RE:RE: the UK Met order for WVSS-II advancingThank you for the very thorough response. As per usual great points. You also helped me realise I had made an error in currency conversion (sometimes forget which figures are USD vs CAD).
One thing I'd raise is that FLYHT always quoted "$2-3m per year". Hardware costs are obviously paid upfront, and are not paid per year. Sure, they may be spreading the whole cost over the course of the contract, however, this strikes me as a little disingenuous. I always believed they were referring to what they thought the SaaS revenue would look like since that is annual.
However, now that I've fixed the currency issues, and if we include a second airline, the SaaS revenue does start to get much closer - I figure would be around $1.2m. This feels much closer to what we're looking for. Have a look at my numbers below, and see if they make sense.
Note - my calcs are based on the assumption that the extension actually is important because it can indicate an ongoing SaaS cost for the latter 5 years, which can be applied for the entire period to estimate the hardware / SaaS split. I'm not saying it's accuate, but it does make the most sense to me. Of course, the ongoing entension revenue may include maintenance charges too as you rightly point out, which may come under hardware, however, I don't mind it being bundled with SaaS since it would be a more regular ongoing cost as opposed to the upfront amount.
I had the same thought though - these 30no. units might just be the beginning. Will the data need be largely satisfied for the UK? In the last earnings call, Alana said "However, I will say that there are possibilities for an increased number of aircraft under that proposed contract heading into the future. So I can see in addition to the hardware and the SaaS opportunity that's contemplated at the moment that there would be room for growth." So it certainly sounds like there is additional room to grow. Maybe that's what they meant with the $2-3m number, which they do call an "investment potential". They secure an initial contract, and then hope to expand that over time.
Why in £ - probably the contract is valued in £ throughout I guess. They can give $ for the first part because they know the majority of the contract is paid upfront for hardware, and timeframe is closer, so the exchange rate is more accurate. This isn't true for the 5 year extension, so exchange rates are unknown that far in advance.
How many agencies? I agree, the TAM probably is bigger than 5 agencies. That said, I think they think there's stronger incentive for the big 5, which is probably true. Probably a bigger budget too. Also, as noted in the press release, the UK met needed a super computer to properly harness the data, so it's also a case of capability. I'd say the 5 agencies are the market for now, but could see this changing. In a few years, perhaps they'll consider more local/regional players.