ORBCOMM Inc.
Q4 2020 Earnings Call Transcript

Published: 24 Feb 2021

[Operator:]

Good morning, ladies and gentlemen, and welcome to ORBCOMM's Fourth Quarter 2020 Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question and answer period. Please note, this event is being recorded and a replay of this conference will be available from approximately 11 a.m. Eastern Time today through March 10, 2021. 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.

[Aly Bonilla:]

Good morning and thank you for joining us. Today, I am joined by 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 a strategic update on the business. Dean will then review the company's quarterly and full year financial results and outlook. 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 include 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.

[Marc Eisenberg:]

Thanks, Aly, and good morning everyone. We finished 2020 strong with Q4 coming in at the high end of our guidance for both revenue and adjusted EBITDA margin. Net subscriber additions down to about 55,000 bringing the total in 2020 to over 170,000. While the pandemic caused significant disruption, we showed our resilience. We’ve made major strides in the integration of our twelve acquisitions by moving to a single ERP platform, going live on our two customer-facing web platforms, and rationalizing our product portfolio. In addition, we expanded our agreement with Inmarsat extending our partnership expected to last through at least 2035. We began rolling out many of our newest products, some of which have already begun to hit the market. In just last quarter, we significantly improved our capital structure with a new debt facility that dramatically reduces our interest payments. Clearly, it was a busy year and we are emerging from this pandemic as a stronger, more agile company with good momentum and strong financial results. Earlier this morning, we issued a press release announcing our financial results for the fourth quarter and full year ending December 31, 2020. Total revenue for the fourth quarter was $63.8 million, up sequentially from Q3, its hardware sales continues to recover. Higher service and product gross margins, combined with effective cost management led to Q4 adjusted EBITDA of $14.9 million or a 23.3% margin.

[Dean Milcos:]

Thank you, Mark. Good morning, everyone. I'm pleased that we continue to make progress on multiple key initiatives with our financial performance in Q4 coming at the high end of our guidance range. Total revenue for Q4 was $63.8 million, up about 3.5% sequentially from Q3. Product sales in the fourth quarter were $24.7 million, a 12% sequential improvement as customers continue to ramp up business from the pandemic lows in Q2. In total, we shipped over 76,000 devices in Q4, it is approaching our pre-pandemic early average and with 10,000 more devices than we shipped in Q3. Q4 service revenues were $39.1 million with the recurring service revenues of $36.8 million, up sequentially $400,000 from Q3. In Q4, we added over 55,000 net subscribers bringing our total billable subscriber account to $2.23 million at the end of December 2020.

[Operator:]

And the first question will come from Rick Prentiss with Raymond James. Please go ahead.

[Rick Prentiss:]

Thanks. Good morning guys. Hope you are continuing to be well.

[Marc Eisenberg:]

Hey, Rick.

[Dean Milcos:]

Hey, Rick.

[Rick Prentiss:]

Hey. First question I’ve got, the Army contract sounds pretty interesting. Can you walk us through maybe a little bit of the pacing of what you think how that might play out? What kind of margins that could bring? And is it just products or is there services?

[Marc Eisenberg:]

Well, it’s some products and connectivity. So, it’s product plus the associated air time. So, that includes cellular, satellite and dual-mode airtime, plus the products. I don’t know that we can comment on the exact margins. They are not far off from normal margins. It’s – we are already starting to ship with limited amounts of product, but there is some development that we are in the process of completing for the U.S. Army including a web interface that allows them to change the settings, onboard these units. You can well be – the web platform, that customer-facing web platform we are integrating into a U.S. Army interface. So there is a little bit of work to be done. We are starting to sell hundreds of units and we anticipate it will be thousands of units by the back half of the year.

[Rick Prentiss:]

Nice contract. And you mentioned the inventory situation you are managing through, is there any difference in kind of the product margins by using the global chips instead of a North American chips?

[Marc Eisenberg:]

Yes . That’s like a buck or two. It’s not drastically different. I mean, maybe, it will cost us across the entire business quarter of a point in margin at some time. But you got to keep your customers happy and this 3G replacement is significant. We’ve got to geared to get it done. So, we got to get those products out there.

[Rick Prentiss:]

Sunset is sunset. Yes. The – obviously, a large part of the story here is the free cash flow story and you laid out a lot of what you’ve done on the debt side. Help us understand where you see CapEx heading, both for the subscription model, but also the total CapEx.

[Marc Eisenberg:]

Sure. Dean, do you want to take that one?

[Dean Milcos:]

Yes. Yes. Sure. Rick, we think CapEx excluding subscription will be pretty stable with 2020 maybe that $18.5 million and right now we are expecting subscription model investment to be somewhere between $7 million and $9 million. But it depends on how quick the customer uptake is on the customer side.

[Rick Prentiss:]

Okay. And you mentioned, obviously, the refinancings the spread can come down as the leverage comes down, how do you think about leverage heading down at some point, does leverage get like, too low and you want to stay somewhat levered.

[Dean Milcos:]

Yes, right now, our net leverage ratio is about 3.2 and when the ratio comes down below 3, we use another 25 basis points on the spread with our term loan. At the end of five years, we do expect to pay down this remaining balance right now by about half and that would get us down to some negligible level of net leverage ratio. And it’s just something that we have to keep monitoring. I think, being in the one range Rick is kind of appropriate for the company that we are driving towards, that’s something we manage every year.

[Rick Prentiss:]

And does that allow some flexibility for stock buybacks too as we monitor what’s happening. Obviously, stocks had a nice recovery from the COVID gaps, but the stock buyback is something also an opportunity in the long-term.

[Dean Milcos:]

In the long-term it gives us a lot of financial flexibility, whether it’s stock buyback the one like we did two years ago or whether it’s a larger investment somewhere. It just gives us the financial flexibility to do those types of things in the future.

[Rick Prentiss:]

I guess, these are my last questions. Sorry for shooting couple of elaborated ones, but obviously M&A, you can hit up for me there, Marc, what are you thinking about the marketplace? Do you need any acquisitions, people love to seeing the execution you are doing, but how should we think about large M&A and when you might have the office space again?

[Marc Eisenberg:]

So we are trying to achieve the record, Rick, the Guinness Book of World Records from converting analysts in Q2 from do you have enough cash to what you are going to do with all your damn cash? So, I don’t know if we’ve got there. There is no M&A on the books this year for 2021. We’ve just been through a very difficult integration. We got it done and the company is behaving exactly the way we would hope that it would. And you could see it become easier for us to forecast with less SKUs, the ends of these quarters across platforms and we are really focused on these multiple new products that we really want to kind of aged out there with customers. And I don’t know that we can inject something on the M&A side and pull off this 10 and 20 plan in 2021 and do it well. So, we are not really considering M&A this year. In the out years, maybe, but just not this year.

[Rick Prentiss:]

That’s a good plan. Execute and deliver. So I appreciate it. Stay well, guys.

[Marc Eisenberg:]

Thanks, Rick.

[Dean Milcos:]

Thanks, Rick.

[Operator:]

And the next question will come from Mike Walkley with Canaccord Genuity. Please go ahead.

[Mike Walkley:]

Great. Thanks for taking my questions. Hope everybody is healthy and well on the call. Hey, Marc, just want to follow-up on the 10 and 20 targets realizing that some supply issues and uncertainty around the pandemic, but can you maybe talk about the 10 and 20 potential for given this calendar, which has given some easier comps. You start to lap and then on top of that, you have always new products coming into the model. How should we think about those impacting growth throughout the year? Thanks.

[Marc Eisenberg:]

Yes, I mean, we are kind of arriving into a little bit of perfect storm here, right. You’ve got very easy comps especially in Q2, I shouldn’t say, especially in Q2, starting in Q2 and you’ve got these 3G replacements and there is a lot of exciting stuff. The reefer business is on fire. We are seeing growth in the transportation macro industry that we really haven’t seen since the end of 2018. There is a lot of starters aligning in. Well, I’d be disappointed if we didn’t grow 10% this year. I’d be really disappointed and then with all the work that we did around cost reduction and the efficiencies in getting this integrations on, I think pretty easily you are getting two points in adjusted EBITDA growth for every one point of revenue growth. So, we are comfortable there. If I have to check the over under on the 10 and 20, GIC be over, but I am focused on – I think we’ve got a pretty good handle on the component issue based on our global variance in other stuff and we are not kind of reliant on third parties to reengineer. We do it in-house. We submit for our own regulatory approvals. There is a lot of bench strength here that we can kind of fix our own problems. So we are confident. So, if I make a bet, I chase this year, yes.

[Mike Walkley:]

Okay. That’s helpful. And Marc, maybe we have to flush it out another way on the 10% growth side. Lot of tailwinds you talked about on just organic growth. So, how should we think about just the organic growth of the business? And then, maybe if you can layer on top of that, I know there is different timing when new products hit, but if you just look at new products separately look at that maybe add to growth based on what you are hearing from field trials and your anticipated timing when they might hit the model?

[Marc Eisenberg:]

Yes, I think it will be 4% to 5% of these new products. Unfortunately, in our industry, it’s like that, 550, 500 customer drive size, they move to set these before they get to 500 and that takes a couple of months to get them converted. The good news is, once you get them on those new products, our churn is like 7% a year. So, it’s a little bit of a long cycle in terms of selling it, but there is a massive tail once you do. So, I would say it’s there. And understand I think when we talk about the 10 and 20, we are converting - $7 million and $9 million of product at cost into this subscription model. So, $7 million and $9 million at cost is what $12 million or $13 million at retail and then $12 million or $13 million at retail is something like 4% right there, right that we are compensating for. So, 10 and 20 isn’t really 10 and 20. It’s 13 and 20.

[Mike Walkley:]

Great. And the last question from me and I’ll pass the line. Just a couple clarifications. Dean, I think you mentioned Q1 without this parts shortages you could have done with a $2 million to $3 million. Can you just clarify that? And then, also just on operating expenses going forward, it was better than expected on the execution which rolls into my model in Q4, is that a good runrate for Q1 or is there is something I think you mentioned in terms of higher salaries or something that come back into the model in Q1 and implied in your guidance? Thank you.

[Dean Milcos:]

Sure. Yes. We mentioned on the call, it was $2 million to $3 million of a potential push, because the components are maybe not available to do the full builds for the March purchase orders. But we are still chasing those components and seeing what we can do. On the operating expenses, we do expect SG&A to be relatively flat from 2020 to 2021. So I don’t really expect any growth in SG&A for the full year. And maybe cost of product development has a small increase from last year, something in the 5% to 6% range. But operating expenses are going to be relatively consistent in 2021.

[Mike Walkley:]

Great. Well, congrats on the strong execution and then, I look forward to another good year for you guys. Thanks.

[Dean Milcos:]

Thanks, Mike.

[Operator:]

And the next question will come from Anthony Stoss with Craig-Hallum. Please go ahead.

[Anthony Stoss:]

Good morning, Marc and Dean. My congrats as well on the continued strong execution and getting the integration behind you. Marc, I wanted to focus in on the dual-mode products you are talking about. I think you mentioned there is 90 customers that are in process of designing that and how important are these products for new customers, maybe if you can give us the mix of existing versus potential new customers within that 90 tally. And then, presumably, with this functionality that would imply likely larger customers. Any detail you can share related to that and I did have a follow-up.

[Marc Eisenberg:]

Yes, so the 90 kind of follows that 550, 500 right. So it’s small amount of units right now with these guys get their development. The dual-mode is, there is two separate and distinct customers for it. Number one is our reseller network and basically are selling satellite connectivity and a modem or a telematics box to a third-party seller. Typically, these are international folks. And we see a really good market for that. But probably the largest user of this dual-mode service is going to be ORBCOMM itself. And that’s literally our transportation customers coming off of 3G sunset saying, gee, I am never going to deal with that again. Let me get a dual-mode deployment through our channel and we’ve closed some super exciting deals here already. None that were able to talk to on this call. But thousands of them. And I think, the trick in dual-mode is, how do we turn it from 2% of our deployments to some larger number, 20%, 30%, 40% of our deployments. That’s really the game changer there, because then ORBCOMM has a competitive advantage that really no one can touch, certainly if the price points that we are at. And be just better service, right. So, I think it’s exciting. It’s a game changer. These price points that we are talking about for these products from hardware perspective, I don’t think customers have ever seen anything like this and it will definitely affect the elasticity of the market.

[Anthony Stoss:]

Got it. And then, Marc, following up on, I guess, Dean commented that he doesn’t expect SG&A to necessarily go up this year. After having doubled the sales force in 2020, are you comfortable that that’s the right level to take you forward for the next couple of years? And then, lastly, if you wouldn’t mind taking a shot, your sub growth continues to be quite strong. Any guess as where do you think you exit calendar 2021 in terms of number of subs?

[Dean Milcos:]

So, you said, we doubled the inside sales staff not the sales staff?

[Anthony Stoss:]

Yes. Correct.

[Dean Milcos:]

Right. So, the inside sales staff, when we see double it, I think, we went from like 3 to 6 which is why you are not seeing massive increases in SG&A. And most of our sales historically have been through these large customers or OEMs that don’t require a large staff or internationally, we mostly sell through a reseller network where they are typically the ones that are adding staff. So, again, that’s why we’ve got this incredibly scalable model. So, that’s kind of the way we are looking at it. What was your next – I am sorry, your…

[Anthony Stoss:]

You did the bench…

[Dean Milcos:]

In 2021, yes

[Anthony Stoss:]

Subs.

[Dean Milcos:]

So, my guess is in the first quarter, it should be at least as good as Q4. Probably a little better in terms of subs. We are about two-thirds the way into the quarter and we are probably looking at like a 40 number right now with the whole month to go. So, we are trending just a little bit better. I looked it at this morning. But it’s just creep back closer to the 60s and 70,000s which is where we use to kind of where we use to live, right before the pandemic and then with it some point in time, hopefully, it starts to creeping forward 6% or 7% a year. So that we can achieve our 10 and 20 plan. Keep in mind, new products in these SKUs are also going to end up meaning more subs.

[Anthony Stoss:]

Thanks for the color. Best of luck, guys.

[Dean Milcos:]

Thanks.

[Marc Eisenberg:]

Thank you.

[Operator:]

And our next question will come from Mike Latimore with Northland Capital Markets. Please go ahead.

[Mike Latimore:]

Great. Thanks. Yes, congratulations on the year. On the, I guess, Marc, we touched on the sub commentary for the year, what about ARPU? How do you think ARPU sort of trend throughout the year here?

[Marc Eisenberg:]

ARPU just remained relatively constant. I think, what we are focused on is mix when it comes to ARPU. And mix means two things in my book, it means subscription versus selling the hardware upfront generates far higher ARPUs, but as you heard me say it’s on 3% or 4% of the business. So, it moves nickels, but not tons or quarters. And I think also mix, we are selling a little bit higher percentages of In-Cab versus the basic trailer and that stuff kind of steps up. That can affect ARPUs as well. But if you are expecting like massive moves in ARPUs, it’s really hard to move a base of 2.2 million subs. Every year, let’s say you are adding 250,000 to 300,000 subs on 2.2 million. It’s hard to budge right, which is why you do so well in the middle of the pandemic, right.

[Mike Latimore:]

Yes. Excellent. Good. Okay. Great. And then, if you get to your 10% goal for the year, I guess, can you achieve that while there is still a supply constraint out there or any of the supply constraints are basically at the 10% given?

[Marc Eisenberg:]

I am knocking on wood here, Mike. I think we got the supply thing covered. That being said, I don’t what the next molars that we are going to have to whack. The ones that we are looking at right now, the last one being this LTE modem, we are going to get a redesigned modem from new blocks by the end of the month that’s the North American version that we’ve been referring to. And we haven’t been struggling so badly with our other modem supplier at Quectel. So, we are going to have enough for our Q2 demand. So, I don’t know what the next molars that we are going to have to whack, but it does feel good to have 400 engineers running around, sort of when you do run yourself into a problem that they can dig your way up.

[Mike Latimore:]

And then I guess, just last question on the 4G upgrade opportunity. I guess, one, did you say that you are expecting about 60,000 units to upgrade this year? And then two, is that’s sort of the entire 3G baseband, or because that you obviously need to be up by yearend?

[Marc Eisenberg:]

Yes. So we need to be up in yearend if they aren’t Timo. And then you got a little more time if it’s the other vendors. So, Timo is predominantly on our reefer fleet, which is why you heard us spin out a lot of reefer names. So, I think the whole issue is about 100,000. And the biggest one out there is hub and hub has been dealt with and we’ve already started fielding their units maybe to the tune of about a third in 2020 and then two-thirds in 2021. Maybe some sneaks into 2022, because they are on AT&T. The next biggest one is Prime. And Prime is one of the larger companies that some people haven’t heard of, but believe it or not, they are the largest reefer fleet in the nation. And they started operating at about a 150 a week and will continue doing that all year. So, two customers almost gets you to half and then, you’ve got a bunch of other guys. I think we’ve got this. There really isn’t a wonderful second option that delivers the kind of value that we do and the kind of return that we do that’s so embedded with these customers and integrated with these customers. I mean, there is – you look at some of these guys like a Prime in 10 years of work together developing a product together that works for them.

[Mike Latimore:]

Got it. All right. Thanks a lot. Good luck this year.

[Marc Eisenberg:]

Thanks.

[Operator:]

And the next question will come from Chris Quilty with Quilty Analytics. Please go ahead.

[Chris Quilty:]

Thanks. A follow-up for Dean, I hate beaten on the SG&A, but I just want to clarify, I didn’t catch the number. The incremental bad debt expense this year I think was around $8 million. Is that correct? And if I understand your SG&A guidance, bad debt goes down by $8 million back to normal, but the spending on marketing and travel and entertainment those have to offset and you end up flat. Is that correct?

[Dean Milcos:]

Yes. Let me just clarify for you, Chris. So, bad debt was $2.4 million in 2019 and it went up to $6.1 million in 2020. So it’s an increase of $3.7 million. And we expect that $3.7 million to drop off and get back down to that normalized level of about $2.4 million a year. On the flip side, we did see travel come down about $3 million and I expect that go back up. But I don’t know if I look at this past the pre-pandemic levels, and then just note down on SG&A, just to clarify, we did have reduced headcount for the year. We are down about 50 employees from the end of 2019 to the end of 2020. So, some of those employees you might get, that builds, but that is also a good driver of the SG&A staying down to the low levels that we are seeing today.

[Chris Quilty:]

Got you. And product margins, still good to model those around the 30% level?

[Dean Milcos:]

Yes. I think that’s the level we are at now. Yes.

[Chris Quilty:]

All right. And AIS revenues in the quarter and any updates on your small boat OSP initiatives and what you are seeing there?

[Marc Eisenberg:]

I am sorry it’s just the revenues.

[Dean Milcos:]

I’ll let Marc take that. Yes. The revenue was $2.7 million consistent with Q3. But I’ll let Marc take the small initiative.

[Marc Eisenberg:]

So, the thermal testing is beginning on the first space craft. And it’s set up for a June SpaceX launch. But it is the space business. So, I don’t – maybe Q2, maybe Q3.

[Chris Quilty:]

Understood. And any other movements you are seeing in the AIS market in terms of either your strategy, once you have the new satellites online or competitive changes?

[Marc Eisenberg:]

Well, there is definitely three competitors out there, right. And the good news is, there is only three guys out there. But the offerings are definitely similar. I think the thing that’s really going to give us legs going forward is the Haley products which is something super cool from a product perspective as opposed to a space craft perspective. And then the second thing that could launch us back to growing the AIS business would be launching those satellites and getting those Class D vessels under that.

[Chris Quilty:]

Got it. And final question. Any updates on Brazil, which has been problematic. Are you seeing a recovery in that market?

[Marc Eisenberg:]

Brazil is kind of back to normal levels. So, I think, it’s a struggle in Brazil in terms of the economy. But structure is still moving right. So, Brazil is certainly up Q4 from Q3.

[Chris Quilty:]

Very good. Thank you very much, gentlemen.

[Marc Eisenberg:]

Thanks, Chris.

[Operator:]

The next question comes from Scott Searle with Roth Capital. Please go ahead.

[Scott Searle:]

Hey. Good morning. Thanks for taking my questions. Hey, Marc, couple of clean up items. I guess, I am not sure, did you give an AIS number for the quarter? And then to dive in again on component availability and the impact on product gross margins. It sounds like you are comfortable at that 30% range for the year, which I think has been your target level. But specifically, as we are looking into first quarter here, are you expecting any impact or pressure on gross margins, because it still seems like there is an availability issue or potentially that $2 million to $3 million that could get pushed in this quarter and maybe throw on top of that as well, the guidance of $61 million to $65 million, what are you factoring in of that $2 million to $3 million kind of for the midpoint of the range. Is that’s some of that $2 million to $3 million comes into the quarter? None of that comes into the quarter? How should we be thinking about that, call it $2 million to $3 million at risk at the current time versus the current guidance?

[Marc Eisenberg:]

Sure. AIS was, someone has just asked. It was flat to last quarter.

[Scott Searle:]

Okay.

[Marc Eisenberg:]

In terms of the margins, I think we pretty clearly guided to the adjusted EBITDA margins which are kind of on line with Q4 just maybe 8 points lower because, expenses jump up in first quarter and that will be fast. So, that’s what we are predicting. But I don’t think that hardware margins are going to vary much from Q1 for despite the component shortages that we’ve battled in Q4, we still came in at, I think 29.8, which is kind of right at that 30 number. So, we are comfortable. If the $2 million to $3 million comes in, you are at closer to the 65 number. If it doesn’t come in, you are probably closer to the 63 number. And if all $3 million doesn’t come in, they view it below and but, gee, we are not planning to be at the low end. But we were. So, that’s kind of how we are looking at it.

[Scott Searle:]

And then, Marc, just in terms of the new products, and enhanced services kind of getting layered in something the middle of this year and how you are bundling both service and hardware components, released hardware components. How are you – I mean, what are the indications of demand that you are seeing on that front? So, as we go forward, and you think about getting back to your normalized sub growth, what percentage do you think are going to move in that direction? It seems like the $7 million to $9 million probably implies like, 10% to 15% kind of conversion rate. Is that in the ballpark? How you are thinking about it? How does that’s stacking up against in this indications?

[Marc Eisenberg:]

So, we don’t really look at it as a percent of the entire hardware. We look at it as, a higher percent of the solutions part of our business. Not every piece of hardware we sell would lend itself to a subscription model. When we are selling a satellite modem, it’s not really – you don’t really sell a satellite modem and bundle in the airtime, because the satellite modem is a component in someone else’s product, right. It’s like, financing the serious receiver in your car, not the car, you know what I am saying. So, when we look at that, 8 to 10, it’s a higher percent of the solutions business that we sell to and then even within the solutions business, when you look at ORBCOMM’s super large customers, like Walmarts, or a J.B. Hunt, their cost of capital is lower than ours. So they don’t really need us to help them finance their products. So, once you kind of factor out the product that don’t really lend themselves to subscription and some of these larger customers, then we are kind of factoring in like a 30% to 40%.

[Scott Searle:]

Gotcha. Okay. And lastly, if I could just dive in, in terms of lack of annual guidance, it seems like you are pretty comfortable with your component availability situation that you guys have done a good job in the fourth quarter. You have pretty good visibility in the first quarter here. You’ve got a nice demand profile kind of shaping up, key markets that have been headwinds like oil and gas have bottomed out for you guys. Transportation is starting to come back. I guess, what is the hesitance in terms of providing that annual guidance? Is there something else that’s going on out there that’s causing you some concern? Or is it just level of caution kind of given where we are basically in a COVID recovery cycle? Thanks,

[Marc Eisenberg:]

Hey, to be clear, I am on record for taking me over. But I think we are just being cautious and I think the way we are kind of guiding through the year is still more aggressive than all our peers, right. I mean, there are lot of guys that we deal with aren’t even giving the first quarter guidance and it’s February 24. So, I think, we’ll continue to be conservative. But I don’t want you to think that we are doing anything different than we normally do, Scott. We always kind of give that annual guidance on the next call. I know you haven’t been following us that long. But this is ORBCOMM’s part for the course.

[Scott Searle:]

Great. Thanks, guys.

[Marc Eisenberg:]

Thanks.

[Operator:]

And the next question will be from Adrian Doria Medina with ADM Capital Management. Please go ahead.

[Adrian Doria Medina:]

Hey guys. Congratulations on a good quarter. So, I wanted to ask you, and circle back to the 10, 20 plan. So, in order to achieve this goal, does that mean that you guys are going to incur higher CapEx? I know 2020 was about $20 million of CapEx. So should we think about that for the runrate? Or should we think about, I guess more normal levels, pre-COVID levels?

[Marc Eisenberg:]

Definitely, not getting back to pre-COVID levels. We only have very minimal amount of satellite CapEx being launched. But, in terms of the runrate, Dean, do you want to take that one?

[Dean Milcos:]

Yes, yes. I think, when you mentioned the $20 million of CapEx in 2020 it was really two pieces. There was $18.5 million of, call it, project CapEx and $1 million of investments in the subscription model. I think the CapEx projects will stay consistent at about $18.5 million, but we are looking to do more of the subscription model and that investment will grow and we are thinking that will be in the $8 million to $9 million range. So, all in, investments in cash flow will be in the $27 million range in 2021. But, look, that clarifies your question.

[Adrian Doria Medina:]

Yes. And so you are saying that for 2021, we should think about close to $27 million, is that right?

[Dean Milcos:]

We are investing, yes, again, but between CapEx and $8 million or $9 million for subscription model investment.

[Adrian Doria Medina:]

All right. And should we think about a number going forward decreasing or staying at that level.

[Dean Milcos:]

This is for modeling purposes more than anything.

[Marc Eisenberg:]

I think in the short-term that CapEx project spends, it should be at that level. The subscription model it really depends on the demand in the marketplace from customers for that model structure. But we do see that demand growing incrementally.

[Adrian Doria Medina:]

All right. Perfect. All right. Thank you very much guys.

[Marc Eisenberg:]

Sure.

[Operator:]

Ladies and gentlemen, at this time, there are no further questions. The company thanks you for participating on the call and look forward to speaking to you again when they report first quarter results in late April. Have a good day.