FLYHT CEO – 2015 Could Be A Perfect Storm

Following the overnight release of its Q3 financials, FLYHT management hosted a live conference call to update shareholders on the company’s progress. During the call, CFO Nola Heale reviewed the Q3 results and CEO Bill Tempany discussed a number of new items that could make 2015 a “Perfect Storm”. Those items included a significantly increased sales force, the development of the L-3 Communications and Sierra Nevada Corporation relationships and the pressing China SatCom mandate. Before opening the call to questions Mr. Tempany stated, “We are making progress on all fronts” and “I think 2015 is going to be an excellent year for us.”

Here are some highlights of the call:

  • Q3 revenue was the highest to date in 2014 at $1,808,794.
  • Recurring revenue increased to $927,117, up from $881,903 in Q3/13 and now represents 51% of revenue.
  • The company has made a fundamental shift from a development to a selling organization.
  • The sales force has grown from three to 15 over the past ten months.
  • L-3 Corporation has placed an order for 35 units from Airbus to be delivered in November.
  • Sierra Nevada Corporation has made its first two orders for a total of four units for delivery in Q4
  • Today FLYHT announced a new North American cargo customer. The company has two existing aircraft with AFIRS 220 and will add AFIRS to three additional aircraft. To view the news release please click here.
  • 40% of the Chinese fleet of aircraft must have SatCom capability by the end of 2015. Other than factory installed Inmarsat systems, FLYHT is the only satellite communication system that has been rolled out.
  • Q3 2014 saw FLYHT certified for the Airbus A320 family of aircraft, and FAA issued certification for the Hawker Beechcraft 700/800/900 model aircrafts. A large part of research and development expenses are attributed to gaining engineering certification for new aircraft.
  • In August, FLYHT strengthened its board by appointing Mr. John Belcher and Mr. Barry Eccleston, who have both been working to open doors for the company. During the quarter, Mr. Thomas French retired and the company welcomed Ms. Nola Heale as the new CFO.
  • FLYHT is investing in the ongoing regulatory discussions around flight tracking in order to be a part of the solution. Regulation is not expected to be a short term sales driver.

An archive of the conference call is available on FLYHT’s website, click here to access.

FLYHT Technology Gains Attention – NTSB & NOVA

FLYHT’s technology has been highlighted this month as a proven solution for airline safety through two very different sources: The National Transportation Safety Board (NTSB) and the Public Broadcasting Service (PBS).

On October 7th, a FLYHT Director presented AFIRS™ and FLYHTStream™ at an internationally attended forum on Emerging Flight Data & Locator Technology, staged by the NTSB – click here to view news release.

The following day, FLYHT’s technology made an appearance in a NOVA documentary called “Why Planes Vanish,” produced by the Public Broadcasting Servic (PBS).

The attention that FLYHT received in the NOVA broadcast was reminiscent of the Horizon program, “Where is Flight MH370?”, that was produced by BBC this past June – click here to view. Both programs effectively followed the MH370 tragedy and presented a compelling case stating that worldwide flight tracking is inadequate and that changes need to be made to prevent future tragedies. oth programs present solutions that are available today, such as FLYHT’s AFIRS technology.

The narrator of the NOVA special could not have been more clear when he commented, in reference to FLYHT technology, “If all airliners were equipped this way we would know a flight was in trouble even if the crew could not communicate by other means. And we would know its location. It could make searching for the black boxes a thing of the past.” The NOVA program presented AFIRS™ as a currently available, viable solution to make air travel safer.

To view the NOVA “Why Planes Vanish” special, please click here (FLYHT appears at the 46 minute & 40 second mark.)

FLYHT CFO Nola Heale Selected As 2014 Diversity 50 Board Candidate

FLY_141021Recently, FLYHT’s CFO Nola Heale was selected to the Canadian Board Diversity Council’s (the Council) prestigious Diversity 50 list of Canada’s most diverse and eligible board candidates.

The Diversity 50 is Canada’s only national database of qualified candidates for corporate board appointments that includes measures of diversity. The Council expands on the traditional qualifications/charactisteristics considered when selecting board members by including ethnicity, gender and aboriginal status. The Diversity 50 list is designed to help directors identify board-ready candidates beyond their own networks.

“It is an honour to be chosen as a member of such a prestigious group of individuals,” commented Ms. Heale. “Diversity on corporate boards and in executive management is an area currently receiving significant attention both in Canada and around the world and I support the Council’s effort to increase diversity as a way to add value to organizations.”

The Diversity 50 database allows for the search of 78 specific fields such as industry experience, functional area of expertise and gender. Like as in any search for a new director, the onus remains on a board’s nominating and governance committee (and their executive search firm) to exercise due diligence and assess the potential candidate’s credentials against the board’s requirements.

This year’s candidates hail from eight provinces. For a summary of biographical and professional information for each 2014 Diversity 50 candidate visit the CBDC website at http://www.boarddiversity.ca/diversity-50.

CEMATRIX Lands Record $6.8 Million Contract

CEMATRIX announced today that it has received a record $6.8 million contract along with several other recent orders for a total of $8.4 million. These new orders bring this year’s total contracted work to a record $14.7 million. To put this into perspective, the company achieved just over $8 million in sales for all of 2013.

CEMATRIX has been working to replace lost revenues from the economic crash in late 2008, when the company was solely focused in the oil sands and refinery business, and has done an impressive job since introducing its specialty solutions to the always active infrastructure market.

As the oil sands and refinery work continue to recover, CEMATRIX should benefit from its past efforts and successes in this area once again.

To view today’s news release, please click here.

BNN Portfolio Manager on FLYHT – “Table Pounding Buy”

Yesterday on BNN’s Market Call Tonight, in response to a question about FLYHT, Arrowhead Capital portfolio manager, Alex Ruus called FLYHT one of his “table pounding buys”, citing a “huge opportunity” for a couple of different reasons, being that FLYHT offers what he called “smart” black boxes, which allow constant tracking of aircraft and, as well,FLYHT offers high Return on Investment (ROI) products that allow airlines to improve efficiencies and save money.

This morning it appears the market has taken note to Mr. Ruus’s two minute commentary on FLYHT. As of the writing of this blog, the share price has increased by nearly 9% to $0.43, with more than 1.8 million shares having traded.

Click here to view clip, FLYHT is mentioned at the 38 minute 46 second mark.

FLYHT Q2 Conference Call – CEO Expects Strong Second Half

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On this morning’s FLYHT second quarter conference call, CEO Bill Tempany addressed a number of topics and questions around the release of Q2 financials and business activities. Right out of the gate, Mr. Tempany commented on the weakness in revenues experienced in Q2. Quarterly revenue was $1.5 million, down 30% from last year’s Q2 results of $2.2 million. The company however, is ahead of Q1, which would indicate it is headed in the right direction. Recurring revenues increased slightly to ~$893,000 from last year’s ~$846,000 and it was explained that this should improve in Q3 as customers that had been shut off due to nonpayment have restarted and a customer in the middle of a fleet switch is up and running again.

Mr. Tempany noted that in Q2/2013, the company recognized significant orders from First Air and NetJets, which accounted for the strong second quarter in 2013. He emphasized that the third and fourth quarter of this year are looking to be very strong as the company has shipped more AFIRS units in July than in the entire second quarter.

Throughout the call, Mr. Tempany addressed a number of other items:

  • He believes FLYHT is on track to be operations positive (EBITDA with IR and share based compensation removed) by the end of 2014.
  • The company has approximately $5 million in modified working capital.
  • The settlement with Sierra Nevada Corporation (SNC) has allowed the company to eliminate nearly $2 million in debt. The SNC relationship opened a new market to FLYHT. SNC will lead sales in the United States and NATO military and government manned and unmanned aircraft markets.
  • An initial regulatory report on aircraft tracking by the International Civil Aviation Organization is anticipated in late September and FLYHT will ensure it meets regulatory requirements as they are developed.
  • On the sales front, there has been a great deal of activity in Asia. The company has hired a Singapore based sales person based on identified opportunities in the region. FLYHT is planning to add one or two full time sales positions.
  • The company is in discussions with Bombardier and other OEM’s with the objective of having AFIRS become a standard feature on aircraft.
  • Mr. Tempany expressed that although its L-3 relationship has been successful and a good one, he believes that FLYHT does not require a third party to gain direct access to manufacturers. He is confident that the company is at the point where it can have those conversations directly with the manufacturers.
  • When asked about progress in China, Mr. Tempany stated that FLYHT has already shipped 50 units and that the Company is the only certified Iridium provider in China.
  • The company in Q2 launched FLYHTSafe, a new safety notification solution. Investors should expect to see more service add-ons being launched in Q3 & Q4, which will improve efficiencies and communications for aircraft and allow FLYHT to earn additional usage fees.
  • In regards to the increase in expenses, it was explained that there will be a continuation of Investor Relations efforts focusing on U.S. and International investors and the company has experienced an increase in travel expenses as a result of ensuring that FLYHT has a presence at all the industry related meetings. Also, the reported R&D spending is a result of the continuation of securing AFIRS 228 Supplemental Type Certifications, which will continue for at least three years.

To listen to the conference call, please click here.

CEMATRIX Releases Q2 Results

CEMATRIX released its second quarter financial results this morning for the period ending June 30, 2014. Sales increased 10% over last year, reaching $3,070,504 with gross margin also slightly up over the same period year over year. Over the second quarter, the company added $1.3 million of sales orders bringing the annual amount of work under contract for 2014 to $4.5 million.

The six month reporting compared to last year saw net revenue decrease by roughly $1.5 million. This decrease can be attributed to an extraordinary Q1/13 that saw a number of 2012 projects extended into and completed in the new year.

The release also highlights management’s positive outlook for the rest of 2014, citing anticipated growth in Canadian and U.S. infrastructure sales as well as continued growth in the Western Canada oil and gas sector. In addition to the $4.5 million of work contracted for 2014, numerous other bids have been placed on projects that, if won, will result in additional work to be completed in 2014.

To view CEMATRIX’s news release, please click here.

– Brad Dryer
Jeff Walker

Second Malaysian Airline Tragedy Renews Focus On FLYHT Aerospace Systems

FLYHT CEO, Bill Tempany, was in the spotlight today with an appearance on the Canadian network ‘CTV Morning Live’ to discuss the company’s technology in light of the recent downing of Malaysian flight MH17 over Eastern Ukraine.

While there was significant global media focus on the attributes of the company’s AFIRS technology following the March disappearance of MH370, additional questions have surfaced about what answers may have been provided in the most recent tragedy if the aircraft had been equipped with the system.

To view the interview with Mr. Tempany, please click here.

 

Global Maxfin Reiterates STRONG BUY With A $1 Target For FLYHT With Update

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In acknowledgement of the news issued today by FLYHT on the certification of the AFIRS 228S for A320 Aircraft, Global Maxfin analyst Joe MacKay issued an update to clients. In the report Mr. McKay says the implications of this announcement are positive for FLYHT. Specifically stating “the process to certify AFRIS with Airbus has been underway since 2012 and was recently approved by Airbus. L3 is the world’s largest manufacturer of flight data recorders. Under the agreement with L3, L3 manufactures and installs the AFRIS units on the aircraft with FLYHT receiving a royalty payment of approximately $6,000/unit for a retrofit and $12,000/unit for a factory fit.”

Further into his commentary he also points out that, under the L3 agreement “FLYHT then has the opportunity to sell applications and services to the end user, receiving 100% of the monthly recurring revenue.”

To receive a copy of the update please contact Global Maxfin analyst Joseph MacKay at (416) 741-1544.

CEMATRIX – Watching Concrete Dry Has Never Been Better

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This week, a well fed group of engineers and construction industry professionals got to witness CEMATRIX Cellular Concrete in action. On Thursday (June 26th) Lafarge and CEMATRIX co-hosted a BBQ lunch & learn on Lafarge’s new property in Southeast Calgary for a group of about 40 engineers and construction industry professionals. Doug Lavis, Business Development with CEMATRIX, provided an in depth explanation of the production and various applications for Cellular Concrete and the many benefits the construction material has.

After Doug’s presentation and a number of technical questions, the group donned all of the appropriate personal protective equipment and walked over to the worksite where a base slab was being poured for a new building. The group intently watched as a concrete slab was poured and began to dry. After the demonstration was complete, many of the attendees  stayed to ask questions as to how this product might work in a variety of applications. Each attendee was given a hockey puck sized piece of cellular concrete as a memento of the demonstration.

CEMATRIX has been diligently working towards mass industry acceptance as a preferred supplier and has been submitting proposals on projects across North America.

The demonstration proved to be an effective education tool, supporting the work to gain mass acceptance. Attendees left with a greater understanding of Cellular Concrete and how it can have a positive impact on a variety of projects that are currently underway or in the design phase.

BBC Asks “Where is Flight MH370” – Is FLYHT’s Technology The Answer?

Few FLYHT stakeholders have had the opportunity to see a live demonstration of AFIRS. The BBC program Horizon recently provided the world with an insider view of the FLYHT technology in action as part of a documentary on the mysterious disappearance of the Malaysian flight.

This past spring, BBC crews were aboard a First Air aircraft in Ottawa, Ontario to film AFIRS in use with several minutes of the footage used in the documentary. First Air and FLYHT announced this past April that the airline was adding FLYHTStream’s automatically triggered, real-time data and live black box streaming capability to its fleet of B737, ATR and B767 aircraft. Click here to read the news release.

The AFIRS system is highlighted in the documentary as a technology that could help prevent the future disappearance of aircraft. To view the documentary, please click here (AFIRS is featured at the 50 minute mark).

– Brad Dryer
Grant Howard

 

Pope & Company Initiates Coverage On FLYHT – BUY With A $1.05 Target

Fadi Benjamin from Toronto based, Pope & Company has become the fifth analyst to initiate coverage of FLYHT Aerospace, with a BUY rating and a target price of $1.05.

The key points in the report titled “FLYHT VECTORING FOR GROWTH” are as follows:

  • Immense market size: A sizable and growing market of 20,310 airplanes in service, and 35,280 airplanes to be delivered in the next 20 years.
  • Differentiated/Purpose-Built: FLYHT’s technology is unrivalled by flight data gathering systems, in‐flight entertainment, or passenger connectivity focused solutions.
  • Value Creating To End Customer: Our analysis supports US$150,000 of direct cost savings per year per airplane from fuel management, maintenance rationalization , and accurate time focus only on program wins and moderate contribution from the sales force. Applying this to Southwest Airlines’ fleet, net savings could contribute over US$60MM to the bottom line in 2013.
  • Growth Catalysts: Our conservative assessment is based on realizing revenues from three programs: SkyBlue (218 aircraft), Datang (415 aircraft), and an L‐ partnership with Airbus. Significant upside potential exists from new program wins, a partnership with a Boeing approved factory supplier, and supportive direct sales into other airlines.
  • Valuation: Our valuation is based on a 5‐year DCF analysis using a discount rate of 10% and a terminal value growth rate of 3.9%, in‐line with industry peer projections. Our target price corresponds to an EV/EBITDA multiple of 14.8x on projected FY2016.
  • Investment Recommendation: We rate FLY a BUY for its exceptional growth profile, differentiated product, and market size. In our opinion, FLYHT is ahead of its competition, and presents a unique and sought after solution.

For a copy of the Pope & Company research report on FLYHT please contact Fadi Benjamin at 416-588-9397 or by email at fadi@popecompany.com.

About Pope & Company
Pope & Company Limited is an independent full service financial services firm founded in 1962. Our long established history as one of the oldest member firms on the Toronto Stock Exchange allows us to take a unique and measured view of the markets. We provide institutional services through our Capital Markets division and individual services through our Asset Management division.

We have a proven track record of identifying undervalued opportunities. We are active in the trading of equities, syndicated bank debt, corporate bonds as well as certain distressed debt situations. We combine best-in-class corporate advice with our proprietary sources of institutional debt and equity capital. In addition we have in-house mergers, acquisitions advisory and capital structuring expertise. By consolidating advice and access, we offer our clients innovative capital markets solutions individually tailored to their requirements.

Pope & Company is employee owned, enabling us to take an unbiased and concrete approach to client relationships while avoiding the conflicts encountered by many large investment banks. Pope is a member of the Investment Industry Regulatory Organization of Canada (IIROC) and The Canadian Investor Protection Fund (CIPF).

FLYHT Conference Call & Global Update

FLYHT CEO Bill Tempany covered a broad range of topics in yesterday’s (May 14th) first quarter conference call with a strong emphasis on the status of key business initiatives such as China and L-3 Communications-Airbus as well as several key conferences that FLY representatives will be attending in the near-term.

In re-capping first quarter results, he noted that the organization remains focused on achieving the break-even point in 2014. In the quarter FLYHT generated $1.34 million in revenue; which represents a decrease of 21.5% over the same period last year. However, Q1 customer deposits were $1.30 million, an increase of 100.2% over the first quarter of 2013 and unearned revenue was $1.36 million, also a solid increase over last year.

In relation to FLY’s revenue model, Mr. Tempany expressed that it is important to understand the below points:

  • When a customer makes an order, the customer gives FLYHT a deposit.
  • Then when FLYHT delivers the order, it registers as “Unearned Revenue.”
  • When the unit is installed, and activated the sale them moves into AFIRS UpTime Sales.
  • Then if the airplane is in service, FLY generates monthly AFIRS UpTime Usage fees.

Mr. Tempany also spent considerable amount of time talking about the latest announcement from Inmarsat, as there were a series of questions on a recent announcement from the satellite company. It stated that it is now going to offer customers free real time data streaming, which speaks to the controversy surrounding the disappearance of Malaysian Flight 370.

He said that he believes this offer of free data streaming doesn’t affect FLYHT. Flight-following is just one small piece of the technology that FLYHT provides, which is first and foremost designed to save airlines money and increase operating efficiency. That functionality, though important, isn‘t driving the sales of FLYHT‘s AFIRS units. For example: China’s mandate is for satellite communications, or satellite phones. Inmarsat does offer satellite communications, however the system is more expensive than AFIRS and there a major dead zones, particularly over the poles.

Global Maxfin Analyst Joe MacKay sent some notes from his attendance at yesterday’s ICAO (International Civil Aviation Organization) press conference on the offer of “free basic” airline tracking.

“ICAO indicated during its press conference that it was “thankful” to Inmarsat for their offer, but at the end of the day, the Inmarsat proposal “probably does not get us where we want to be, and we told them that today.” ICAO is putting together a task force(based on 20 member states) that will review and make recommendations to ICAO by September (FLYHT is a member). They are working under a best practices methodology which means that members can be complaint based on what is best for their circumstances (i.e some members do not fly over water as much as others).

To listen to an archive of today‘s conference call, please click here

A Technology Insight on FLYHT Aerospace Drives A Positive Market Response

FLY stock moved to the positive side this morning after coming under recent pressure with much of the uptick attributable to an article posted in Technology Investment News. The article is called “Real Time Black Box Technology Takes Flight” and cites Portfolio Manager and Founder of Roadmap Capital, Hugh Cleland.

Mr. Cleland in his April letter to his fund’s investors went into great detail as to why FLYHT technology has the “go-to” technology. In the piece Mr. Cleland states “recent events (the disappearance of Malaysian Airline flight 370) have reinforced my expectation that FLY will be in the $1-$3 range within 3 years [200%-600% higher than current valuation].

Key highlights from the article:

  • Current “Black Box Technology” is pre-internet – so vulnerable to communications mishaps that it’s like attaching a message to a carrier pigeon.
  • (FLYHT) has developed an emergency data streaming technology called “FLYHTStream”. This technology sends critical data to ground-based operations using the Iridium satellite network through Iridium Communications.
  • Inmarsat’s (ISAT-LSE) recent offer to transmit GPS location data every 15 minutes for free is not expected to compete with FLY’s instantaneous stream of aviation data points including: location, altitude, airspeed, pitch, roll, yaw, engine performance metrics and airframe indicators.
  • Since January 2014 FLYHT has seen analyst coverage initiated by Clarus Securities, Byron Capital Markets, Salman Partners and Global Capital.
  • “We are initiating coverage with a SPECULATIVE BUY recommendation and $1.10 target price,” states the Clarus report, “We estimate that the opportunity in China could generate ~$24-57 million in hardware revenue over the next three years, while incremental recurring annual revenue could be as high as $11 million”.
  • The Salman Partners report forecasts “strong revenue and earnings growth in 2014 and 2015”. It issued a SPECULATIVE BUY recommendation and a $0.85 target price [double its current share price].
  • “We are initiating coverage of FLYHT with a STRONG BUY rating,” states the Global Capital Report, “and a 12-month target price of $1.00.”
  • “Global movements catalyzed by the disappearance of Malaysian Flight 370 mean that the $2-$5 range for FLYHT is now quite possible on a 2-3 year basis,” states Cleland, “Shorter-term, I will be surprised if we are not in the $1-$2 range by the end of 2014.”

To view the full article, please click here.