FLYHT Aerospace Solutions Ltd. (FLY) Earnings Call Transcript & Summary

I do some preliminary comments here first. So I'll just get those out of the way. Thanks for joining us, everyone. Just a few comments before we get started here with FLYHT. Kent will be presenting and we'll be having -- Kent and I will be having a discussion. And then we are taking questions from the audience. [Operator Instructions] We really appreciate the questions from the audience be at sort of beginner. You don't know the story well or something more sophisticated. In depth, please put it in there. If we already hit the topic, we may jump over it or we may revert it a bit, given the context of everything. So we highly encourage audience participation. It really does make it better, and I'm always impressed at the diversity of great questions we get from our audience, and thanks for joining us, everyone. And now I will start the official introduction here. So good day. We've got Kent Jacobs, CEO of FLYHT Aerospace joining us. FLYHT develops wireless information systems to improve efficiencies for the airline industry. It's Wednesday, July 12, and I'm Martin Gagel with market Radius Research. Please remember this is neither a recommendation nor investment advice. We're here to learn about the company. Kent, thank you very much for joining us. The airline industry has gone through an incredibly tumultuous several years from almost shutting down over COVID to really peak demand as we speak as everyone is trying to get in their last years of travel in over the summer. FLYHT has some very interesting solutions for the airline industry. Please tell us what FLYHT is doing to help drive both airline efficiencies and revenues.

Martin, thank you. It's a great introduction, and I really appreciate the opportunity to share some information about FLYHT to talk about the company a bit, the company I love so much. And to take some questions, hopefully, as we go through this and at the end of the presentation. Just a really quick bit of the information about me. My name is Kent Jacobs. I'm the President, Interim CEO of FLYHT Aerospace. I've been with the company for over 20 years. The first employee hired by the two gentlemen who started the company background in flying. I grew up in the north of Canada for 4 or 5 years, background in computer science as well. And just love the industry, love what we're doing and love taking my experience and applying it to what FLYHT is producing for the industry. Just a quick disclaimer. There are some forward-looking statements in what I'm going to be talking about a fairly. Here is the standard page. A bit of history about FLYHT. The most important thing to take away from this is that FLYHT was founded in 1998. We've been around for more than 24 years. We're headquartered in Calgary, up here in Canada. We have sales and installation teams in China and Southeast Asia, in the United States and in Europe. In fact, last year, we acquired a company in Germany. So to expand our footprint there in the European markets, it was a great move on our part to expand that way. As Martin explained, we provide solutions to airlines. And we do it through our SaaS products and our hardware products. So we build the avionics, we actually put on the aircraft. What we do is we allow airlines to make smart decisions. We allow them to operate more efficiently. We provide that hardware and software, also our weather sensors and our services to that industry. The capitalization table on the top right corner, you can see our share price is currently $0.85. We have outstanding shares of just over $40 million. The market cap of just over $32 million. Insiders represent about 5% of our ownership and institutional ownership is a little over 23%. If you look in the far-right corner there, you see some of our customers worldwide, and FLYHT is really proud of this, right? It's -- we started as a small company, great growth within the organization up to serving more than 100 customers around the world. There are some pretty impressive airlines on that group and some pretty impressive OEMs that we work with. And that longevity of the FLYHT has been able to demonstrate that ability to come up with great ideas in the beginning, get them implemented, break into the market, break into the industry and then sustain ourselves. Is -- it's a great representation of the pedigree that FLYHT brings to the industry. I talked about the 24 years, and this slide just lets us talk or let me talk a little bit about the state of the company right now and how we've got here. If we look at our last 12 months revenue, $24 million. As Martin mentioned, we're coming out of that COVID phase. It was a difficult two years. I'm glad not to talk about it about COVID, but we did some important things during that time. I'll talk about that further in the presentation, but our revenues are starting to come back up. They're matching where we were pre-COVID and we expect them to keep growing. We have a $19 million backlog as of Q1 of 2023. That's great news for us. We would like to keep that backlog populated. Our last 12-month SaaS revenues representing 38% of our total. Our SaaS revenues typically would have represented more of that, but we had a large licensing order, a large OEM order that drop the SaaS a little bit there. FLYHT is focusing heavily on the stats opportunity on those recurring revenues. And that's why we keep careful track of where our SaaS revenues are relative to our total revenue. We always maintain a high margin -- high gross margin on our SaaS revenues. Greater than 60%, we focus on that. We will not implement SaaS solutions at the expense of driving that margin. And it's also a reflection of the efficiency that we built and the relative importance to the airlines. We have a 95% retention rate. FLYHT has a great history of getting our products and our services into an airline onto an aircraft, and then maintaining them. Aircraft, once you put an avionics product on that aircraft, it can stay there for 15, 20, 25, 30 years. What we have there is a wonderful opportunity to draw those recurring revenues. So maintaining that high retention rate is really important to FLYHT, and we've done a wonderful job doing that. When we do lose a customer, that 5%, it's typically to mergers, airlines that are merging or the airline goes bankrupt. That does happen. FLYHT has invested heavily, especially during COVID and then the last year -- during COVID year and then the last year in our sales team and our sales capability, and that's reflected in our pipeline of opportunity, which is larger than it's ever been, $77 million in our pipeline of opportunity. And what I'd like to talk about here is that pipeline -- it's reflected in a more mature airline than we would have done in the past. So not only is the pipeline growing, but it's growing with airlines that we are much more that we would like to work with more so. Doesn't mean that our current customers, our existing customers are not the kind we want to work. But for a company that has started small, is growing, starting to demonstrate our longevity moving into the Tier 1 market is where we want to be and that pipeline reflects that. Little bit technical here. There's something called the supplemental type certificate. This is a very important part of FLYHT's work. A supplemental type certificate it's an authorization by an agency like the FAA or Transport Canada that allows us to put an avionics product on an aircraft. As you can imagine, you can't just build a computer or take a computer and shove it in the avionics bay, of an airplane you have to get it approved. The installation has to be approved. So we have -- internally to FLYHT from day one, we've had our own engineering team that is capable of generating those supplemental type certificates, getting them approved and allowing us to put the product on the airplane. This is an important distinction for a smaller company for not a Boeing or not in Airbus. It's the ability for us to generate the avionics to build it, get it certified and install it. We were very proud of that. And the fact that we have more than 100, and we're continuing to grow that number all the time. It just means we can put our products on more airplanes at any time. And we recently passed over 5 million hours of voice and data service. So again, a reflection of the longevity of the company. On the far right-hand side there, you can see that we have more than 4,000 AFIRS installations around the world. so more than 4,000 aircraft are flying our product right now. And that's a great way for us to -- when we put the product on the airplane, that's our opportunity to start looking at the SaaS revenues and the ways to look at that data to provide value for our customers. We've identified three macro trends that are really serving as a catalyst for a FLYHT right now. And I'll spend some time talking about these and then dig in a little bit deeper on each one in subsequent slides. The first one is there is a technology obsolescence issue that is happening right now that is of a huge benefit to FLYHT. And in fact, during the downturn, FLYHT recognized that this technology obsolescence was occurring and instead of just surviving the COVID years, we expanded and we grew and we increased our development during that time, and it's leaving us in a wonderful position as the airlines start to recover. That technology, the driver here is that the 2G, 3G, the LTE cellular networks around the world are starting to retire. They're being replaced by 5G networks. And what this means is the airlines have leveraged those cellular networks to move large volumes of data off the aircraft post flight into their systems. So they're worry about where the data goes. The airlines need that data from the aircraft after a flight and they've been relying on 2G, 3G, LTE networks to get that data or manually retrieving that data from an aircraft. What FLYHT took the opportunity to expand our existing products, our AFIRS line from the 220, the AFIRS 228 into what's called the AFIRS Edge with a 5G capability. And what that's going to do is let us leverage those 5G networks around the world as they start to come online and move data for airlines in a more efficient manner. But it's even better than that because as those older networks shut down, the products that are on the aircraft right now are not going to be able to perform. They're not going to be able to transmit over those 5G networks. So we've got a wonderful industry that has to respond to the fact that the telecoms around the world are changing to 5G networks. And the products that they have on their aircraft right now are not capable of dealing with the new 5G networks. FLYHT is unique in this position. We also see that the real-time visibility of operations, this is bread and butter for FLYHT. This is what we've been doing for 20 years, which is that Avionics product onboard the aircraft, that's bringing in all the data from several data buses off the aircraft. The most obvious data bus that people are going to be familiar with is the black box data, the flight data recorder data. That's just one of the inputs to the AFIRS unit. There are several buses that are providing engine, hydraulic, navigation, system, fault codes off the aircraft. All that data is compiled, brought into the AFIRS unit and we analyze it in real time. So in addition to storing that data for transmission post flight, we're also analyzing it in real time and able to transmit that data off the aircraft to provide information to the airlines about their operation. It's that real-time visibility that FLYHT has been performing for the last 20 years. Relatively new -- well now take that back. FLYHT has always been in the environmental side of aviation. And that we have collected for the last 15 or 20 years, AMDAR data. AMDAR data are weather observations that are calculated off of an aircraft as it takes off and it lands that simulate the data that will be collected through a weather balloon. So we collect that information, transmit it in real time. FLYHT has also moved into capturing of relative humidity data. About 5 years ago, we purchased the TAMDAR Pro, we purchased the Panasonic Weather Solution. That was [indiscernible] that allowed us to capture relative humidity. And a couple of years ago, we purchased a better sensor that allows better capture of relative humidity. And now when you marry that aircraft data with the relative humidity data, we're providing -- we're helping airlines meet their net zero commitments, and we're helping airlines and weather agencies around the world better respond to the environmental impact of aviation. We'll dig a little bit into each of these to go forward. The technological -- the obsolescence issue is being dealt with a FLYHT by the AFIRS Edge. So our first product was called the AFIRS 220, then we built something called 228, and now we're we've built and we're releasing the AFIRS Edge platform right now. And we genuinely see this as the biggest opportunity in the last 20 years. And it's around that retirement on the cellular networks around the world and the fact that we're building a 5G product that can leverage those. 5G relative to 2G and 3G, it's night and day. The volume of data transmission, the ease with it can be transmitted and the cost. It's just it's so much better. And the volumes of data that we're capturing on the Edge are now able to be transmitted post-flight in a very economical way. We're first to market with this. We are bringing that 5G product to market. We have our first one -- our first product is operational. We're doing the initial STCs, and we've just signed our first contract for it. The -- there is a product that exists out there. It's a competing product that provides 2G, 3G and maybe LTE, sometimes it provides LTE capability. But that product requires an installation in the aircraft that is a standard installation. And we are plugging compatible with that product, which means that if an airline -- when an airline decides to upgrade to our product, we will literally be able to slide out the competing product that is no longer functioning and slide our product in, the installation is that simple. It would be completed within 30 minutes. And you can imagine that one of the challenges we put new equipment on board in aircraft are things like the installation process. By leveraging an addressable market and the incumbent out there that is going to be retired in their product without a replacement right now, we have a beautiful, easy way to sell our new products.

And just get clarification on it. So you've got a cellphone, a mobile-enabled box in the plans. They come in land once they're in mobile reception range, a 5G range. It then takes all the pistons that it's been collecting off of the plan. And then over the 5G network dumps it into the airlines server data center where it can then be analyzed on how much wear and tear and that and then maybe they make maintenance decisions based on that information and to sort of get a health check on the plane. Is that roughly what it does?

Yes, it's a big description. And it's -- an important addition to that is that not only does the information go to the airline and throughout [ their ] team should get that information. We also work with the airline to let us do that deeper analysis of the data as well. So by collecting it, FLYHT always, always recognizes the data is owned by the airline. But when we work with them, we work with them closely, we also gain access to be able to analyze that information as well. And that's where so many of the SaaS opportunities that we have that they grow from that. Yes. That's great. But your description is absolutely right.

And currently, there is a system. It's based on the 2G, 3G. The networks are shutting those down. So they're just going to be -- there's not -- they're going to be a box that can't transmit the data. and you're putting in the 5G version of this. And then the -- what -- because 5G is so much more powerful than especially 2G and 3G, you can dump a lot more data. And so that additional data, is that key? Is that important for the airlines -- can they make better decisions based on that additional information.

Yes, yes, absolutely. You loft in your Boeing or Airbus bragging about their capability to generate gigabytes of data per hour per flight and how valuable that is. But most airlines, in fact, I think you'd have trouble finding any airline that is capable to absorb or first of all, easily collect all that information. It's expensive, it's difficult to collect that information. Secondly, doing something with it is not trivial, gigabytes of data per aircraft per hour multiplied by the number of flights and the number of aircraft in the fleet represents almost an unmanageable amount of data. And that's where FLYHT is also providing the actionable intelligence and the means to sift through that information and make it ready for deeper analysis. And you'll hear people talk about artificial intelligence and machine learning as that it's just a natural extension GPT chat is just blowing that world out, but when it comes to detailing and getting through that aircraft data, there's a level of cleansing and preparation of the data that needs to be done first, something that FLYHT does. So yes, yes, the volumes of data are very important to the airline. They're key to all kinds of operations. Yes, that's absolutely where we're moving. So in addition to doing that real-time analysis, there's the post flight with even more data.

And would does that -- could that potentially drive greater efficiencies of the airline where they say they can catch a maintenance issue. They've got to deal with right away sooner so that the flight is not delayed. And when a flight is delayed, they get penalties from all sorts of people from the airports and so forth. Does it give that kind of immediate benefit to them? Or is it just when it goes in for a service a month later or a week later, they kind of have a little bit more information on what to do? in which point does it drive efficiencies and cost savings?

Yes. There are two -- I'll answer that at two points during the course of a flight. Because FLYHT is analyzing this data in real time. So forget the large volume of data collection right now, just remember that FLYHT is actually looking at the data as the plane is flying, right, second by second. And that's where you -- that's where airlines are capable -- where we're capable of programming the AFIRS unit to look for certain types of events, to look for certain error codes that are being generated by the aircraft that the airline may have to wait until the airplane lands. Traditionally, we have to wait for the airplane to land. So we're providing that analysis in real time and providing that feed to the airlines in real time. So there's that level, that real-time notification.

Sorry. And when you say real time, while they're over the Atlantic, over a SATCOM system, they're going to say, "Hey, we're getting an error thing here." And then maybe they can prepare for that maintenance when it lands? Or what would you mean by real time?

Yes, exactly as you described. So real time as in the -- something happened on the aircraft, the event was noted by the AFIRS unit via satellite, the airline was notified. That's -- yes, that's the definition of real time there. And that whole process would take between 5 and 8 seconds to get that information to the airline. The deeper analysis, the deeper look at the larger volumes of data, there are certain algorithms and certain machine learning processes that can only be run on the ground or requiring machines and models that are significantly larger and more complex than you could put into an avionics product right now. That waits until the aircraft is on the ground, and that's when the 5G capability kicks in and the large volumes of data can be pushed off for that analysis. And that would drive the efficiencies that you're talking about. Absolutely.

Got you. And on the bottom of the slide, the different U.S. networks shut down their 3G last year. And you've got your first orders now, but it seems like there are a lot of planes out there that don't have any kind of connectivity or what are they doing in the meantime between sunset and your sunrise?

Yes. So some airlines collect the data manually. And so you always have to keep that in mind. And some of them are larger airlines, right? They're not -- it's not just small or low-cost operators. There are some significant airlines around the world that collect that data manually. So what we think is -- for them, we think we absolutely have the right solution to provide the capability to do it automatically over the 5G network. Other airlines, if an aircraft move throughout different regions around the world where they do eventually hit a 2G, 3G network, even if some parts of the world where they fly or they shutdown, they can still collect the data automatically while the networks are operational in different parts of the world. So yes, it's just a matter of time before T-Mobile, Verizon, these companies start to actually finish the shutdown of all of those networks. It's not a -- it turns out that it's not an overnight across every Verizon cell power around the world, but the shift happens. It happens over time.

Got you. And so the existing provider of this is not upgrading their systems to 5G and there aren't any competitors you're aware of that are doing this sort of a system.

That's correct. So the competition that has the existing product that is the de-facto product out there that provide this functionality over 2G, 3G and sometimes over LTE, is not, we believe they're absolutely not pursuing this to the 5G level.

All right.

Yes. The second of the macro catalyst was this kind of continuation of what we call actionable intelligence. And Martin and I were talking about that a little bit. We bled a little bit into this slide. If you look at the airborne side here, it gets a little bit technical, so maybe if there are some questions afterwards, I will gladly go into it, but I will just identify the airborne components there because they're important. And the AFIRS Edge, the new product represents a significant expansion of what we could do. There is, of course, the what's called the wireless QAR capability, which is the recording of that data and the transmission on the ground. People may have heard a thing called EFBs, they're electronic flight bags. And if you haven't heard of that, you've definitely heard of this. Airlines buying ridiculous numbers of iPads for their light crew. And those iPads go onto the aircraft. You hear airlines buying 11,000 iPads or 14,000 iPads and those go onto the flight deck. But unless they are connected to something, they don't have access to the data from the aircraft and the AFIRS Edge provides not to what's called the AID aircraft into this device. It's very important to be able to push that information. So all the applications, if you think of an iPad on the flight deck, well, it needs to know things about the plan to provide guidance to the flight crew throughout the course of the flight. It doesn't come from the avionics. It comes from -- it doesn't come from the avionics that are native to the aircraft. It comes to a product like the Edge. ACARS over IP is simply us leveraging the easy IP connection of the aircraft when the aircraft is on the ground, using 5G to move older data from older systems onboard the aircraft. There are some aircraft that are going to maintain those systems and they need ways to move the data more efficiently off the aircraft, and we can provide that. The ADL -- ADL stands for airborne data loading. That's not the important part of that bullet here. The Edge provides something called the container for third parties to run their software on our product. And you would be surprised how many companies think they have great ideas and have software that they want to run in the airplane, but they don't have avionics. They don't have anywhere to run it. Well, we've actually incorporated the ability to containerize and run third-party applications, an airborne data loader is a great example of that. FLYHT uses Amazon web services for both our enterprise ground-based systems and for components on the Edge. And what that does is it lets us act, have the Edge act as a module or a node in our AWS infrastructure. That's what the Edge server icon represents. And it's an important -- it's important because what it does is it allows FLYHT to easily manage and maintain the Edge software and product. I've talked about SATCOM but flight to our AFIRS 220 and 228 have always used the Iridium SATCOM network. We'll absolutely be continuing with Iridium with the Edge, but we're not limited to it. We can have an Ethernet connection off the Edge and incorporate any other SATCOM network onboard the aircraft to be our means of the aircraft.

Are you able to hook up with StarLink since StarLink is the one most people are familiar with?

Yes. Absolutely -- we haven't but if there's an Ethernet connection, and I just -- I cannot believe there wouldn't be to the radio to the modem that is incorporated into a Starlink system, absolutely, we would be able to do that. Other players in aviation, you might have heard of Viasat, Inmarsat, those are companies that we're more likely to deal with. But yes, you can't count deal on outer, right? I mean you guys are going to -- yes, he's going to be there. ACMs, ELA aircraft conditioning monitor turning system, that's just our -- again, our cable stakes, the analysis of real-time data. People will also, though, be very familiar with cybersecurity concerns that airlines have and the risk that can be posed or can be felt by an airline if they start to deal with systems that are not built with security in mind. The AFIRS Edge from day one has had security in mind. We worked closely with AWS to make sure that we are following the proper standards and that we are building this product with cybersecurity considerations in place. FLYHT has a director of security. It's a position we created a few years ago here. We take security very important. We -- it's not something that you can add after, in fact the products need to be developed with it in mind. On the ground side, that is, again, table stakes for a flight, the automated data distribution. That is just the moving of the data once it lands or gets to the ground, device management, actionable intelligence and the cellular services I've talked about in various ways. This environmental services. This is very exciting for FLYHT. So I talked about how FLYHT has always been generating, what's called ABOs aircraft-based observations. Sending that data to different weather agencies around the world. And the weather agencies around the world are groups like NOAA, like U.K. Met, like the Bureau of Metrology in Australia, the Chinese Meteorological society -- Agency. What you recognize about those is that they are heavily government related. They're government funded, and they have money and they recognize the value of aircraft-based observations. when an aircraft takes off and when an aircraft descends for landing from the ground up until their cruising altitude, they are simulating the path that a weather balloon would take as it ascends and descends. We gather that information and we married it up with the relative humidity, which takes our aircraft-based observations from a value of 1 to a value of 6 or 7 because relative humidity is not natively captured off of an aircraft. There's no aircraft at least Boeing or Airbus or Embraer that has relative humidity capability, but it is the most important value for all of those weather agencies. So FLYHT has the ability to put these weather sensors onboard the aircraft, generate that relative humidity, send it down to the ground in real time. And these observations are captured throughout the ascend of the aircraft, right? So they're not taken once or twice, they're taking 50, 70, 80 times from takeoff to [ crew. ] They're taken throughout the [ crews ] of the flight as well. So this provides weather information to those agencies that is second to none. Not only that, there's always more. You've heard of contrail. Everybody I think is familiar Contrail that are generated when aircraft fly through a certain type of air mass or certain characteristics. It's being understood now, and there's more research that is going on, but it's going to fall very much, it's going to demonstrate very clearly in the next few years that contrails have a significant negative impact to global warming. So not only are the engines of the aircraft the aircraft using producing gases and such and things that are negative, bad for the environment and bad for -- contribute to global warming. Contrails contribute to global warming. And by taking these aircraft-based observations and combining it with the relative humidity information, there are companies that can determined the air masses where contrails are likely to be formed, and we can provide that information then to flight planning applications or air traffic control systems and have aircraft avoid those areas. So it may seem strange, but actually have aircraft deviate left to right or vertically up or down to avoid areas where contrails are being formed or they're likely to be formed. It's very important. And they could be -- is that contrail contribute up to half of aviation's climate -- negative climate effect. Again, FLYHT is in a very unique position. We're in a unique position to be able to provide that information to those agencies and to the companies that can generate those models.

Could you just -- just briefly, how does the business model work for this? Is it didn't get attached to an AFIRS Edge unit. So you put in an Edge unit and then you attach a sensor to the outside of the plane that measures the relative humidity and then you track it and then over the SATCOM you send it to the weather agencies and the airlines where they can use that data. And the weather agencies pay you for that data, pay the airlines? How does that work?

Yes. So your description, Martin, of how the data is collected is exactly right. The -- on the left side at the bottom here, that is the only part of the WVSS that sits in the air stream. So it's a little air and take. The air goes into that through a laser, we determine the relative humidity onboard the aircraft that is sent to the AFIRS Edge. The AFIRS Edge combines that with other aircraft parameters generating a weather report, the weather report is transmitted by a satellite down to the ground, where we format it slightly differently and push it off to the weather agencies, and they're the ones that ingest the data and do something with it.

All right. And they pay you, you sign a contract with the weather agencies where they pay to get this information?

Absolutely. They are the ones that are looking for it. In the past, flight struggled a little bit. We originally thought, if you roll back 8 years ago, we originally thought the airlines will be the largest consumer of this data, and they would want the weather data for their own purposes. It's not the case. The largest consumer of this information of this weather data are the weather agencies that can consume it into their large supercomputers and generate the models for the forecasting around the world. That's where we found -- yes, that's where we found the home for this information.

And like you're having to install this, it takes equipment. You're putting this sensor on the outside of the plane, which is I'm sure the airlines are -- like are the airlines, is there a revenue split on this? Or what incentivizes the airlines to get this additional equipment installed on their plane?

Yes. FLYHT isn't looking directly at revenue splitting. Sometimes the weather agencies are willing to compensate the airline for carrying the aircraft or carrying the equipment on board. But the easiest way to recognize the value for the airline is that the weather agencies when they're contributing to or fully responsible for the cost of the Edge onboard the aircraft, you end up with an Edge and a SATCOM system on board an aircraft at no cost to the airline beyond the installation and the maintenance to look after it. And then the airline can use that Edge in whatever way they see fit. By collecting and transmitting the weather data, you're not avoiding or stopping any of the other services from being done, and that's a huge advantage to the airline. Think of airline with 50 airplanes and the weather agency paying for 50 Edges and 50 SATCOM units, you can see how valuable that is to the airline.

So the airline kind of gets a free ride on the equipment and then they get a free ride. You're installing this and the weather agency is putting the bill for it. They get the kind of equipment for free and then they get the other benefits that equipment provides.

We're working on this model. Yes, we're moving towards it. It's always a negotiation. And there's three parties, right? There's the airline, there's the weather agency, and there's FLYHT. So it's not -- it's maybe not quite as simple or straightforward as that. But yes, that's the value to the airline is there through multiple ways. Yes.

Got you. Okay. All right.

We talk often about the addressable market, and this is really key to where FLYHT -- where we're going over the next few years here. We see an addressable market of 25,000 aircraft right now. And a lot of these aircraft -- a majority of these aircraft have existing systems that are going to go dark when the various networks around the world shut down.

And these -- is this specifically for the AFIRS Edge that you see at 25,000 aircraft opportunity?

Yes. We're -- this is tough. The AFIRS 228 is still -- the AFIRS Edge is not a replacement to the AFIRS 228. So yes, the two parts. In this context, this is an addressable market for the AFIRS Edge, but it doesn't preclude us from selling -- continuing to sell the AFIRS 228 with different set of features in parallel with the Edge. But yes, 25,000 aircraft AFIRS Edge addressable market here. And that would represent the $750 million hardware and a $3 billion lifetime SaaS opportunity. And I got to explain the $3 billion lifetime SaaS. That's if we look at the 20-year lifespan of the product onboard the aircraft. And we have AFIRS units that are coming up on 20 years, 15, 16 years, once you put them on the plane, they stay on the plane. And then like a $6,000 annual SaaS revenue coming off those aircraft. But if -- just for purposes of demonstration, if we expect it to win 20% over the course of 5 years. We would be looking at $150 million in hardware and $600 million in lifetime SaaS opportunities. And on the weather side -- just straight on the weather side, there are 5 main meteorological agencies around the world. We're working with U.K. Met., U.K. Met has made it clear that -- they press released last year that they plan to buy the WVSS and to incorporate that the data collected from the WVSS into their models. We see a significant opportunity up to $3 million a year per weather agency. Again, U.K. Met being the being the first one that we expect to be able to work closely with. And with all the environmental considerations that are going on around the world, we all understand climate change and global warming. The WVSS has a genuine potential -- the WVSS are weather sensors -- sorry, the relative humidity sensor has a genuine potential to become OEM line fit. That's amazing. And so you could just look at the numbers of aircraft that are produced throughout the course of a month. And you can see large, large numbers per month per OEM.

All right.

So if we look at the potential for the Edge and weather products and SaaS opportunities, the graph on the right shows that if we had -- if we started to do 500 installs in 24 up to 1,600 in 2028 with a recurring revenue component of between $500 and $700 per month, you can see the SaaS opportunity peaking at $30 million to $42 million per year. It's significant. This is all based on 20%. It represents a 20% market share -- peaking at a 20% market share at the end of 5 years.

So on the SaaS side, you charge the airlines $700 a month to have the Edge system on and to manage that data?

Yes. It's an à la carte system, right? So an airline would be able to look at it and say, "Hey, we really like your fuel program. We really like your operational control information. We definitely want to be able to feed the data to the flight deck. And of course, we want the wireless QAR features." So they could pick 4 of those and not pick another 8 or 10 that we offer. Some airlines will pick all of it. Some will pick 1 or 2.

Got you.

These numbers represent what we think is a reasonable average of what we will expect.

All right. What is the initial -- do you just sell it like if you sign up for like a cell phone plan, give us 50 -- $80 a month and you get a free phone with it? Does it work like that? Or do they have to sort of bring your own device thing where you have to pay for the upfront hardware as well?

Well, yes, that's a great question for the sales guys because they're always wheeling and dealing as they come up with these. But no, we sell the hardware. We make a decent margin on the hardware between 30% and 40%. And from there, we go with whatever the SaaS opportunities are, sometimes doing a little bit of custom development, but focusing more and more on the core products like our turn management system or our fuel program or the wireless QAR functionality.

And roughly, what is the upfront cost for an airline on one of these, just so you have a sort of order of magnitude...