Q&A with interim CEO Bill TempanyBill was kind enough to answer a number of questions I asked in an informal interview yesterday, herein posted...
Q: Before COVID-19 affected worldwide aviation, former CEO Tom Schmutz predicted that Flyht would be profitable after the PWS acquisition was total and complete in all aspects. Can we, accordingly, expect Flyht to be profitable when flights and flight hours return to pre-COVID levels?
A: We are working very diligently on making sure our resources are deployed where maximum revenue/profits can be derived. One of the issues we have overcome is spending money on development for clients where there was no foreseeable return on that investment so we are confident that once the industry is back on its feet, we will be in a strong position to improve our financial performance.
Q: As has been reported, management has prudently reduced expenses and limited R&D to immediate needs. Will Flyht hold this line even after recovery commences and revenue returns to previous levels?
A: We are very focused on return on investment and will be very cautious to continue to evaluate every dollar spent on how much that dollar will bring in.
Q: Have the 160+ Westjet AFIRS SatCom installs begun as yet?
A: Installations are scheduled to start in early 2021. We have every confidence that those installations will occur.
Q: Domestic flights in China have returned to near 2019 levels - any news on the commencement of ARJ-21 OEM installations for regional use there?
A: The first ARJ-21 has been delivered and the work is progressing on the STC with CAAC. The ARJ-21 with AFIRS will go into full service in 2021.
Q: Whatever happened to the 146 installations ordered by AVMAX back in 2015 for its small fleet of six aircraft and its leasing clientele? The order had a seven-year term - how many installations were completed and how many are left to do?
A: They continually install as aircraft are back in Calgary for C-Checks etc.
Q: Can you provide an update for the weather data collection trial with the ECCC?
A: We have renewed the contract and it is in force.
Q: With the Boeing 737 Max returning to use and Boeing’s related woes subsiding, is Flyht any closer to signing an OEM installation deal with Boeing?
A: We have not been successful getting a deal with Boeing even though we have invested millions of dollars in two Eco Demonstrator trials. We have been successful in having WestJet able to order provisions only for SatCom and can install an AFIRS unit on delivery of the aircraft to WestJet upon arrival. That is as close as I expect to get to factory fit from Boeing. It is expensive to get approved and you are no further ahead if you are an option so having provisions only is the best way for us going forward.
Q: Does Flyht have the certification for AFIRS installation on the Boeing 737 MAX?
A: We don’t need a separate STC with provisions from Boeing to implement our TSO AFIRS units.
Q: With the planned merger of Embraer and Boeing now cancelled, does Flyht have any talks ongoing with Embraer about OEM installations on their commercial aircraft?
A: We continue to meet with Embraer once travel resumes, however, all Embraer installs continue to be by the customer, not OEM installed. That will change when a customer pushes them for factory install.
Q: In Flyht’s conglomerate sales backlog of $50 million (as reported in Q1), Flyht had orders for AFIRS and its suite of SaaS products, and Flyht had orders for the acquired FlightLink hardware and software and Tamdar sensor from PWS (Panasonic Weather Services). When delivery resumes, will these orders be fulfilled as originally placed or will customers be invited to choose from the mix of products available?
A: We reduced our backlog at the end of Q2 to $33mm and update it every quarter for realistic numbers. With COVID some things will likely not occur and that is why we reduced the backlog. Our discussions with Air Asia have been that new installations will be TAMDAR/AFIRS and not FlightLink so that they can take advantage of Actionable Intelligence and other features not available with FlightLink.
Q: Recently, you reported that the sales backlog had gone down to approximately $30 million. Proportionately, how much of this was this due to installation, cancellation or expiration? What does the backlog stand at today?
A: At the end of Q3 our backlog is $34 million. As we said, this is reviewed quarterly for what is our realistic expectation and we continue to monitor and adjust as the recovery horizons become more visible and the status of our client base is better understood.
Q: Is it Flyht’s goal to install the Tamdar sensor with existing AFIRS installations to increase the collection of weather data and its revenue? What is the typical cost of installation and will the sensor be installed at no charge?
A: As mentioned above, all future TAMDAR sales will be with AFIRS. The cost of the TAMDAR is sometimes borne by the meteorology department in the country the airline operates or sometimes by the airline. There may be a business case for us to provide the device for the revenue from the soundings but again this will be evaluated on a cost versus revenue basis.
Q: What is Flyht’s cash position at this moment?
A: At the end of Q3 our cash was roughly $4mm and nearly the same as the end of 2019. We do not forecast cash but reiterate that we have been very prudent in the use of that resource, particularly over the last 2 quarters.
Q: Can you comment on progress with China Express and Westjet subsidiary Swoop as the launch customers for the new Actionable Intelligence software offering? In which quarter of 2021 can we expect to see revenue commence from these installations?
A: We are working closely with both clients to define the highest value items for their operation. We expect by Q2 of 2021 to deliver the value anticipated and commence billing but again with the caveat that the progress being made on COVID restrictions have started to ease.
Q: What will differentiate Flyht’s offering in the fledgling aviation actionable intelligence marketplace?
A: Real time data from AFIRS plus the ability to add data sources not normally available from the aircraft very easily because we own the STC and the AFIRS technology is very flexible in data sources.
Q: Who, specifically, makes up Flyht’s worldwide sales team and who are they targeting? Are any sales announcements pending? Is Flyht receiving unsolicited potential client requests for information around the new AI offering?
A: Every contact that we have made in the last 6 months is looking for increased digitalization as the optimal way to recover to maximum efficiency. We have 7 people worldwide on our sales team and we are targeting the tier 2 and tier 3 airlines particularly. We cannot disclose non press released information.
Q: What information is most looked at on Flyht’s website? What are the inquisitive seeking?
A: It varies week to week but there have been a lot of viewing of our Actionable Intelligence pages since the new website went live.
Q: Is there a market for securely piggybacking and streaming real-time data from IoT objects aboard an aircraft to interested parties who are not the aircraft owner?
A: Machine to Machine communications is the way things are moving. We are evaluating some IoT and Edge computing as part of AI but likely not until 2022.
Q: Are you still a shareholder of Flyht?
A: Yes, I have never sold a FLYHT share and am a large holder of the stock.
Q: Can you provide an update on the recently re-priced warrants?
A: We have had five shareholders exercise so far and several inquiries. I’m not sure how many will exercise but I think they would be remiss to not exercise.
Q: What does Flyht gain by attending investor conferences?
A: Awareness of our company and our technology, ability to bring in new investors and hopefully drive the share price up by education and others buying the stock.
Q: Are there any frequently-asked questions you receive at the investor conferences or by telephone or email that you would like to ask and answer in this forum?
A: The most asked question is why it has taken so long for us to penetrate the market. The aviation industry is a very conservative industry. For example, there are much more efficient configurations for aircraft but the 4-wing style we are all used to is consistent with every aircraft on the drawing board that I know of because it is a proven configuration. People are used to it and there is a fear that people would not get on a flying wing or an aircraft with forward canards. AFIRS was revolutionary when it was conceived and first deployed and even though we have nearly two decades of successful deployment behind us, there is still reluctance from the old guard to change their ways.
The reason the board wanted to focus on SaaS is because things in the technology world change more quickly and airlines accept that change more easily than changing their aircraft. We can drive value faster with technology, we have a large install base to deploy that technology to - once people see how much more profit they can make, that they can get into the game with no capital investment, and when the return starts coming and the additional savings are identified they can invest in AFIRS technology to save even more. The redirection of FLYHT to a SaaS model was necessary for us but is also an advantage to our customers.