FLYHT Aerospace Solutions Ltd. (FLY) Earnings Call Transcript & Summary
May 4, 2022
Earnings Call Speaker Segments
Operator
operatorThank you for standing by. Again, this is the conference operator. Welcome to the FLYHT Aerospace Solutions Limited Annual and Special Meeting of Shareholders. [Operator Instructions] The conference is being recorded. During the official meeting, registered shareholders and proxy holders will be entitled to speak to motions and vote. Just a reminder that beneficial shareholders, often referred to as retail investors, and members of the general public will not be eligible to ask questions or vote during the official portion of the meeting unless they have appointed themselves as a proxy holder. Following the meeting -- following the official meeting, there will be a presentation. And following that, there will be an opportunity for any attendee to ask questions. I would now like to turn the conference over to Mr. Bill Tempany. Please go ahead, sir.
William Tempany
executiveThanks very much, operator. Besides the formal part of the meeting, Alana and I are going to go through our Q1 results, and we will be doing a presentation that's being presented this week. There's an IR show in Las Vegas called the Planet MicroCap Showcase. Kent and Alana are in Las Vegas and have, I think, 16 meetings set up down there with various groups, so we will be going through the presentation that we're using down there after we do the first quarter results. Good afternoon, ladies and gentlemen, and welcome to the Annual and Special Meeting of FLYHT shareholders. My name is Bill Tempany. I'm the CEO of FLYHT and I will be acting as Chairman for today's meeting. Before we begin the formal business of the meeting, I would like to thank all of you for joining us today. In order to cover the required business in an efficient manner, we have prearranged with certain shareholders to move and second motions of business. This is in no way intended to discourage comments from the floor, and on the contrary, should there be a registered shareholder wish to speak on any matter, please do so at any time by typing your question in the Q&A section on your screen within Zoom. If the shareholders present have no objection, I welcome all guests and ask any non-security holders to refrain from asking questions or voting during the formal meeting, there will be a presentation of the company's business affairs after the formal meeting, and you can continue to ask questions throughout that presentation using the Q&A function on your screen. This meeting will now come to order. And with your approval, I shall ask Alana Forbes to act as secretary for the purpose of recording the minutes of this meeting. The first item of business will be the appointment of scrutineers. With the consent of the meeting, I shall ask [ Nazim ] to act as scrutineer. And [ Nazim ], sorry if I butchered your name there. Odyssey has indicated that shareholders of record at the close of business on March 30, 2022, were mailed the notice calling this meeting, together with the accompanying meeting documents on April 13, 2022. Accordingly, with the consent of the meeting, I would propose to dispense with the reading of the notice, and I direct a copy of the notice and proof of service to be kept by the secretary with the records of this meeting. I note that a quorum of shareholders is present at the meeting, irrespective of the number of persons actually present if 2 shareholders or duly appointed proxy holders are present. I have received the preliminary scrutineers' report indicating that a quorum is present. It shows that there are 17 shareholders present or represented by proxy representing 6,720,303 common shares the [ 18.56 ] of the total issued capital. I ask that when a vote is requested, shareholders do so by choosing from the responses available on the polling questionnaire that will appear on your screen as each motion is put forth. Since the notice and requirements have been met, I now declare that the meeting is regularly called and properly constituted for the transaction of business. The first item of business is to receive and consider the financial statements for the year ended December 31, 2021, together with the auditor's report thereon. With the consent of the meeting, the reading of such financial statements and auditors' reports will be dispensed with. Copies of the financial statements and the audit report -- auditor's report thereon have been made accessible to each registered shareholder who have had the opportunity to review them, and no action is requested. I would be pleased to answer any questions after the meeting. The next item of business is to fix the number of directors of the corporation to be elected at this meeting and hold office until close of the next annual meeting of the FLYHT shareholders.
Flint Walters
executiveMy name is Bert Walters and I move that the number of directors to be elected at the meeting to hold office until the close of the next annual meeting of FLYHT shareholders be fixed at 8 directors.
Kent Jacobs
executiveMy name is Kent Jacobs, and I second the motion.
William Tempany
executiveThe motion is now open for discussion.
Operator
operatorAny registered shareholder or proxy holder who wishes to speak to this matter should raise their hand on the meeting platform. Once you are announced, your audio will be open so you can speak. You will not appear on camera. Mr. Chairman, no one has indicated that they wish to speak on this at this time.
William Tempany
executiveYou've heard the motion, and if there's no further discussion, I ask for all shareholders present to indicate their voting using the on-screen poll. Because this takes some time on the Internet, we're going to pause for a few minutes to make sure everybody gets a chance to vote.
Operator
operatorThe poll is now appearing on screen. Please make your selection. We will leave it open for 30 seconds. [Voting]
Operator
operatorThe poll will close in 10 seconds. This poll is now closed.
William Tempany
executiveBased on the preliminary scrutineers' report and the votes conducted at this meeting, I declare the motion carried. The next item of business is the election of directors to hold office until close of the next annual meeting of the FLYHT shareholders.
Kent Jacobs
executiveMy name is Kent Jacobs, and in accordance with the bylaws of the corporation and as detailed in the information circular, I nominate Brent Rosenthal, Douglas G. Marlin, Jack Olcott, Mary McMillan, Michael Brown, Nina Jonsson, Paul Takalo, and William T. Tempany be elected as directors of the corporation to hold office until the close of the next annual meeting of the FLYHT shareholders or until their successors are duly elected or appointed.
Unknown Executive
executiveMy name is [indiscernible] and I second the motion.
William Tempany
executiveOperator, is there a vote on this?
Operator
operatorYes, there is. But prior to that, any registered shareholder or proxy holder who wishes to speak on this matter should raise their hands on the meeting platform. And once you're announced, your audio will be opened. There appear to be no shareholders who wish to speak to this matter.
William Tempany
executiveOkay, I ask that someone move and someone to second the resolution to elect those nominated as directors of the corporation to hold office until the close of the next annual general meeting of the FLYHT shareholders.
Flint Walters
executiveMy name is Flint Walters, and I so move to elect those nominated as directors of the corporation to hold office until the close of the next annual general meeting of the FLYHT shareholders.
Derek Taylor
executiveMy name is Derek Taylor and I second the motion.
William Tempany
executiveThe motion is now open for discussion. Sorry, I got everything out of order there. You've heard the motion -- okay. If anybody wants to comment here, put your hand up. You've heard the motion, and if there's no further discussion, I shall ask for all the shareholders present to indicate their vote here being the on-screen poll.
Operator
operatorThe poll is now appearing on screen. Please make your selection. We will leave this poll open for 2 minutes as there are a number of selections to be made, and we will play a music now while you're voting. [Voting]
Operator
operatorThe poll will close in 30 seconds. The polls will close in 10 seconds. And the polls are now closed.
William Tempany
executiveBased on the preliminary scrutineers' report and the votes conducted at this meeting, I declare the motion carried. The next item of business is to the appointment of auditors for the current year. I will now ask someone to move and someone to second a motion in this regard.
Alana Forbes
executiveMy name is Alana Forbes, and I move that KPMG LLP, Chartered Accountants, be hereby appointed as auditors of the corporation to hold office until the close of the next annual meeting or until a successor is appointed, and that the directors are hereby authorized to fix their remuneration.
Paul Takalo
executiveMy name is Paul Takalo, and I second the motion.
William Tempany
executiveThe motion is now open for discussion.
Operator
operatorAny registered shareholder or proxy holder who wishes to speak to this matter should raise their hand on the main platform. Once you are announced, your audio will be open so you may speak. You will not appear on camera. Mr. Chairman, no one has indicated that they wish to speak to this matter.
William Tempany
executiveThank you. You've heard the motion. And if there is no further discussion, I ask for all shareholders present to indicate their vote using the on-screen poll.
Operator
operatorThe poll is now appearing on screen. Please make your selection. We will leave it open for 30 seconds. [Voting]
Operator
operatorThe poll will close in 10 seconds. The poll is now closed.
William Tempany
executiveBased on the preliminary scrutineers' report and the votes conducted at this meeting, I declare the motion carried. The next item of business to be conducted today is to consider and [ find it ] advisable to pass an ordinary resolution to adopt and approve the stock option plan of FLYHT. The ordinary resolution approving the stock option plan can be found on Page 11 of the information circular. With the consent of the meeting, I propose to dispense with the reading of the resolution in its entirety and proceed with approving, by way of ordinary resolution to shareholders, the stock option plan, all as provided for in the information circular. I will now ask for someone to move and someone to second such ordinary resolution.
Paul Takalo
executiveMy name is Paul Takalo, and I move that the stock option plan, as described in the information circular, be occupied -- or sorry, be approved as the stock option plan of the corporation.
Unknown Executive
executiveMy name is [indiscernible] and I second the motion.
William Tempany
executiveThe motion is now open for discussion.
Operator
operatorAny registered shareholder or proxy holder who wishes to speak to this matter should raise the meeting platform. Once you are announced, your audio will be open, so you may speak. You will not appear on camera. Mr. Chairman, no one has indicated that they wish to speak at this time.
William Tempany
executiveYou have heard the motion, and if there is no further discussion, I ask all shareholders present to indicate their vote using the on-screen poll.
Operator
operatorThe poll is now appearing on screen. Please make your selection. We will leave it open for 30 seconds. [Voting]
Operator
operatorThe poll will close in 10 seconds. The poll is now closed.
William Tempany
executiveBased on the preliminary scrutineers' report and the votes conducted at this meeting, I declare the motion carried. As there is no further formal business to be brought before the meeting, I would now ask for someone to move and second the termination of this meeting.
Alana Forbes
executiveMy name is Alana Forbes, and I move that the formal part of the meeting be terminated.
Derek Taylor
executiveMy name is Derek Taylor and I second the motion.
William Tempany
executiveI declare the meeting terminated. Following the presentation, [indiscernible] will invite questions. Okay, so the formal part of the meeting is closed. We've got -- Alana and I will go through the Q1 results and talk about what we see for the things that are happening and the growth we see in the industry. I encourage anybody that wants to ask questions any time and we can certainly answer them. We do have formal questions from some investors the investor site that we will do at the end of the Q1 wrap-up. And as I said earlier on, we're going to run through the presentation that's being used in Las Vegas at the IR show this week and talk to everybody about what we've been building and where we're going and what's happening as a business. So Alana, if you want to do financial highlights first or do you want me to go first? We never decided that.
Alana Forbes
executiveWe didn't decide. How about I go?
William Tempany
executiveOkay. Go for it.
Alana Forbes
executiveOkay. So these set of statements for Q1 2022 were rather interesting from our accounting group's point of view and also from the results that were presented as the result of the activities in Q1. We had a lot going on. First off, you'll see that the CrossConsense business has been consolidated in with the greater business, just from the closing date onwards. So these results show -- or they include CrossConsense results from March 17 to 31 only. What you'll be seeing in Q2 is a full quarter of all of our subsidiaries' contribution to the consolidated results. If you're interested in seeing what the combined businesses would look like, if CrossConsense have been incorporated from January 1, you can see that in the note for the statements and also in the MD&A. We were pretty glad to see the impact that revenue would have had. The revenue totals would have been just under $6 million. We showed great improvements in particularly our Hardware line of business and our Licensing revenues. Those both contributed to us showing higher top line revenue than at any point since the pandemic started. So that was good to see. One thing. So EBITDA, we ended with $930-odd thousand net EBITDA loss. There were a number of onetime nonrecurring items that contributed to that. There were some acquisition costs with regards to CrossConsense. We had a bad debt increased reserve that basically attributed to a couple of customers who are having a bit more trouble through the pandemic and we hope to collect that in the future, but that's a nonrecurring onetime expense. We also spent a bit more on our Edge development, and foreign exchange had an impact as the Canadian dollar and how it varies with the U.S. dollar and particularly with the euro led to some different results as to normal. I should mention 1 thing with the acquisition of the CrossConsense business, there's a lot of increased complexity that we're accounting for in accounting for our European subsidiary. And so what you'll see in future quarters is that we'll be taking an extra week to report our results. So you can expect that starting with our Q2 results and being applied consistently into the future. Bill?
William Tempany
executiveThe letter that we included in our financial statements this quarter, I think, very, very clearly points out that we are at a point of inflection in this business. I think that the wind-down of COVID is what everybody has been waiting for in aviation. But I think the things that we're seeing as global trends in the communication area and the concern for the environment area are all playing directly into our strength as a company and our strength as a team and an organization. The addition of WVSS last fall was something that we looked at because weather is so important to everybody, and we have a unique way and actually an exclusive way to collect the information about the weather today. Our TAMDAR sensor and our WVSS sensor are the only airborne sensors for humidity. One of the options that we have with the WVSS sensor with some software changes is to monitor other things in the air stream as the aircraft goes through the air. So if we want to monitor CO2, if we want to monitor NO2, or if we want to look at any of the greenhouse gases and where they occur and get it on an aircraft, we can actually map for people what's happening with emissions and where it's most affected what we can do with that. That focus, I was in a meeting in Seattle 2 weeks ago of suppliers to the aviation industry, and we were on a panel talking about what's going to change in -- between now and 2030 and people supplying solutions to aviation. The focus very heavily by the buyers and the people at those meetings was, they want solutions that help achieve net 0. They want solutions that are economical. They're looking for solutions that don't make become a luxury. They want it to be something that everybody can afford to do, and to do that, they've got to use technology. And whether it's sustainable aviation fuel or better engines or the redesign of aircraft, so they're more aerodynamic, those are the things that the industry is looking at. And we play directly into that with both our weather sensors and our ability to communicate real-time data about the aircraft and the operation of that aircraft. The integration of the CrossConsense team, having a European base with European employees, people that understand aircraft maintenance has been something that I've been looking for since I came back is make sure that we've got feet on the ground in Europe. We've got people in China. We've got people in North America. Europe was always kind of dragging behind that. And when we do the presentation in a few minutes, we'll show you what we think is going to happen in '22 for revenue distribution. And I think it's really exciting that we've got a very strong team in Europe that are -- have good customers, have good products and have good reputations that we're really enjoying working with and going to be a very strong part of what we are as a company going forward. You've all heard about the problems with 2G, 3G, the concerns over 5G and how it may interfere with the aircraft. There's actually a podcast we did on our website about 5G. It's not the aircraft that's the problem. It's one of the sensors on the aircraft, and that's being resolved by the industry very quickly. The world is going to 5G and that opened up an opportunity for us with some legacy providers of equipment that use 2G and 3G and are selling upgrades to those old products, but they don't have the capabilities that we put in our Edge product. So I'm very excited about the Edge product. And as I said at year-end, and I repeated in Q1, the investment we've made in companies and products and people and services are going to serve this company very well going forward. Alana's comments on our EBITDA loss being in the $400,000 range, if you take out the onetime charges, it is something that we can fix this year. It's something that we're focused on and dedicated and being very prudent in what we do and how we do it. The last 2 years, Alana has done a great job of holding on to the purse strings and making sure that we only spend money where it's needed to be spent. But I think the shareholders should be proud of what we've achieved in those 2 years and what we're going to be capable of doing in the years coming with the products, the people and places we have things set up. The other thing that I think is really important is that Q1 kind of shows the kinds of revenue that we can generate. We never do forecasts. I'm not going to give you any outlook, but I'm very bullish about what we can do this year because the teams are working so good together. We can cross-sell into our customers and CrossConsense customers. There are a lot of new airlines being formed. I think in Canada, there's 6 new airlines been announced since the pandemic started that are all looking for modern solutions to reduce costs and manage their fuel consumption and their greenhouse emissions. And as I say, we are in the sweet spot to be able to do that. One of the things that I'm -- particularly have been proud of is the staff we have and the retention we've had. We did an employee survey and people are extremely happy working here. They see that we're being very forward looking in what we're dealing with, as far as the economy goes as far as the environment goes, and in the programs that we provide for our people to be up-to-date in technology. The partnerships that we announced in the first quarter with AWS are something that developers really want to be part of. The cloud is a reality. The tools that AWS brings are definitely industry-leading and our staff being able to participate in those things is something that they really want to have on their resume. They want to be part of companies that are looking at the environment and thinking about ways that we can save fuel, save greenhouse gases do things in a different way. They want to be part of the company where they get to participate in the decision-making and the products that they believe in. And those are all things that we've put in place and are in place and will continue to be in place that give people a good feeling about where we are. So Alana, maybe what we could do is go to the questions that were asked, and then I'll run through the presentation.
Alana Forbes
executiveCertainly. So we have quite a few that were e-mailed in previously. Thank you. How much revenue has SITA-derived so far?
William Tempany
executiveOkay. The SITA arrangement, the first press release that went out is that we are working with them to use Certus bandwidth through their relationship. The way that Iridium put the Certus services up is you need to buy a seat and you have a minimum commitment of a lot of dollars a year that you have to be able to spend to get a seat on the Certus network. Paid about 2 seats, and we did a deal with them to buy part of 1 seat from them on an as-used basis until we see what the demand is going to be. Our equipment that's fielded today, both AFIRS 220 and AFIRS 228 use the Block 1 Iridium satellite system. It is compatible with the Certus network but doesn't have the bandwidth or the speed. So we're not planning to change the AFIRS units to Certus, but the Edge will be Certus-capable. When we start shipping edges and see what the volume is once we get to a certain size, then we'll just buy a seat from Iridium. But in the meantime, we wanted to make sure we were controlling our costs. And we did that by partnering with SITA. Having said that, we're working with SITA on a bunch of other opportunities that include being able to provide services to their customers, having them provide our products to some of their customers. That's an ongoing process. There has been no contracts signed to date. When they are, we'll definitely press release them. But for now, the relationship is strictly for the Iridium bandwidth and the Certus network.
Alana Forbes
executiveOkay. This same shareholder is looking for also an update on the AWS partnership.
William Tempany
executiveOkay. AWS has got a travel and transportation group. They are collecting applications. And when customers with AWS come and look for an application like APU tracking, our system will come up in their search and they will recommend it to their customers as a solution. We've been introduced to, I think, 6 or 7 significant aviation customers of theirs and we're in discussions with those today. We've not signed the contracts as yet. That relationship is 3 months old and in aviation, that's a real baby. Things don't happen in 3 months in aviation. But the discussions are very positive and ongoing, and I think the big thing is that we've got AWS in those meetings with us. They're sitting at the table with us. They're helping us with the solutions. As I mentioned earlier on, we've trained all of our people in the AWS tools. We've used AWS tools to build all of our products. The Edge is actually the first AWS Cloud-enabled avionics piece on an aircraft. And we're in the process of certifying the Edge and hearing the FTCs on 3 different models. So it will be in the first pod-based avionics box in the world, and that's in part because of the AWS relationship. So even though there's no revenue to date on it, it's certainly a very active partnership that we're working on.
Alana Forbes
executiveOkay. Will the AWS relationship require new software development to produce revenue?
William Tempany
executiveWe've done all of the development. The last 2 years were dedicated to moving all of our solutions off the old platforms onto the AWS platform. So that investment is done. We have work to do all the time every month on fine-tuning and making sure that we're optimizing the use of the AWS platform. But there's no more -- I shouldn't say no more software development because we're continuing to build applications, but they're being built with the AWS field set on the AWS cloud, and we will be deploying them as they roll out.
Alana Forbes
executiveOkay. Next topic. Has FLYHT reached its goal to install TAMDAR sensors for the governing weather agencies? What percentage of these installs are still grounded during COVID?
William Tempany
executiveThe goal for TAMDAR was basically the systems that were out there, AirAsia being the biggest user of the TAMDAR sensor. They definitely do see the weather agencies. We provide them to NOAA and NOAA provides them to the WMO. Part of the way we've done our contracting is for NOAA to distribute those instead of going direct to each metrological association. And we can seek to sell TAMDAR. We're looking for applications at TAMDAR. But as you can imagine, through COVID, there weren't a bunch of people looking for new equipment to put on their aircraft. But we are working with it. TAMDAR is excellent for turboprop aircraft. Turboprop aircraft don't have proper temperature sensors, so -- the WVSS system does not measure temperature. So on a turboprop, we'll be putting TAMDAR equipment on, and on a jet aircraft, we'll be putting WVSS on. The percentage of the installs that are grounded is probably in the 75% range through COVID. Most of the big users of TAMDAR, like I say, were AirAsia and Southeast Asia, and I think they've got 30 out of 130 aircraft flying today. So there's a lot on ground today. Their plan is probably late '22, early '23 for them to get back to full crewing, but it really depends on the lockdowns for COVID.
Alana Forbes
executiveWill SaaS revenue gross margins go up as more SaaS revenue is recognized?
William Tempany
executiveI think that the SaaS revenues have the opportunity to increase for several reasons. Number 1 would be that we pay so much for the infrastructure on AWS on a monthly basis. And the usage charges go down as a percentage of the total usage the bigger you get. So that's 1 area of saving. The other thing is that we're adding new functionality all the time to the same customers. So the revenues will go up and as revenues go up, our cost of supporting that revenue will go down so the margins could increase that way. The other thing is the introduction of the Edge and the ability for us to get large amounts of data through 5G, 4G or through WiFi, Bluetooth, even through Certus, will be a higher margin than we're getting today using the Block 1 [ motives ].
Alana Forbes
executiveOkay. And part 2 to that, what is the gross margins for SaaS for FLYHT and CrossConsense individually? And I can answer that. Our gross margins for traditional flight business for the AFIRS product line has been in the 65% range, and CrossConsense has something very similar. Next up, how big is the 2G and 3G data markets?
William Tempany
executiveThere are somewhere between 35,000 and 40,000 aircraft equipped with what's called the wireless QAR, WQAR. Quick can access recorder. They are all 2G and 3G. And as the market rolls out, 5G starts to step down those 3G networks and 2G networks. Most of the 2G have turned off now, but the 3G networks have not turned off. That market needs a solution, and that's what we're addressing right now with the Edge.
Alana Forbes
executiveAnd the second part to that question. What is the deadline to disconnect each of those 2 technologies? And are the dangers with 5G technology close to airports been fully fixed?
William Tempany
executiveThe 3G turnoff seats are individual by country and by area. I think there's parts of the U.S. that have turned off 2G but they still have 3G, and there's parts that have turned off 3G and go into 5G. I think the drop-dead data, as far as I've heard for 3G is 3 to 4 years out. It's imminent, it's not tomorrow, but people have to plan and be ready for it. The dangers around 5G, I think, has been fixed. What needed to happen was that they needed to certify the equipment so there was no 5G issues with the -- maybe Kent or Derek can jump in here and it's something to do with your ground proximity equipment that was being confused by 5G. That has been fixed in all the major airports and isn't an issue. But it's not anything to do with our box. Our box is actually set up so it's select what's available at the airport. So if there's 4G available at the airport, it uses 4G. If there's 3G available at the airport uses 3G. If there's 5G available, it uses 5G. So our box is not affected by the stories we've heard about 5G, and it's up to the airport to decide whether or not they're allowed to have 5G turned on within range of the airport. So that is our problem I think.
Alana Forbes
executiveWill FLYHT's revenue increase as more data is pulled off the plane via Iridium Certus? Also, will the AFIRS modem be changed to enable AFIRS to download more data?
William Tempany
executiveOkay. I think we talked about this as far as the service pipes and the capabilities. Our increased revenue is going to come from applications. We can already get all of the data off the aircraft in real time, anytime we want. So whether it's through Block 1 modems or service modems or 3G, 5G modems, we can get all of the data all the time anywhere. But the things that we're doing are doing things different with that data, providing actionable intelligence, being able to create value for the airlines through the data that comes off that aircraft. There will not be a retrofit to existing modems on the AFIRS unit. It's certified for safety services. The service network is not yet certified for safety services. So all of our boxes can be used for air traffic control and for dispatch and all the things that the airlines need to do, and we won't be changing those blocks to Certus. One thing that we are definitely looking at is having the edge with a service model to be able to take data from the AFIRS unit and transit. That's going to be a regulatory issue as to when that seat will -- technically it's very easy for us to do. Regulatory-wise, there's issues with what we can do there and how we can do it.
Alana Forbes
executiveAll right, new topic. When does FLYHT move its U.S. office to Greater Denver and why? What is the focus of the U.S. office now?
William Tempany
executiveAll right. We were fortunate, I guess, is a good way to put it, that our [indiscernible] in Denver came off the end of March, so we have the ability to downsize that office. The majority of the people working in the U.S. work from home and wanted to remain working from home. So we got a smaller office with an ability for people to go in if they want to work in the office, boardroom and so on, and continue to work on the weather systems. Some of our development staff are down there. So it's weather, it's software development. So we've moved the inventory in hardware to Calgary because we have space here and it's a cost saving. And we still are a U.S. corporate registrant. Our FAA registration is still out there and still part of our U.S. operation. So it was just a cost saving and better utilization of resources. Alana, do you want to add anything to that?
Alana Forbes
executiveNo, I think that sums up the reasons behind the decision and the timeliness of it. Can you provide an update on FLYHT's relationship and business with ECCC? Are the U.K. meteorological office and the WMO only testing the WVSS or are they also testing TAMDAR?
William Tempany
executiveDo you know what ECCC is?
Alana Forbes
executiveYes, it's the Environment Canada.
William Tempany
executiveEnvironment Canada.
Alana Forbes
executiveI can't remember what the CC part is, but the EC part.
William Tempany
executiveOkay. We're working with Environment Canada and a joint development project with [ Swoop ] to look at fuel burn. It's funded in part by the Alberta government. We do work with Environment Canada on weather, and we've got a couple of programs we're talking to them about. We're particularly interested in weather in Northern Canada. Everybody around the world is interested in weather in Northern Canada because if you have a look at it if you've got a storm in Iqaluit on Wednesday, by next Thursday, it's going to be in England. And so there's a lot of interest in our weather capabilities there. We actually started the business in the weather business. Our first revenues came from Environment Canada tracking down [ ships ] that we're looking to find the weather on the west coast of Canada in preparation for the 2008 Olympics or 2010 Olympics. So weather is in our blood, and we do have a very unique situation in what we can do there. The U.K. [ Met ] office are -- they're not testing WVSS. They've committed to buy WVSS. That's not a press release from us. That's something that was released by U.K. Net. They're putting 30 units in place in Europe to track community. We're currently working through 3-way negotiations to have that happen but it's not done yet. But we expect that, that will happen this year. There's some work to be done but definitely a commitment from them and from the aviation community in Europe to get better information going.
Alana Forbes
executiveGreat. And a topic from yesterday. How likely is it that the new collaboration with MBS amount will lead to future revenue?
William Tempany
executiveOkay. I think I missed one piece on there. Are they testing TAMDAR as well?
Alana Forbes
executiveYes.
William Tempany
executiveNo, they're not. And again, I think it's aircraft type. There's not a lot of turboprop aircraft registered in Great Britain, they mainly FLY jet aircraft. And we do not currently have a program planned for TAMDAR in there. Okay. On to the MBS opportunity. We have designed and built the Edge to allow third-party software to be executed on. So not only does the Edge take advantage of all of the things that we've developed for AFIRS, and give you multiple channels to get data to from an aircraft, it also gives you the ability to put third-party software on it. So MBS had software that they have written that's used to do certified upgrades to avionics equipment through a piece of hardware that they developed. And somebody physically had to go to the aircraft, hook up the hardware, run the software, verify the load, accept it, unhook the hardware, get back on the aircraft. And if you can imagine somebody with hundreds of aircraft, hundreds of airports and try to keep track of which item was done and which one wasn't and when you can cast that aircraft, when you can catch that aircraft, it becomes very cumbersome. So what we did over the last 3 months is we've loaded their software on AFIRS. We've hooked it up to a simulator that simulates any avionics box that you want. We've taken certified software upgrades for those avionics boxes and run them through the AFIRS software or the software on the edge using an iPad as the connectivity and updated and certified that. And we're demonstrating that next week at a show in Memphis. The question about future revenue, I can't tell you. I know it's very expensive to keep the avionics up to date on an aircraft. And I know that this is a huge saving in both time, people and accuracy. And it's very important to the airline that they do these upgrades as quickly as possible because some of them change how the pilot interfaces with the aircraft. So having them done on a timely basis is critical as well. So we will know more in the next couple of months, be able to show goals, but I'm quite bullish on this being an opportunity, and we've done a lot of work to make this happen, as has MBS. MBS has been doing this for 20-some years, and they put a lot of time and effort into making sure that the software is doing what it needs to in this certified manner so we can actually do this on an aircraft.
Alana Forbes
executiveGreat. So those are all the e-mailed questions that we received in advance, but we also just have some from the crowd. Can you discuss the impact of your several recent acquisitions and partnerships are affecting opportunities in the sales funnel? How much is the sales funnel increase? What does the current sales funnel look like as pre-COVID funnel levels? And finally, how have these recent partnerships affected the sales cycle, i.e., trying to close or book [indiscernible]?
William Tempany
executiveThose are a lot of questions.
Alana Forbes
executiveThere's a lot sales funnel questions here.
William Tempany
executiveThe sales opportunities are better than I've ever seen in this company, and the sales pipeline is large. We don't release those numbers. We do release the backlog number. And in the presentation, at the end of Q1, the backlog was $25 million. I think at the end of this month, we're going to -- at the end of April, I mean, it will be $32 million or $33 million. So backlog is growing, the revenue is growing. And the opportunities that we're working today with CrossConsense and us, they have an excellent relationship with their customers, as do we, and we've got opportunities with flight customers were CrossConsense is working with them on predictive maintenance and putting some of the flat watch tools in. We've got opportunities with customers [indiscernible] who put flight equipment on their aircraft and do what we do for them. I think our pipeline is probably 25% to 30% ahead of where it was 2 years ago. So it is growing. But the pandemic, I think if it wasn't for the pandemic it would probably be double what it was 2 years ago. But pandemic being what it is, it's slowing down decisions. The average sales cycle in this business can be anywhere from -- we had 1 that closed in 10 days. We've got people that we've worked on for 15 years that are finally starting to listen. I think our average sales cycle when we have an expression of interest and they're looking for a solution that's in the 8- to 18-month range, and a lot of it depends on budget cycle. If you're starting in January, trying to sell something in the budget in November, we can probably close it in January. If you start in November and start selling something, it could be 18 months because they've got to get through a budget cycle. So it's very variable, and certainly, COVID has impacted it.
Alana Forbes
executiveOkay. There are some questions on deployable recorders. Here, Airbus is looking to use deployable boxes. What is Boeing doing and are we in those discussions?
William Tempany
executiveWell, I was at Boeing 2 weeks ago. And both Boeing and Airbus have decided that deployable recorders are the right way to go. I disagree with it. A lot of the people in the industry disagree with this, but that's life. I said in an interview a couple of weeks ago that I'm sick of chasing the ghost rabbit. We've invested time, money, energy, demonstrated it, we're on [indiscernible] demonstrated. We proved it worked. We've got customers using it, and the industry has decided to go another way. So we're going to find something that makes money for us and for the shareholders and adds value to the airline and not chase that rabbit anymore.
Alana Forbes
executiveOur next question, the Airbus box, what is the weight difference between ours and theirs?
William Tempany
executiveVery meaningful.
Alana Forbes
executiveYes. Okay. Any additional movement on getting those Airbus boxes into the SaaS business?
William Tempany
executiveYes. Well, one of the things that I mentioned earlier on is that the edge can transmit data through Certus from a per unit. Guess what else it can transfer? So that's the edge. I hope to hear on our ability to show positions and track aircraft and discuss -- we do provide flight tracking and the basic service that the acreage unit does. We're tracking some of our aircraft in Russia right now. And that's the basic capability that we do have and most of our users use. It's one of those things that are kind of basic behaviors and continue to help generate...
Alana Forbes
executiveThere is a question here on backlog, if you said the backlog was $25 million last December and now at the end of the month, $32 million. You closed new business of $7 million recently. So at December, our backlog was $25 million. And at the end of March, it was $25 million as well. And so backlog will increase as we sign new business. It will decrease as we produce that into revenue. And our number is also being constantly evaluated and reserved for what we think and what our customers are communicating their near-term future plans are. And so we're constantly scrubbing that number so that we can present a number that we believe is realistic. So I hope that answers that question. I think that's it, unless anyone else wants to...
William Tempany
executiveI have 1 more. When do you think sales revenue will start with the kind of numbers we're expecting? We do have customers starting to adopt and use that. And I think a lot of it is going to depend on recovery of our existing customers. There is Actionable Intelligence revenue in our SaaS number today. But the -- because other SaaS revenue from fleets that have been grounded because of COVID have reduced that number, it doesn't show up. But we are generating Actionable Intelligence revenue and it will grow. Okay. What I'd like to do is share my screen, and we'll just go through quickly the presentation that's happening. This presentation will be on our website this afternoon for anybody who wants to go out look at it. It will be in a slightly different format because we're working on a new cover page and so on. But just 1 second, and I will bring it up. Alana, can you tell me if you have the screen?
Alana Forbes
executiveThere we go. Looks good.
William Tempany
executiveOkay. So like I said, Kent and Alana are in Las Vegas and spending money and -- no, no, they're at the conference. And this is the presentation that we're giving to the investors down there, the 16 meetings they're at. So I think most of you have seen most of these slides, so I'm not going to go through them all in detail. But we continue to deliver Actionable Intelligence, and our focus is really on the net 0 targets and how we're going to help the airlines achieve those. There is quotes here from industry experts on what they see as some of the things that have to change, both in operations and in environmental constraints. There's a lot of things that this company is set up to do to help with this: The weather, the ability to monitor where and when fuel is being used, when and where equipment is being used, those are all things that the CEOs of these airlines are saying they want, and that's what our sales force is out working on is getting those in place. The partnership with SITA, we talked about during the question period, but SITA is definitely the industry leader in ACARS. And for years, you've heard us talk about ACARS and getting messages off in the [indiscernible] format through a VHF radio. One of the things that SITA is looking at is our AFIRS Edge product and the ability to deliver that stuff through IP. So whether it's through a satellite connection of the entertainment system or it's a part of the ground infrastructure, doing 5G, whatever we can download. And in exchange for providing that hardware solution for SITA, what we're doing is working with them to provide our solutions that they don't work on already in the airports and some of the other systems that they do. The AWS partnership, I talked a lot about what we've done with this, what we're working with them. This is something that's been active for 2 years. This isn't something that we just announced the partnership and we're going to see where it goes. We're actually working on opportunities with them. We're working with their tools and their sales department and their customers. And we're providing solutions through the AWS network. The AFIRS Edge is really a unique technology, and we reused a lot of the AFIRS technology. So we spent some money doing this, but we also took the investments that we've made over the last 15 years and incorporated that. As I mentioned, there's 35,000 boxes out there that are going to have to be replaced or upgraded. That's a $1 billion opportunity on that obsolete hardware over the next 3 or 4 years. We intend to have a big chunk of that be ours. This is the first [indiscernible] enabled hardware. It's something that the industry is looking for. They're looking at how they're going to use technology better, and we're part of it. Having Certus enabled is -- we've been -- we were, I think, the second Iridium aviation VAR. And there are no VARs out there today with the Certus application. There's 1 working on it but it's for smaller aircraft. We talked about the MBS deal. This is the first of the kind with an avionics data loader. The stock building is similar to a cell phone. Total addressable market, we think, is about 35,000 units. I mean, not as huge when you think that we've got 3,000 AFIRS units out there today, it's 10x the size of the market opportunity with the edge. So really something that I think is a company maker and a really good use of both the time and the money through COVID to be able to come up with a solution like this and be where we are ready to launch into the market today. Our WVSS system. I talked about some of the things that it'll do and why it was important that we go and spend that money in time and buy this and be able to get it in here. Southwest Airlines, FedEx, Horizon are all WVSS users. They all have WVSS installed on their equipment. WVSS within probably the next 3 months will be certified attached to the edge so that we can put it on the 737, and we can put it on A320. We can put it on Dash 8s -- excuse me, ATRs. So we've got a fleet of aircraft that are ready to go that we can start adding WVSS. And as the environmental movement catches up to what they really want to know about what's in the air, we can be a major part of that and participate in the net 0 initiatives that are going on around the planet. We're working with the Chinese Metrological Association. We're working with, [indiscernible] as we've talked about. All of the met agencies are looking for this kind of solution, and we're there ready to do it. We talked about the integration of FLYHT and CrossConsense and what it means. We've got a really great set of customers that are very happy with the services that both companies provide. And the integration of the people and the products with these customers is going to be a really good place for us in the marketplace in this year and all years going forward. Everybody always asks why it should be on the screen? Well, I think that helping our customers achieve net 0 is something that the industry is very focused on. The 2G/3G we've talked about, our AWS and SITA relationships, our airborne weather capabilities, our growth is going to be organic and inorganic. You saw that we bought CrossConsense. We're looking at other companies to buy and merge with and we're focused on SaaS. We want it to be a service provider enabled by the hardware that we've built and certified. ESG is helping the aviation industry get there. And [indiscernible] we did an announcement. It's one of the first things that was out there. The APU tracking but we've also got a full fuel system. We can do all the core reporting. This is the focus that we're putting on our Actionable Intelligence to save money, save the environment, makes yourself a better corporate citizen. Our operating model, if you look at '21, we are 50% North America; 3% Europe, 40% '22 -- in '21, in the rest of the world. '22, we expect to be 50%, 30% and 20% and growing from there. I think we answered this question earlier on about the SaaS revenue, the -- and the recurring revenue, the 65% margin Alana talked about. So at a 30,000-foot view, I just said our last 12 months revenue was [ 14 ] It's certainly going to go up from that with what we did this quarter and going forward. Our backlog is increasing. Our SaaS revenue is continuing to improve as a percentage of total revenue. Margins are the same. So Alana wanted to talk about was -- what was flying -- what did we do for the last 2 years? What are we doing today and where are we going in the future? So 2 years ago, we refocused and rebuilt the company, adding products, geographies and services. And I think the industry is recognizing that we're a different company to date. Now we've got to get the investors to realize we're a different company today. We didn't just survive COVID. We reformed our company during COVID and put out the new solutions that are going to help us be successful going forward. We've got new products, new offices, new customers focused on the environment and our solutions. Today, we have the best revenue quarter since COVID started. We talked about that. [ U.K. Met ] has announced an order that we're working on closing in the next couple of or 4 months. There's a press release that went out about 2 minutes ago now that we just signed an order for CAD 7.1 million for license fees. And I've been asked, when is that going to happen, when it's going to happen? Those will be delivered this year. And I think that's the [indiscernible] in our cap that the supply chain issues around the globe are getting people who were supplying to say, we better stock up and make sure we don't run into an issue. And we've been doing buying. We've increased our inventory, which has affected the cash flow. But we had to increase inventory, so we didn't have supply chain issues when we're selling product. And now our customers are doing the same, and we're very excited about that. We do have launch customers lined up. They haven't signed. They don't have press releases yet for the 737, A320, Q400 and ATR, I expect those press releases to be out in the next 30 to 60 days. We're already working on the STCs. Our engineering department is a long way along on both the 320 and 37 STCs, and we will have those products ready to be installed by the end of the summer on loan the end of the year of the other and all 4 of these by this time next year. So the future of this company is based on SaaS revenue, mainly driven by the edge. So you may see some large hardware orders over the next few quarters because we're going to get the edge out there and be able to do Actionable Intelligence because we have the edge on a lot more platforms. We're going to focus on our tools on assisting our customers to achieve net 0. It's being driven by the flyers. It's being driven by the airlines, and it's being driven by the government. We're 100% behind making this a key driver. We're going to drive profitability and cash flow. It's well underway. I think that this announcement of shows that we've got the sustaining power to get to where we want to go, and we will continue to drive to make that happen. And I just see the AWS and see the partnerships is putting us in a whole different category in the aviation space. And I'm really proud that we accomplished that and that we're going to take that and write it for the success we're going to see this year and beyond. So the strategic highlights, the focus on Actionable Intelligence and SaaS we've talked about the technology leadership, we've talked about we're out ahead of everybody. We've talked about how healthy our customers are -- there were 2 of our customers that went into receivership during COVID. One of them came out of receivership and signed a contract with us the next week. The other 1 that said as soon as they get the receiver off their back, they're going to be there. We cut our costs by $2 million. The question about the Denver office is one of those things that we looked at what we could do about. And we've been lean and mean through this whole thing, and the money we've spent has been invested in products and the ability to generate recurring revenue in SaaS going forward. I think we're as strong financially as we've ever been. All of the debt is government debt, low interest, no coupon debt. And the leadership team, I couldn't be prouder of the group that are running this company today. We've got everybody behind what we're doing. They're working together cohesively. We're achieving things that small companies just don't ever achieve. We do plan to do an uplift into the U.S. national exchange. Today, our share price, our market cap, our revenue doesn't get us there. Later this year, it will, and we're focused on it and working on it. So those are the highlights. I'm going to throw it open to questions again, if anybody wants to. But I think as a shareholder, you can look at this list, and be proud of who we're dealing with as a company. So I'm going to stop sharing this and any other questions, be happy to take it.
Operator
operator[Operator Instructions]
William Tempany
executiveMust have done a good job, nobody wants to ask any questions. I hope they're all rushing off to get [indiscernible] for tomorrow morning. That's nice. All right. If there's no other questions, I want to thank everybody for the time, and we are very excited about where we are and where we're going and what's going on with this company, and I hope you are, too. So thanks again. We got 1 question in the chat. Wait a second. So the question is we saw CrossConsense revenue contribution in Q1. Is it growing? If so, where is it coming from? Actually, CrossConsense is working on a couple of strategic contracts that will grow that revenue. Go ahead, Alana. Fortunately, Alana would like to answer.
Alana Forbes
executiveYou did a fine job.
William Tempany
executiveYes. Okay. There will be growth in the CrossConsense revenue. Definitely, we're working on new products. We're looking on new costumers and the joint customers of FLYHT and CrossConsense, we will see this grow. Again, I'm not going to give any forecast on that. But it's a healthy business. That's been healthy for 20 years, and we're not interfering with that. We're not going over there and telling them what to do, they're doing a great job. So there we go. Okay. Well, I think I don't see any other chats or questions. So thanks again, everybody, for your time, and have a great rest of the week.
Operator
operatorThis concludes today's meeting. You may disconnect. Thank you for participating, and have a pleasant day.
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