FLY.V - Guidance is needed.


Flyht Aerospace Solution Ltd. (FLY.V) improves aviation safety, efficiency and profitability by providing airlines, leasing companies, owners, operators and original equipment manufacturers with real-time insights.


Coverage was initiated on February 2017 with notes on September 2017, November 2017, March 2018, May 2018, October 2018. and June 2019. Listed below are the releases issued since the last update.

July 3 - Provides Second Quarter 2019 Update. Secured an aggregate US $3.0M in contracts and purchase orders and reported order backlog of $58M. It also received Parts Manufacturer Approval (PMA) from the Federal Aviation Administration (FAA) to manufacture the AFIRS family of products within the United States.


Moved forward with the “OneFLYHT” integration program by successfully manufacturing the first FlightLink Iridium Satellite Data Unit and Tropospheric Airborne Meteorological Data Reporting (TAMDAR) sensor.


July 17 - Partner to Produce Enhanced Aircraft Reliability Application with ADP CaseBank. The companies joined forces to create an application that will help identify and communicate potential and existing aircraft equipment health issues, more effectively allowing for better diagnosis and subsequent repair. This Aircraft Health Monitoring System (AHMS) is designed to detect, alert, and automatically capture key diagnostics data for all aspects of the aircraft, in real-time.


July 24 - Appoints Captain Mary I. McMillan to Board of Directors.


Aug. 1 - FLYHT and L3Harris extend their agreement to provide SATCOM products on the Airbus A220 family. FLY.V will customize L3Harris AFIRSTM228S (Automated Flight Information Recording System) to support global communications between pilots and Air Traffic Control (ATC), Aeronautical Operation control (AOC) and Airline Administrative Control (AAC) through the Iridium® high-fidelity satellite network used in the Airbus A220.


Aug. 2 - Schedules Second Quarter Conference Call.


Aug. 7 - Reports Second Quarter 2019 Results.


Aug. 20 - Present at the 8th Annual Gateway Conference on September 5.


Sep. 17 - Partners with Environment and Climate Change Canada partnership will deliver crucial weather data. For the acquisition and delivery of Aircraft Meteorological Data Relay (AMDAR) data by FLYHT and Environment and Climate Change Canada (ECCC). The estimated total value of the contract, including options, is CAD$166,000.


The ECCC launches weather balloons equipped with a radiosonde, a package of electronics, sensors and batteries to capture weather data. This weather data is augmented by a variety of satellite and other data sources for use in weather forecasting. The AMDAR data collected by FLYHT’S AFIRS system provides additional key aircraft-based weather data which has been proven to greatly improve forecasting accuracy.


AMDAR data differs from Tropospheric Airborne Meteorological Data Reporting (TAMDARTM) data. AMDAR data is collected strictly from sensors such as air speed indicators and temperature probes which are part of the aircraft when it is manufactured. TAMDAR is a sensor deployed by FLYHT that is purpose-built and installed on aircraft to capture additional environmental data such as relative humidity, icing and turbulence.


Oct 2 - Third Quarter 2019 Update. Secured an aggregate of US $1.0 million in new sales contracts and purchase orders, reported order backlog of more than $50 million, completed integration of Panasonic Weather Solutions (PWS) assets (i.e. known as the “OneFLYHT” Program) and expanded licensing agreement with L3Harris Technologies.


Oct. 15 - Announces Private Placement of Up to $6 Million. At a price per Unit of $1.25; Warrant $1.75. The net proceeds will be used to assist in the funding of new development programs to diversify the Company’s product offering, to expand the Company’s sales and marketing efforts in order to accelerate sales, to augment the working capital needs of the Company which have become greater due to recent business expansion and for general working capital purposes.


Nov. 15 - Announces Closing of the First Tranche of its Private Placement for Proceeds of $5,990,500.


Nov. 21 - Schedules Third Quarter Conference Call.


Nov. 25 - Announces Closing of the Final Tranche of its Private Placement. A total of 5,335,220 Units were issued pursuant to the entire Offering for gross proceeds of $6,669,025.


Nov. 26 - Reports Third Quarter 2019 Results.


Dec. 2 - To Present at the LD Micro Main Event (XII)


Jan. 16 - Awarded SatCom Contract from WestJet. - secured a US$6.2 million contract to install FLYHT's Automated Flight Information Reporting System (AFIRS™). Under the terms of the five year agreement, FLYHT will provide WestJet with AFIRS units to support satellite communications (Satcom) as well as Satcom Air Traffic Control (ATC) data safety services, FANS datalink, and voice capabilities. WestJet will use AFIRS on its entire Boeing 737 fleet.


Jan. 23 - Provides Fourth Quarter 2019 Orders and Operations Update. New sales contracts and purchase orders increased to US$6.5 million. Expanded presence in Asia and Oceania, and announce partnership with Environment and Climate Change Canada. Sales order backlog at CAD$49.2 million vs. CAD$50.0 million in the third quarter of 2019.


The sales order backlog is defined as the sum of all unrecognized revenues from previously announced purchase orders and contracts and includes technical services, licenses and hardware as well as the future value of contracted Software-as-a-Service (SaaS) products. Backlog value from contracts deemed unlikely to manifest is excluded. Twelve months of SaaS product value is included in backlog if a customer is currently paying for SaaS products under a contract that has exceeded its original term and is auto-renewing annually for subsequent one-year terms. The sales order backlog value assumes that FLYHT provides hardware and services over the full scope and term of the constituent contracts.


Jan. 27 - Named to 2020 OTCQX Best 50.


Feb. 18 - Receives US$2.43 Million Follow-On Order from a Long-Time OEM Partner. Purchase order for Iridium modems and license fees from a long-time OEM (AirBus) customer. Under the terms of the existing agreement, the OEM will be licensing FLYHT’s technology and delivering the automated flight information reporting system (AFIRS 228S) to their European airframer customer for three certified aircraft platform types.


FLYHT anticipates shipping all product, and therefore recognizing revenues, from this order during 2020.


Feb. 24 - Receives US$1.77 Million FLYHTHealth™ Order from Azur - for software as a service (SaaS) features FLYHTHealth and FLYHTMail™ from Azur Havacilik A.S. (Azur) based in Antalya, Turkey. This order builds upon several other previously announced orders from Azur including those on January 14, 2019, and October 17, 2017.


Mar. 4 - Promotes Derek Taylor to Vice President of Sales and Marketing


Mar. 10 - To Participate at 32nd Annual ROTH Capital Conference on March 16, 2020.


Summary

As a reminder, on October 10, 2019 FLY.V acquired Panasonic Weather Solutions (PWS) from Panasonic Aviation Corporations (PAC). The deal involved a subsidy of USD$3.3 million from PAC. Below are the 2019 financials.











To date, it is evident that FLY.V has been able to grow its top line revenue from Q4 2018 to Q2 2019 with a reversal in Q3 2019, slightly below Q4 2018 results. However, the "Other Income" line which refers to subsidies from PAC accounted for a declining but significant portion of the revenues ranging from 32% (Q4 2018) to 11% in (Q3 2019).


In essence, PAC subsidies have allowed FLY.V to turn a positive net income in Q4 2018, Q1, and Q2 2019. However, the relatively smaller contribution in Q3 ($0.62M) was not enough. The data suggests that in the absence of subsidies, turning a positive net income is a challenge. It is also likely that Q3 2019 contributions might be the last. The cumulative subsidies were initially cited at $3.3M (USD) or a $4.46M (CAD) equivalent while the actual ones based on the earnings reported are estimated at $5.34M which suggests an incremental contribution of 16% by PAC.


Hence, it comes to no surprise that a private placement of $6.6M at $1.25 (Warrant $1.75) was completed in the period. Nonetheless, FLY.V has been recently very active in securing new orders from WestJet ($6.6M), OEM Partner ($2.49M), and Azur ($1.77M) totaling over $10M in the span of roughly six weeks.


The impact of the Coronavirus on airlines is a reality. Bloomberg stated today: "While new cases in China have slowed, the rate of known and reported cases is increasing in many countries as the virus continues to spread globally".

This has led to a growing number of travel restrictions and advisories, as well as, cancellations and postponements of conferences and events with repercussions across the industry. It also explains the decline in valuation of late. FLY.V broke S1 ($1.23) today and there is evidence that these events are likely to affect Q1 and Q2 2020 revenues.


A possible silver lining in having airlines grounded involves an opportunity for aircraft maintenance and for FLY.V to possibly work through its large order backlog which was reported at $49.2M in the Q4 2019 Update. As a proxy, in the past fiscal year FLY.V reduced its backlog by $10.8M. However, it is difficult the total share of which is actual revenue.


The sales order backlog is defined as the sum of all unrecognized revenues from previously announced purchase orders and contracts and includes technical services, licenses and hardware as well as the future value of contracted Software-as-a-Service (SaaS) products. Backlog value from contracts deemed unlikely to manifest is excluded.


Given the above (i.e. PAC Subsidies, Coronavirus, and actual backlog revenue conversion), guidance is needed.


DISCLAIMER: The work included in this article is based on current events, technical charts, and the author’s opinions. It may contain errors, and you shouldn’t make any investment decision based solely on what you read here. This publication contains forward-looking statements, including but not limited to comments regarding predictions and projections. Forward-looking statements address future events and conditions and therefore involve inherent risks and uncertainties. Actual results may differ materially from those currently anticipated in such statements. The content of rally is provided for informational and entertainment purposes only and is not a recommendation to buy or sell any security. Always thoroughly do your own due diligence and talk to a licensed investment adviser prior to making any investment decisions - rally cannot take responsibility for your investment decisions.


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