In the simplest analysis, higher margin licensing revenue (>85%) could bring profitability to Q4 all by itself. Such an order could come at any time, but to see licensing revenue in Q4, an order from L3H for licenses would probably have to come before the end of November. L3H cannot only be selling the product only as an OEM install (which would set the annual limit to the production rate of Airbus and make the rate of draw somewhat predictable), an order for client airlines of theirs would likely include licenses for retrofitting existing planes.
Delivering enough product from the $38 million dollar backlog in this quarter could be key. This number includes an amount of SaaS deliverable over the next five years, but we were given some sense of how much hardware is in the backlog in the CC. AF: "...about 60% of the backlog would be hardware at this point". Hardware would generate immediate revenue upon delivery, with SaaS following soon after.
The combination of increasing revenue as the aviation industry continues to recover from COVID while controlling operating expenses should result in an increase in profit, but may not be enough by itself to make up for the reasonable loss incurred in Q3. FLYHT needs to maintain the attitude of being a world class player to secure agreements with world class players, so I don't foresee any significant operating expense reductions, no "belt tightening". Holding the line on expenses may be all that is necessary.
Nov. 13 article snips...
https://airport-world.com/world-in-motion-16/ "Global passenger volume in 2023 is expected to reach 8.6 billion passengers, which is 94.2% of the 2019 level."
What is not recovered in 2023 is expected to be recovered in 2024.
"The year 2024 is expected to be a milestone for global passenger traffic recovery as it reaches 9.4 billion passengers, surpassing the year 2019 that welcomed 9.2 billion passengers (102.5% of the 2019 level)."
Additionally, and worth noting, the newest revenue source, the SaaS part of the UK Met order recently fulfilled, will begin to have an impact in Q4. Will FLYHT see revenue from the balance of the UK Met order for 30 WVSS-II installs (13 complete) before year end? Not likely, in my opinion. Seeing revenue before year end from the new agreement with NOAA also seems somewhat unlikely, but we don't yet know the details or how far along these two agreements are, or what their terms are. While deposits would help the cash situation, I don't think undelivered or uninstalled product counts as revenue. FLYHT can be prepared to deliver but receipt depends on the buyer and the contract terms.
Following Q4, things appear quite rosy for the weather product offerings in 2024. The UK Met order should be fulfilled by Q1 and the increase in budget in the U.S. for sensors and expanded coverage will see some significant new dollars (some portion of an anticipated $10M USD annually) from NOAA.
KJ: "We expect to begin generating meaningful upfront hardware sales (of the Edge, Iridium Certus 100 connectivity and the WVSS-II sensor) in 2024 and thereafter realize the recurring revenues associated with the aircraft-based observations that will be generated for these weather agencies."
FLYHT is in pursuit of three other world-class meteorological agencies that will likely fit the UK Met template.