Flyht Aerospace Solution Ltd. (FLY.V) coverage was initiated back in February 2016. The company helps airlines improve safety and decrease operational costs through their innovative products. FLY.V streams data from an aircraft via satellite to the airline's flight operations center.
Since our last note, the following releases were issued:
Sep. 5 - Lands two new commercial cargo customers in China for USD $1.4 million, assuming FLYHT provides hardware over the full term of the five-year agreement. Almost USD $5.5M in AFIRS sales for new customers in China in 2017.
Sep. 19 - To work with Inmarsat for AFIRS Trial Flight - Immarsat Release: Flight test using AFIRS and Uptime Cloud on Immarsat Satellites. "Black Box in the Cloud" Capacity to be tested. Commence in 2017 and will be conducted using an experimental trial aircraft.
Oct. 2 - New CFO Derek Payne announces Q3 Earning call scheduled for November 3, 2017.
Oct. 3 - Provided Q3 2017 Update: $3M in revenue. Three existing customers, one in Africa and two in China, ordered additional Automated Flight Information Reporting System (AFIRS) for a leasing company located in Ireland for three aircraft. Along with Avmax, signed a contract with one Airline in South Korea and another with Bahamas Air. (AFIRS and Uptime).
Oct. 17 - Signs USD $2.1 Million Sales Contract with Azur Aviation​: Automated Flight Information Reporting System (AFIRS) and Log Services. Work begins in the first quarter of 2018. First customer in the Middle East.
Oct. 27 - Announces New Investor Relations Services Provider: Howard Group was replaced with Ivan Peil (3 month contract). Mr. Peil was previously Executive Director of Investor Relations Advisory with JP Morgan and recently served as Director of Investor Relation from NYSE.
Nov. 3 - Q3 Earning Results: Revenue totaled $3.3M, a decline of 18.1% compared to Q3 2016. Net loss of $624K compared to Net Income of $303K in Q3 2016. Gross Profit was 55.4% of revenue compared to 66.8% for Q3 2016. Recurring revenue (voice and data services) of $998K, (-11.0%) compared Q3 2016. Parts revenue decreased 44.7% to $863,221. Revenue recognized on AFIRS was $1.3M, 2.9% higher than the $1.3M in Q3 2016. Customer deposits more than doubled to $1.1M, compared to $508K in Q3 2016.
Nov. 8 - Multiple Insider stock purchase: 1) Tomas Shultz, CEO - 20K at C$1.99; 2) William Tempany, Board Chair - 7.4K at C$1.99; 3) John Olcott, Boar Member - 20K at C$1.99; and 4) Derek Payne, CFO - 20K at C$1.99
Nov. 9 - Insider stock purchase; Derek Payne, CFO - 20K at C$2.00 per share; C$50K.
Nov. 13 - Matieu Plamondon promoted as COO. He will receive an additional incentive stock options (20K). Similarly Derek Payne (newly appointed CFO) will receive 75K. Stock options issue date issue will be from November 3, 2017 closing price (2.10).
Nov. 14 - Repeat insider stock purchase; Tomas Shultz, CEO - 18K at C$1.99.
Based on the charts, after the Q2 Earnings, the stock traded within a narrow range. S1 and R1 were being tested from mid September. Though positive, most of the releases had little impact on the stock price. Looking back, the Q3 update was rather optimistic and so were the October releases.
Hence, the negative Q3 earning results led to a massive sell off. Similarly to Q2 earnings, Q3 earnings were not profitable. While the results were disappointing, we still believe that the issue is related to the different methods of revenue recognition used by the company. It is also worth noting that FLY.V had an acting CFO for the last two earning periods. The previous CFO left on June 5th, Derek Payne officially assume the role November 6th.
Be as it may, the fundamentals for us are still there. FLY.V continues to sign contract and still have a backlog of about $25M. Moreover, the recent strings of insider purchase is an affirmation that the company believe that it will do better in future quarters. Despite the recent earnings, we are still bullish and long on FLY.V. The stock ended the week at $2.12. below S2 ($2.34). We consider accumulation at these levels or below $2.12 as an opportunity.
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