of a leveling off in terms of supply in the market. So it's going to take just a little bit of time for that to level off. I spoke to one of the Presidents of one of the reefer divisions and said, 80 something percent, is that real? I mean, your orders are down 80 something percent, is that real? And his answer was, for this is going to resonate with you, Mike, his answer was almost like IPO numbers, where customers are putting in orders, expecting to get some lower number, and then once all of a sudden, you start getting a full allotment of reefers, then all of a sudden the demand goes down, right.
They start putting in those orders with the lower expectations. So it's not quite as bad as that 80%. But it is relatively soft. I think we're probably going to struggle with it for a couple of quarters. I don't think it's -- I'm not telling you it's a $10 million a quarter problem. That's not what I'm telling you, but it is a couple million dollars, so the sizing for you -- maybe this transportation group is a third of our revenues. So you've got a lot of heat in the business or momentum, and those other two-thirds, which is a whole lot of SkyWave and international and the satellite businesses is doing really well. You've got some heavy equipment stuff and other stuff that's doing just fine.
But our group lost about $3 million last quarter of this base business that we were expecting. So basically a big trucker calls you up and goes, yeah, you know, I'm supposed to take those 500 units from my new build of my carrier of Thermo King product. And I'm just going to shove that off a quarter. So I'm going to shove that off. And typically when you shove off that quarter, it goes quarter-to-quarter and quarter and it gets made up a little bit away. And then -- so maybe that's the number of softness that we're expecting. When you look at our hardware sales, the $27 million or so that we did last quarter and you see what is that $27 million, that $27 million is about $18 million to $20 million of just our current customers that continue to buy stuff. And then the last $7 million to $10 million are new deals or new deployments or retrofits that we sell a quarter back or two quarters back and kind of do it over time. So what we did in this quarter in our transportation business is with the base business a little bit short, it would have been shorter than the $3 million, that new deal -- new customer and I tried to say this in the script but maybe not so well, that new script, I'm sorry, that new -- those new deployments picked up bigger than we anticipated.
哎呀，我在上周做了很多工作，对吧。因此，要清楚他们在OEM制造新产品方面的报告是什么 - 他们报告的是干货车减少50％，比冷藏箱减少80％或大于80％。但这是对运输的过度代表，实际上他们正在努力完成2018年发运的所有这些大量货物。而且市场供应方面有一定的平衡。所以这需要花一点时间来平衡。我跟其中一个冷藏师的总统说过，80％的百分比是真的吗？我的意思是，你的订单减少80％，是真的吗？而他的回答是，因为这会引起你的共鸣，迈克，他的答案几乎就像IPO号码，顾客在订单中，期望得到更低的数字，然后突然间，你开始得到一个完全分配冷藏箱，然后突然间需求下降，对。
他们开始投入那些预期较低的订单。所以它并不像80％那么糟糕。但它相对较软。我想我们可能会在几个季度内与它斗争。我不认为这是 - 我不是告诉你这是每季度1000万美元的问题。这不是我告诉你的，但它是几百万美元，所以给你的尺寸 - 也许这个运输集团是我们收入的三分之一。所以你在业务或势头上有很多热，而其他三分之二，这是SkyWave和国际以及卫星业务的一大部分都做得非常好。你有一些重型设备和其他东西做得很好。
但是我们这个基地业务的上一季度损失了大约300万美元，这是我们期待的。所以基本上一个大卡车司机打电话给你，是的，你知道，我应该从我的Thermo King产品载体的新版本中拿走这500个单位。而我只想把它推到四分之一。所以我要把它推开。通常情况下，当你推迟该季度时，它会按季度和季度进行，并且会稍微消失一些。然后 - 也许这就是我们期待的柔软度。当你看看我们的硬件销售额时，我们上一季度的2700万美元，你看到的是2700万美元，那么2700万美元，仅仅是我们目前继续购买东西的现有客户的1800万到2000万美元。然后最后的700万到1000万美元是新的交易或新的部署或改造，我们出售四分之一或两个季度，并随着时间的推移出现这种情况。因此，我们在本季度在运输业务中所做的是基础业务有点短，它会比300万美元短，这笔新交易 - 新客户和我试图在脚本中说这个但可能不是好吧，那个新脚本，对不起，那个新的 - 那些新的部署比我们预期的要大。
So we did better in retrofits, and worse in the installs at factory than we were anticipating. And that's what the quarter looked like.
Great. Thanks. Last question from me and I'll pass it on. Just want to make sure Maersk one more time, it's going to come out at the end of the December quarter. And can you remind us what the annual revenue that is coming out on services? Thank you.
非常好。 谢谢。 我的最后一个问题，我将把它传递给我。 只想再确定一次马士基，它将在12月季度结束时问世。 您能否提醒我们服务的年收入是多少？ 谢谢。
Yes, [indiscernible] at the end of Q4, the annual service revenues are about $3.2 million a year.
Okay. Great. Thanks for that clarification and look forward to seeing you next week.
好的。 大。 感谢您的澄清，并期待下周见到您。
Next question is from David Gearhart from First Analysis. Please go ahead.
下一个问题来自First Analysis的David Gearhart。 请继续。
Good morning. Thank you for taking my question. So I wanted to go back to the financial model. Can you repeat what you said about the SG&A per quarter and the total operating expenses? I didn't get that. And as well, I think in the last quarter, you had mentioned $50 million in operating cash flow for the year and $25 million in free cash flow. Just wondering if you could update that with adjusted EBITDA coming down for the back half a little bit.
早上好。 谢谢你提出我的问题。 所以我想回到财务模型。 您能否重复一下您对每季度SG＆A和总运营支出的看法？ 我没弄明白。 同样，我认为在上一季度，你已经提到了今年5000万美元的运营现金流和2500万美元的自由现金流。 只是想知道你是否可以更新，调整后的EBITDA下降了一半。
Yes, So SG&A should roughly be about $18 million a quarter in Q3 and Q4, and total operating expenses in each quarter should be roughly $34.5 million.
On the cash side, I would expect the cash flow from operations to be more in the range of $35 million for the year and free cash flow would be minus CapEx, somewhere in the range of $10 million to $15 million.
Got it. And then can you talk a little bit about the terrestrial expense, I think you had mentioned that there was some impact from terrestrial costs on the services gross margin. Wondering what that is exactly, is it permanent, should that kind of normalize? And also on the product gross margin, I'm kind of surprised with five consecutive quarters of increasing sequential gross margin, as you increase the mix of new optimized products and kind of wind down legacy, that you'd see it down. Just wondering why that was down. Is it just a greater number of legacy units being sold in Q2 and in kind of when should that roll off in terms of legacy inventory being kind of wiped out and it being less of a headwind on the quarter on a quarterly basis?
得到它了。 然后你能谈谈地面费用，我想你曾提到地面成本对服务毛利率有一些影响。 想知道究竟是什么，它是永久性的，是否应该正常化？ 而且就产品毛利率而言，我对连续五个季度的连续毛利率增长感到惊讶，因为你增加了新优化产品的组合和减少遗产的风格，你会看到它下降。 只是想知道为什么会失败。 是不是只有更多的传统单位在第二季度出售，并且在遗产库存被淘汰的情况下应该什么时候开始销售，并且在季度的季度中它不会成为逆风？
So I'll answer the legacy hardware, and you can take the first half.
Yeah, the terrestrial cost, we did see a jump of about $300,000 of terrestrial costs from a couple of our carriers. We're working through that to make sure they're [indiscernible] the right rate plans. And I think part of that's just going to be a onetime blip and part of them might be continuing. So we're still looking at that. But I think it will come down a little bit in Q3.
是的，地面成本，我们确实看到我们的几家运营商的地面成本大约增加了30万美元。 我们正在努力确保他们[音频不清晰]正确的费率计划。 而且我认为其中一部分只是一次性的昙花一现，其中一部分可能还在继续。 所以我们仍在关注这一点。 但我认为它在第三季度会有所下降。
You know, and if I'm correct, Dean, sometimes we get the averages within a quarter, we get the bill and then you bill it the next quarter. So there's this catch up sometimes when you get a larger than anticipated.
There is, sometimes there's catch-up customers and sometimes you get a rebate from the terrestrial carrier if there was a wrong rate plan set up. So we'll see how that plays out.
On the other part of the question, the legacy. So in this quarter, we shipped more legacy products than the quarter before. And kind of looking at some of our legacy reefer products, the GT 1100, which at one point was tens of thousands of units, [indiscernible] it was down at 3,000 this quarter. And the legacy reefer product, which at some point had reached a high point, when we were converting at about 14,000 units is down to under 2,000. And what else, there's almost nothing left [indiscernible], it's pretty thin right now. Maybe there's $6 million total left of legacy product, which may be sold in the quarter, not in the quarter. You know, that's not even what worries me. I think we're going to get through that pretty quick. What worries me is, not anywhere near $6 million, but we probably still build $1 million to $2 million a quarter of legacy products. So there are certain configurations of GT 1100 that we continue to build. And because the GT 1200 is out, but the dual mode version isn't out. So we still ship the dual mode version GT 1100 for those people that want a satellite backup. And then over time as the engineering gets done, that will convert. But I think to your point, it's going to get pretty de minimis by the end of this year. 21%, that was a big number.
在问题的另一部分，遗产。因此，在本季度，我们发布的传统产品数量超过了前一季度。看看我们的一些传统冷藏产品GT 1100，它一度是成千上万的单位，[音频不清晰]它在本季度下降了3,000。传统的冷藏产品在某种程度上达到了高点，当我们转换成大约14,000个单位时，已经降到2000以下。还有什么，几乎什么都没有[音频不清晰]，现在它已经很薄了。也许剩下600万美元的遗留产品，可能会在本季度销售，而不是在本季度销售。你知道，这甚至不是让我担心的事情。我想我们会很快通过这个。令我担心的是，不是600万美元左右，但我们可能仍然会在四分之一的传统产品中建立100万到200万美元。因此，我们继续构建GT 1100的某些配置。而且因为GT 1200已经淘汰，但双模版本还没出来。所以我们仍然为那些想要卫星备份的人们提供双模版GT 1100。随着工程的完成，随着时间的推移，这将转换。但我认为，到今年年底，它将会变得非常微不足道。 21％，这是一个很大的数字。
Okay and last question for me, sorry to interrupt you. On the in-cab side, nice to see some orders and things that pulled through. In prior quarters, you had mentioned Blue Tree and not having some of the integrations. So some deployments kind of being on pause or not in a position to order because of that. Can you give us an update? Are the integrations complete? Are you starting to see flow through as a result of that? And orders in the quarter, is it a result of actually having some of that stuff completed?
好的，对我来说最后一个问题，抱歉打扰你。 在驾驶室内，很高兴看到一些订单和事情。 在之前的几个季度中，您提到了Blue Tree而没有进行一些集成。 因此，有些部署暂停或无法进行订购。 你能告诉我们一个更新吗？ 集成是否完整？ 你是否开始看到流量通过？ 在本季度的订单，是否实际上已经完成了一些这样的事情？
Yes. So every customer has different expectations. So the answer is it will never be completed. But I think a lot of the work for the customers that we were closing in on, when we threw out that 10,000 number, to get those guys complete is pretty well complete. And you can see we're trending well above those numbers, that we originally guided to and doing really well. We learned something as we did this. And I think it's directly related to the integrations that you're talking about. The business is a little different than we thought it was, in that we thought that we would win a few, 3,000 , 4,000, 5,000 unit in-cab orders and instead what we closed was tens of 150 to 500 unit orders, which is a little more complex in terms of integration, because each one has their own needs, but it's a whole lot better in terms of margins and ARPUs, because you're dealing with smaller fleet sizes but we kind of ended up at the same place.
是。 所以每个客户都有不同的期望。 所以答案是永远不会完成。 但是我认为我们正在关注的客户的很多工作，当我们抛出10,000个数字时，让这些人完成是非常完整的。 而且你可以看到我们的趋势远远高于那些我们最初引导并且做得非常好的数字。 我们学到了这些东西。 我认为这与您正在谈论的集成直接相关。 这个业务与我们想象的有点不同，因为我们认为我们会赢得一些3,000,3,000,5,000个单位的驾驶室订单，而我们关闭的是几十个到500个单位订单，这是一个 在集成方面稍微复杂一点，因为每个人都有自己的需求，但在利润率和ARPU方面要好得多，因为你处理的是较小的机队规模，但我们最终会在同一个地方。
All right. Thank you so much for that color.
Next question is from Scott Searle with Roth Capital. Please go ahead.
接下来的问题来自Scott Searle和Roth Capital。 请继续。
Good morning. Thanks for taking my question. Hey, Dean, just to quickly follow-up on the OpEx front, the $34.5 million number, I assume that's a GAAP number, correct, including stock comp. And then as you go through some of the integrations and new product development, integration on the Web platform side consolidating, when does that number start to come down? Do we start to see that ebbing a little bit in 2020 or is that going to continue throughout 2020?
早上好。 谢谢你提出我的问题。 嘿，迪恩，只是为了快速跟进OpEx前线，3450万美元的数字，我认为这是一个GAAP号码，正确，包括股票补偿。 然后，当您经历一些集成和新产品开发，整合在Web平台方面进行整合时，该数字何时开始降低？ 我们是否开始在2020年看到这种情况有所减弱，或者到2020年会持续下去吗？
I'll take that, the OpEx question, that is the GAAP number, it includes stock-based comp. I believe the stock based comp is going to be about $1.7 million a quarter in Q3 and Q4. On the synergy front, Marc, you want me to--?
我会接受，OpEx问题，即GAAP号码，它包括基于股票的补偿。 我相信在第三季度和第四季度，基于股票的收益将达到每季度约170万美元。 在协同方面，马克，你要我 - ？
No, I don't mind. I think definitely that business has to scale. We're working full time on 23 Web platforms. And those 23 Web platforms have teams of 8 to 10 as opposed to having two platforms with much more functional teams. I think this is -- this thing that we're building called Project Synergy on the Web platform side, it's less like painting the Mona Lisa and a little more like tuning an engine, in that it will be perfected in perpetuity. As you continue to -- you watch the product and then almost every week, you're adding new features to it. So believe it or not right now there's more work flow than less workflow. But the action start to turn down in the middle of 2020 and we get more efficient. In addition, on the hardware side, there's two big SKUs coming out over the next six to nine months, that will continue. We've done a pretty good job getting the 1,200 -- the GT 1,200 out there ready for prime time. It's reporting about 98% of the time these days, considering -- it's pretty good considering [indiscernible] coverage and everything else. So even at a higher standard the GT 1100 was getting out and the two big platforms that are coming out in the next six months in the hardware side, which will get us from that 53 to 40, is the FM 5000, which is the inthinc device. And the next generation Haley device, which is the AIS device that comes soon. So I think that there is a scaling coming. I think it's six to nine months away. But I think it's coming.
不，我不介意。我认为业务必须扩展。我们在23个网络平台上全职工作。这23个Web平台拥有8到10个团队，而不是拥有两个具有更多功能团队的平台。我认为这是 - 我们在Web平台方面建立的这个名为Project Synergy的东西，它不像绘制蒙娜丽莎那样，更像是调整引擎，因为它将永久完善。随着您的继续 - 您观看产品，然后几乎每周，您都会添加新功能。所以信不信由你现在有更多的工作流程而不是更少的工作流程。但是行动在2020年中期开始下降，我们的效率也会提高。此外，在硬件方面，未来六到九个月会出现两个大的SKU，这将继续下去。我们已经做了相当不错的工作，获得1,200 - GT 1,200准备好迎接黄金时段。考虑到这一天大约有98％的时间报道 - 考虑到[音频不清晰]的覆盖范围以及其他所有内容，这是相当不错的。因此，即使在更高的标准下，GT 1100也会退出，未来六个月在硬件方面推出的两个大型平台，即将从53到40的平台，是FM 5000，这是一个不错的选择。设备。而下一代Haley设备即将推出的AIS设备。所以我认为会有一个扩展。我想这是六到九个月之后。但我认为它即将到来。
Meanwhile, we got more work and we know to do it.
And Marc, I'm not sure if I heard it earlier, but did you give a number for Maersk contribution in the June quarter?
The contribution, they do $3.2 million a year.
$3.2 million, a year. Okay, helpful, okay. Thank you. And just two other items. If you have some -- I don't know if they're updated numbers in terms of subscriber counts for Blue Tree and inthinc and as well I think you've talked about a pipeline, and you've alluded to some of those positive conclusions in terms of -- I think there were six to eight pilots, there were 100,000 plus types of opportunities. Could you just update us on that front in terms of what end markets they're in as well and kind of what the AROU profile looks like that? And so we can start to formulate an outlook for 2020 and beyond. Thanks.
一年320万美元。 好的，乐于助人，好的。 谢谢。 还有其他两件事。 如果你有一些 - 我不知道他们是否更新了Blue Tree和inthinc的用户数量，并且我认为你已经谈到了一个管道，你提到了一些正面的 结论 - 我认为有六到八名飞行员，还有10万多种机会。 您是否可以根据他们所处的终端市场以及AROU简介的类似情况向我们提供最新信息？ 因此，我们可以开始制定2020年及以后的展望。 谢谢。
inthinc and Blue Tree have about a 100,000 subscribers. And I think the good news on that pipeline is we've -- are starting to close in on it or those few hundred thousand, you're seeing 150,000 of them now moving as quickly as humanly possible. There's maybe another 150,000 containers out there. I wouldn't call it pipeline, I call them leads that we're trying to close in on -- maybe we close them, hopefully we close them, hopefully we don't, we'll get it done soon, there's something like 60,000 of them between our OEM and two other customers that we've kind of got the handshake on and we're working through the contractual arrangement of it. So definitely closing in on that. In the rail part, there's another 50,000, 60,000 that we're hopefully closing in on over the next couple months. There's plenty of pipeline out there. We need our closing count to do 9% service revenue growth and hit a good 15%, 20% number next year in growth. We would need a closing count closer to 50% or 60% in order to get there.
inthinc和Blue Tree拥有大约100,000名订阅者。而且我认为关于这条管道的好消息是我们已经开始接近它或几十万，你看到它们中的150,000现在正在尽可能快地移动。那里可能还有另外150,000个集装箱。我不会称它为管道，我称之为我们试图关闭的线索 - 也许我们关闭它们，希望我们关闭它们，希望我们不关闭它们，我们很快就会完成它，有类似的东西其中60,000个是我们的OEM和另外两个客户，我们已经得到了握手，我们正在通过它的合同安排。所以绝对要接近这一点。在铁路部分，还有另外50,000，60,000，我们希望在接下来的几个月里关闭。那里有很多管道。我们需要我们的收盘数来实现9％的服务收入增长并且明年增长15％，增长20％。我们需要一个接近50％或60％的收盘数才能到达那里。
Great. Thank you.
Next question is from Mike Latimore with Northland Capital Markets. Please go ahead.
下一个问题来自Mike Latimore和Northland Capital Markets。 请继续。
Hi, guys. This is Colin [ph] on for Mike. I have two questions. Does the Inmarsat acquisition have influence on your SkyWave business?
嗨，大家好。 这是迈克的科林。 我有两个问题。 收购Inmarsat是否会影响您的SkyWave业务？
Claims on our SkyWave business?
So I don't know if there's claims on the SkyWave business, but we share the technology of IDP together, so they have the ability to sell it and pay us some sort of revenue share or we have the ability to sell it and pay them some sort of cost for access to their satellites. And that's how we kind of go together. We have a contract that extends kind of through the life of I-4. And I-4 should last through the mid-2020s, that being said, it's going to be, I believe I don't want to say for sure, but I believe it's going to be renegotiated pretty soon to include I-6, which will give us life closer to 2040. But we've -- I think in terms of the SkyWave business, we bought a business that had just over 200,000 subs and today it's between 350,000 and 400,000 subs. And I don't know that the relationship with Inmarsat has ever been more positive than it is right now. I don't know if that answers your question?
所以我不知道是否有对SkyWave业务的索赔，但我们共同分享IDP的技术，因此他们有能力出售它并向我们支付某种收入份额，或者我们有能力出售并支付它们 访问其卫星的某种成本。 这就是我们如何走到一起的方式。 我们签订的合同延续了I-4的生活。 I-4应该持续到20世纪20年代中期，据说，这将是，我相信我不想肯定地说，但我相信它很快就会重新谈判，包括I-6， 我们的生活将近2040年。但我们 - 我认为就SkyWave业务而言，我们购买了一家拥有超过200,000个潜艇的企业，而现在它已经拥有350,000到400,000个潜艇。 而且我不知道与Inmarsat的关系比现在更加积极。 我不知道这是否能回答你的问题？
Yes. Got it, got it. And the next question is related to the upfront amortized fees recognized in the quarter, like when do you expect this headwind to dissipate completely?
是。 得到它，得到它。 接下来的问题与本季度确认的前期摊销费用有关，就像您预计这种逆风何时完全消散一样？
Well, right now it's down to a pretty de minimis amount for the quarter, that should extend out a few years. However, with the contract position we're in right now, it's a question whether we have to accelerate it or if we let it run out past January 1, if there's any additional work to be done. So we're still looking at that number. But it's pretty de minimis at this point.
那么，现在它已经下降到本季度相当微不足道的数额，应该延长几年。 然而，由于我们目前处于合同状态，我们是否必须加速它，或者如果我们让它在1月1日之前用完，那么还有其他工作要做。 所以我们仍在关注这个数字。 但在这一点上它是微不足道的。
Got it. Thanks.
[Operator Instructions]. Next question is from the line of Mike Malouf from Craig-Hallum. Please go ahead.
[操作员说明]。 下一个问题来自Craig-Hallum的Mike Malouf。 请继续。
Great. Just a couple of clarification. So with regards to the $3.2 million, that annual subscription revenue that gets allocated to other service revenue, or is that lost at the end of the year, I'm just a little confused about that. Thanks.
非常好。 只是一些澄清。 因此，对于320万美元，即分配给其他服务收入的年度订阅收入，或者在年底丢失的收入，我对此感到有些困惑。 谢谢。
I think it's lost. You know, that being said, we hope to participate in Maersk's next program. But in terms of -- which there's no guarantee. But this program is over.
我觉得它已经丢失了。 你知道，据说，我们希望参加马士基的下一个计划。 但就 - 这是无法保证的。 但是这个计划结束了。
Okay and then with regards to costs associated with that revenue, is it pretty much a 100% margin revenue or is there some cost that will also go away with that?
No, it's engineering services, there's contemplated with the contract about 6,000 hours of service on an annual basis that we need to support them on. So we can either figure out how to rationalize that cost or there are six or seven other container programs that we do not need to hire to support. We can move those resources over or Maersk kind of says, all right, we're going to need your engineering support, but it's not going to be a recurring fee and it ends up in non-recurring. We just don't know, I get the feeling it's not going to look like it does now, subs times ARPU. Is it going go to zero? I don't know, I don't know, I think -- let's take a look, Mike, technically what we do for Maersk, and maybe that'll help you. Technically what we do for Maersk is, we design the firmware that goes on their hardware. That's the first thing we do. And then we update that over time, as new features come out or new SKUs come out from the reefer OEMs and everything else.
And because those units were 3G, there's no need for us to continue to perfect that firmware on this generation for Maersk. And then the second thing that we do is after it goes over the AT&T network and it gets collected, there's an instance of SkyWave technology sitting at Maersk that takes that data and fills the fields of Maersk's systems so that they can manage the business. And then you're doing two things there. You're doing further integrations. You're helping them with the reporting. And then the second thing you do is, you're there in case there's some sort of crisis management, and that's the part that they really need to be worried about, right. Gee, it's not feeding my data anymore and I don't know what's going on my reefers. So that's kind of where we are.
不，这是工程服务，合同中考虑了我们需要支持他们每年大约6000小时的服务。因此，我们可以弄清楚如何合理化该成本，或者有六到七个其他容器程序我们不需要雇用来支持。我们可以将这些资源转移过来，或者马士基有点说，好吧，我们需要你的工程支持，但它不会是经常性的费用，而且最终都是非经常性的。我们只是不知道，我觉得它现在看起来不会像现在这样，次数是ARPU。它会变为零吗？我不知道，我不知道，我想 - 让我们来看看，迈克，技术上我们为马士基所做的事情，也许这对你有所帮助。从技术上讲，我们为马士基所做的是，我们设计了硬件上的固件。这是我们做的第一件事。随着时间的推移，随着新功能的出现或冷藏原始设备制造商及其他所有产品的新SKU问世，我们会对其进行更新。
Okay, great. That's helpful. I appreciate that. And then just a quick follow up on, as far as CapEx goes, as we look into 2020, can you give us a sense of how much these AIS Sats will cost? I know you've started, I think you said $600,000 in the June quarter that you paid, or maybe it was the September quarter that you're expecting to pay. But just a sense of how that will impact CapEx as we look into next year?
好，太棒了。 这很有帮助。 我很感激。 然后，就资本支出而言，快速跟进，在我们展望2020年时，您能否让我们了解这些AIS Sats将花费多少？ 我知道你已经开始了，我想你在6月份的季度里说你支付了600,000美元，或者也许是你期望支付的9月季度。 但是，我们对明年的影响是如何影响资本支出？
Yes, so the total program is -- it's roughly $2.5 million and payments we spread out over milestones, we expect to pay about $1.3 million this year and the remainder in 2020. So in the back half of the year, we're looking at about $700,000 in CapEx and then the rest in 2020.
是的，所以整个计划是 - 它大约250万美元和我们在里程碑上分摊的付款，我们预计今年将支付约130万美元，其余部分将在2020年支付。所以在今年下半年，我们正在关注 资本支出约为70万美元，其余为2020年。
So Q2 could be the peak for CapEx--
For a single quarter.
We paid -- 45% of this program is for the year in the quarter. So looking at CapEx, it's $23 million this year, right. I mean, it could be -- I know we got it at $25 million but it looks like $23 million, could it extend to $24 million? Yeah. Could it be a little under $23 million? No. But there's not like a wide margin forever there.
我们支付了 - 该计划的45％是本季度的一年。 所以看看资本支出，今年是2300万美元吧。 我的意思是，它可能是 - 我知道我们得到了2500万美元，但它看起来像2300万美元，可以扩展到2400万美元吗？是啊。 可能有点不到2300万美元吗？ 不，但是那里永远不会有很大的差距。
And next year looks to be about the same?
Yes, I think next year is about the same in that $22 million, $23 million range.
So we will have paid half the satellite roughly this year and you'll have half left for next year. I don't know, Mike, if we can synergize these platforms like we talked about, and how much of that gets in next year, a huge portion of that is CapEx. That's where a lot of it's being spent.
因此，今年我们将大致支付一半卫星费用，明年你将剩下一半。 我不知道，迈克，如果我们可以像我们谈到的那样协同化这些平台，以及明年有多少这样的平台，其中很大一部分是资本支出。 这就是花费很多的地方。
Next question is from Chris Quilty from Quilty Analytics. Please go ahead.
下一个问题来自Quilty Analytics的Chris Quilty。 请继续。
Marc, I just want to follow-up on the ELD Mandate, do you feel like at this point you have with six months to go, before implementation of 100% visibility on what the customer pipeline looks like or is there the potential that you could see some follow-on sort of late compliance demand that surfaces up?
Marc，我只是想跟进ELD Mandate，你觉得在这个时候你有六个月的时间，在实现客户管道的100％可见性之前，或者你有可能做到这一点 看到一些后续的合规需求出现了吗？
I think it blew away, in the oil and gas markets, where they typically roam in inthinc, we have a pretty good deal, the contracts have been pretty much signed and we'll continue to recognize the revenue as it gets installed. So we're kind of betting on how quick Schlumberger installs and that's how we get the revenue. But believe it or not, most of it's been shipped but not recognized for some of those contracts. But some of this, my guess is you're going to see three to four times the amount of deployments over the next year in this ambulance business than you are in the oil and gas business. So we think that's where the growth is, some of these other types of emergency vehicles that we're working on. So there's potential for a whole lot of growth, it'd just not be, may not be strictly ELD growth that you were anticipating.
我认为它已经消失了，在石油和天然气市场，他们通常在这里徘徊，我们有一个非常好的协议，合同已经签署了很多，我们将继续认识到它的安装收入。 因此，我们打算思考Schlumberger的安装速度，以及我们如何获得收入。 但不管你信不信，大部分产品已经发货，但其中一些合同尚未得到承认。 但其中一些，我的猜测是，你将看到这辆救护车业务明年的部署数量是石油和天然气业务的三到四倍。 因此，我们认为这是增长的地方，我们正在研究的其他一些类型的紧急车辆。 因此，有可能实现大量的增长，而不是，可能不是您所预期的严格的ELD增长。
Understand. And with the consolidation of all of your accounting platforms on the ERP, how does that play out in terms of any potential operating expense savings? And am I correct that you've kind of gone through this process without any major hiccups?
了解。 通过整合ERP上的所有会计平台，如何在节省任何潜在的运营费用方面发挥作用？ 我是否正确你在没有任何重大打嗝的情况下经历了这个过程？
Yes, that's correct. We had no major hiccups, we went live in North America with the system in 2018 and it went relatively smoothly, we're still looking to pull in the last acquisition we did in Europe, Blue Tree in Ireland, Ontario ERP system, they're currently on an SAP system. I think operationally it gives us a lot more insight into managing inventory and managing the business. So there's definitely efficiencies that are pulled out through that process. Does that--?
对，那是正确的。 我们没有出现重大问题，我们在2018年使用该系统在北美上线并且进展相对顺利，我们仍然希望完成我们在欧洲的最后一次收购，爱尔兰的Blue Tree，安大略省ERP系统，他们' 目前在SAP系统上。 我认为从操作上来说，它为我们提供了更多关于管理库存和管理业务的洞察力。 因此，通过该过程肯定会提高效率。 那个 - ？
Q2 last year.
Yes, we went -- that's when the majority of our business went live on the ERP system was Q2 of 2018.
是的，我们去了 - 那是我们的大部分业务在ERP系统上运行的时间是2018年第二季度。
So I mean, I've been through some rough patches with other companies, but everyone got their bills and we got paid.
Understand. But have there been any significant costs that you've been bearing over the last year or so that could fall off potentially as we look out into 2020?
There will be some synergies, we've already made some consolidations of some back offices and finance and accounting operations, which had some small savings in SG&A already.
Contractors. Yes and contractors too. We definitely have some small dollars we picked up through this process.
承包商。 是的，也是承包商。 我们肯定会通过这个过程获得一些小额资金。
Got it. Very good. Well, thank you for the feedback.
得到它了。 很好。 好的，谢谢你的反馈。
At this time, there are no further questions. The company thanks you for participating on the call and looks forward to speaking to you again, when they report third quarter results. Have a good day.
此时，没有其他问题。 公司感谢您参与此次电话会议，并期待在他们报告第三季度业绩时再次与您通话。 祝你有美好的一天。
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