Structural Monitoring Systems Plc (RJP.F) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. Thank you for attending the Annual General Meeting of Structural Monitoring Systems this morning. My name is Sam Wright, and I'll be Chairing today's meeting. It's now 9:00 a.m. Australian Western Standard Time and a quorum being present, I declare the AGM open. This meeting is being recorded and a recording will be made available on the company's website in due course. Before we proceed, I'd like to thank Computershare for land, the company to use their boardroom facilities for today's meeting. I'd also like to acknowledge and apologize to shareholders for the timing of this AGM being held so close to the Christmas period. It was the Board's preference to hold the meeting earlier, ideally in early. However, due to timing considerations outside the company's control, this was not possible. We appreciate your understanding and your attendance here today. Joining me today are my fellow Board members. Mr. Brian Will, who is attending virtually from Alberta in Canada. Mr. Anthony Faillace, who is attending virtual League from Houston in Texas. Mr. Haire Bocken Sands his apologies. It's currently 2:00 a.m. in Amsterdam. Joining me here in person is Mr. Neville Bassetts, who has recently been appointed Nonexecutive Chairman effective from the end of this AGM. Also present is the company's CFO, Mr. Gary Elwell; and Head of Legal, Mr. Terry Walsh. I'm at my fellow directors, I extend a very warm welcome to all shareholders. attending today's ATM. Also attending via Zoom are representatives of the company's auditors, Gerald Alderman, being Hemman and also in person is client. The Chief Executive Officer of the company's wholly own subsidiary Anadi Electronics; Mr. Rick Freeman is attending virtually from Kalana. You see on the screen there, Mr. Freeman will shortly provide shareholders with an operational update covering each of the company's 3 business segments and outline the strategic direction looking into calendar year 2026 and beyond. Following his update, shareholders will have the opportunity to participate in a Q&A session. Before moving to the formal business of the meeting, there are a number of procedural matters I'd like to bring to your attention. As explained in the Notice of Meeting, holders of CHESS Depository Interest, or CDIs are entitled to attend and speak at the meeting but are not entitled to vote personally. In order for votes to be cast on their behalf, CDI holders must have completed, signed and returned the CDI voting instruction form, enabling chest depository nominees to vote the underlying shares on their behalf. Persons entitled to vote today are CDI holders, representatives and attorneys of CDI holders and proxy holders who have lodged a valid proxy form with Computershare prior to the revenue. CDI holders who selected Box B and appointed themselves or a proxy will be able to vote the live poll. For those attendees, a representative will collect your completed voting paper at the appropriate time during the meeting. I will assume that shareholders have read the Notice of Meeting that has been circulated and therefore, with the consent of the meeting, I do not propose to read the notice in full. Before each resolution is forming puts, we'll show the proxy votes on the screen a bit on right now. Where applicable, the Chairman's proxy votes will be cast in favor of each resolution. With those procedural matters addressed, we'll now move to the formal business of the AGM. The first item of business is to receive and consider the company's annual financial report for the financial year ended June 30, 2025, together with the directors' declaration, directors' report, remuneration report and the auditor's report. Does anyone wish to raise any questions or comments regarding the financial statements or the conduct of the audit by the company's audits? Okay. Moving to the resolutions. The first resolution is Resolution 1, which is the reappointment of the auditors. The proxy votes received are displayed on the screen. There are any questions related to this? Okay. Resolution 2 is the reappointment of Directors, Sam Wright, myself. Again, the property votes are on the screen there are any questions related to this? Resolution 3 is the reappointment of Anthony Faillace as a director. Again, the proxy votes are on the screen. Are there any questions? Resolution 4 is the ratification of CDIs and placement options issued under replacement. Are there any questions related to this? Okay. Resolution 5 is the approval of the adoption of the employee share scheme of 2025. Are there any questions? Okay. Resolution 6 is the directors' general authority to allot shares under the U.K. Companies Act. Again, the lots are on the screen there. Any questions on the resolution? Resolution 7 is the additional placement capacity. This is the additional 10% under the neural 7.1. Are there any questions on this resolution? Okay. And the Resolution 8 is the final resolution, which is the general disapplication of preemption rights under the U.K. company's act. Are there any questions on this one? Okay. So ladies and gentlemen, that concludes the business of the meeting. We'll now adjourn briefly, while Catlin from Computershare conducts the poll on all resolutions to be considered today. If you have already voted by proxy prior to the meeting, you do not need to complete the voting card as your vote has already been recorded. For those who tick Box B in the CDI voting instruction form, a representative will now collect your completed voting papers. When you're finished filling in your running card, please hold it in the for collection. I declare the poll closed. The shares will independently collect and verify the votes and the final results of the poll will be released to the stock exchange later today. Thank you for all attending the AGM. On behalf of the Board, I'd like to thank all CDI holders for their continued support of the company. Again, I'd like to thank Computershare for hosting us today and thank shareholders for their flexibility in attending the AGM schedule so close to the Christmas period. That concludes the formal business of the meeting, and I now declare the meeting closed. I'll now pass over to the company's CEO, Mr. Rick Freeman, who will provide an operational update, followed by questions you may have in relation to general business.

Good morning, everyone. Okay. Good. All right. I'm just going to jump into this, and I'll get through. I believe there's a lot of questions that I've already answered in this presentation that came from shareholders. So if I think that they're not answered. I will certainly try to address them in the questions that I received. So I'm not going to go too much into my past experience. All I will tell you is that I'm just -- I had been at AEM for a little less than 4 months now. So I'm still new and getting used to it and understanding the business and the direction where we want to go for the benefit of the shareholders. So let me just first say that I was attracted to come to AEM or this group company SMN because of basically the people and the products and the potential this company has. So I'm excited to be here, and the management team is really solid, and I appreciate them and I appreciate the Board so far, and I'm looking forward to taking this business to the next level. I'll go to the -- let me put a presentation mode, so it's better here. And -- let me go to the next slide here. So what you're looking at here is that at the end of the first half of fiscal year 2026, the sales are up 31% versus the first half of the year of FY '25, which is positive. And then the cash flow and EBITDA are much improved when you compare it to the first half of the year of FY '25. So the trend continues. I think we're going to have 4 quarters of solid performance. When you look at the group adjusted EBITDA on the top right side, you can see that the EBITDA is looking very positive. And then when you look at the bottom left-hand corner, you can see that sales are expected to around AUD 32 million. So we are looking pretty good. When you look at fiscal year '24 compared to fiscal year '25, you can see that the avionics business has grown quite a bit as we reduce the amount of contract manufacturing. And then when you compare fiscal year '25 to the fiscal year '26 estimate, you can see that the avionics business continues to grow. The contract manufacturing is shrinking, and then you're going to see some of the CBM sales that is approximately $3 million in fiscal year 2026 if everything goes as planned. On the bottom right, you can see that the gross margins are positive for fiscal year estimate year-end compared to the previous years. Moving on to the 5-year plan and some of the details that I'm sharing with you here. I'm going to start with the avionics business. And -- the avionic strategy is to be the recognized leader in the special mission products and service with 20% year-over-year sales growth driven by customer-focused products new product introductions and driving success. When you look at the left-hand side, I think this addresses some of the questions for where the Avionics business is going. As you know that we have the firefighting radio, which is the MTP 136 radio, that market potential is about 6,000 for radios. And where we're at right now is we're right around about 600 radios so far. So in a little less than 2 years, we've captured 10% in the market. We think if everything goes well, that we should be somewhere around 15% of the market share by the end of fiscal year 2026. And then you can see right below that, we're releasing the MTP 138 radio in February of this coming year. The market potential is 500-plus radios is probably higher than that. And then below that, you can see we're also releasing a new product. We call it product X, so we don't share too much information that we believe is about 1,600-plus radios in that market that we think we can capture. And then following that, we've got another product new product wide, which has a very large market share as well. So we are investing in 2 product developments right now that are very significant. And we're pretty excited about this product and bringing these products to market. When you look at the Avionics business development table there, you can see that what we want to do is drive long-term sales growth by doing various things and 1 of them is win OEM business. And I don't know how familiar you are with the avionics business, but we are basically our new firefighting radio, the MTP136 is a radio that we are making offerable and taking market share by taking it in the aftermarket, meaning the operators that operate the aircraft, we're convincing them to actually retrofit the radios that they receive from the OEM aircraft manufacturer and replacing it with ours. What we want to do is we want to basically win this OEM business so that we can guarantee that we're going to be on every new aircraft. And it really does a lot of benefits for us. And it moves us into a significant player on that market. because we're being installed at the OEM level, but it gives us consistent year-over-year sales growth. So we have 3 customers that we are currently in the process to potentially gain the OEM business. And 1 of those OEMs is already showing our product in their new aircraft. And so we're in a pretty good position with them. We've just released at the end of November, our rough order of magnitude cost for our new product. And so it's looking pretty strong there. And then the next bullet down or the next line down is expand our product offering to the special mission market. This is what you see on the left-hand side. And then below that, we want to develop the market with improvements in technologies to the existing products so that we can drive new business and retrofits out there in the market. And then followed by that is increasing our aftermarket sales and support business, which is really the aftermarket repair of our products. And some of the customers that we do contract manufacturing for. And we have already, in the last couple of months, significantly increased the prices that we're charging for our repairs. And this is adding about $0.5 million of cash to the bottom line as we take the business from a very, very low margin business to a business that is generating 60% gross margins. And it's a very nice little piece of the business to support our day-to-day activities. And then we also want to grow the business through acquisitions, and we've looked at a couple of those, and we continue to look for new opportunities to grow the business through acquisitions. And then the last item there is increase our European and South America and Astro Asian sales, which are really, really low. So we are going to hit the ground running in January, working on driving long-term sales growth through our commercial activities and our support activities and our business development and new product introduction activities. So that's kind of a snapshot of where we are with the avionics activities. Moving on to the contract manufacturing. Support AEM's growth financially and ensure that we have the best-in-class manufacturing processes, expertise and quality. Plan was to -- recently, the plan was to exit the contract manufacturing business because the margins are low, and we wanted to focus on our AEM products. We have notified our customers that our contract manufacturing customers that we wanted to reduce, stop doing contract manufacturing. We've decided to change that for various reasons. And basically, 1 is that we have the capacity to do this work, and it will not interfere with our AEM avionics business. And then this business, contract manufacturing covers our new product introduction and investments and our overhead costs. And the contract manufacturing provides a buffer for challenges in our other business segments. So I have been talking to Canyon Aero Connect and meeting with them and they fit up to our facility last week. Also I've been meeting with SkyTrak 1 of the other major contract manufacturers that we do business with and I'm approaching or we're approaching some other contract manufacturers. So what we're doing differently than when we -- before we decided to exit contract manufacturing is that we have basically set the criteria that we're not going to make anything less than 30% gross margins on the contract manufacturing business. And with plus 30% gross margins, we should be making money day in, day out on the contract manufacturing. And so that's 1 of our moves that we're doing on the contract manufacturing side. So it's 1 of our levers, just like the Avionics business to actually drive long-term sales growth and at the profit margins that the shareholders would expect to see. Moving on to the CBM business. The goal is to be the recognized leader in structural health monitoring for safety of flight and reduced operating -- operations cost. The targeted customers, I know that the shareholders have seen a lot of opportunities. But right now, we're focusing primarily on the Boeing app pressure bulkhead application and a new application for Airbus on the A320 aircraft, which is called FRAME 16. So above the table there, I think a comment that what we're really doing is transitioning the CDM business from a technically feasible business to a commercially viable business. So right now, I know that shareholders have been very, very patient as we try to grow this business, it's been challenging. I know that. And really, what we need to do is make this commercially viable as our very first step. And so that's what we're doing. And I'm going to make a couple of comments here is that I attend the Boeing meetings every 2 weeks for the most part. I've met with -- discussions with the Delta Airlines people. And if I have to tell you the main challenge that we have is that with Boeing having significant quality issues stemming from the visibility of the 737 MAX crashes and then challenges between them and the FAA and the FAA oversight. The way that the Delta engineering team explained to me is that everybody is very, very cautious about implementing a new technology based on not doing visual inspections. So we're working through that. And really what we need to do is get the first business application behind us. And so let me tell you where we're at on this is that most of the documents are all done. And -- but they still have to be collated at the Boeing company, and then they have to be presented to the FAA. And so I'm putting pressure on Boeing to get this done. It's not easy. I mean, they have other challenges. The team just got pulled away to work on the engine that came off the aircraft on the MD11, I believe it is, for the freight carrier UPS. But I'm trying to put pressure on them. I know that Delta is trying to put pressure on them. But they're accepting the pressure, but they don't want to pressure the technical teams too much because they don't want to make errors by rushing the process to get this to market. So I'm anticipating that we will have a better idea by the end of January on where we're at. And then we're going to have to be discussing with the FAA on taking the Boeing documents. And so we can get to the point where we can implement the service bulletin so that we can get this product in the field and being serviced. So the first step is just Boeing getting this over to the FAA. And then followed by that, that the FAA has to basically approve the documentation. And then from there, we'll move to the commercial actions, which is to due to the invoicing for the Delta Airlines business, which is about $3 million. And then we will move to have the commercial agreements with the airlines, starting with United Airlines first and then the other ones. So I think it should go very quickly after we get this first 1 done. But we really need to get those first steps done before we can move on. I want to talk a little bit about the Airbus 320 frame 16. So 1 of the questions that we received was, "are we doing preliminary work to prove out the different cases with the different opportunities we have", not only with Airbus, but another 1 that we have with Boeing and then some other operators. But what I'm learning here and want to communicate in case you don't know is that these new applications for CBM are very, very difficult and in some cases, impossible to move forward on with LD OEMs full support. So we received -- when you look at the picture there, the kind of like the engineering drawing -- we received these parts from an operator. And I'm asking the team here working on the CBM product, hey, can we start the preliminary testing, et cetera, and get going so that when Airbus decides to move forward with this project that we will be well down the road with the technical work. And the answers that I receive from our technical team is we cannot do anything until Airbus gives us the load around these sections and what the pressure and the vibration and all the requirements this area has to basically withstand. And so like Boeing, we could put pressure on, but we need the cooperation with the OEMs in order to move these applications forward. Now on the Airbus 320, there is 3, maybe 4 operators that are complaining about the test that has to be done and the visual inspection and the rework, and so we've got airlines that they're supporting and pushing this with Airbus as well. And we believe that in the next couple of months, we'll start to see Airbus, whether or not they really have an to invest the time and energy to support this project. And right now, we're hopeful that they will. So anyways, I think that's the main point of CBM activity is at. It's not something we can go it alone for and push various organizations, either OEMs or airlines to do this. They actually have to basically open up a charge line for their own people to support these applications, and that's what we're hoping that Airbus will do like Boeing. And it's just taking a little bit of time.

Okay. So I'm going to move on to the questions. And just a minute here, I'm going to pull up a couple of questions. So that we stop sharing here. Okay. So let's see. So has the company been looking at expanding the CDM technology to other industries and what industries. I think the short answer is, right now, the answer is no. We're focusing primarily just on the aerospace industry. Why is that? Well, the cost of the applications of the CVM activity going into different industrial-type applications, it is -- the cost doesn't justify it. In other words, these products are designed for going on aircraft, and they're designed to be there for a very, very long time. But in order to make pass those requirements that the team has done so well to meet is that these are very expensive applications and you get this from doing critical mission type application. So right now, we're not focusing on that. We did participate in a military application were shown up in November. So we will be pursuing the military applications. We're hoping that those type of applications will have a shorter turnaround time than what we see on these commercial aircraft. And then 1 of the other questions is that we recently -- we're trying to approach the B-52 bomber crews to see how we can get some applications on there as well. So we're working on that. Let's see. One of the other questions, are you able to provide some perspective around the significance of the AEM program to supply amplifiers to the U.S. Navy? If everything goes as well, we'll be shipping those by the end of this month. And then we do anticipate follow-on orders, but not in the near term, not in the next 6 months. So that is a positive business for us because not only are we getting some military business and getting our name out there for our different products, but we are -- we have opportunities to be meeting people that can help us out and develop other opportunities. So are we looking at bolt-on acquisitions? And the short answer is yes. We did look at an application for a structural health monitoring, but we're not planning to pursue that at this time. Why? I think the main reason is that -- it's a business that has a technically feasible application, just like we do with CDM, but they're not commercially viable but they've actually not sold anything. So -- we're going to wait and focus on our CVM activity and get some credibility there, get some business behind us, and then we'll look at other opportunities like this other 1 -- other company that's another Canadian company. Also looking at other acquisitions to the AEM business, we signed a letter of intent to look at a business. And at the end of the day, we started talking to them about what we do offer for their business, they decided that they were going to go it alone at this point in time. And that's because what we were offering this company was a fair amount, but the company was not making money like they anticipated, and they were losing market share. So I've never been in a company before where we run out of money. And I will take every step to make sure that this company is a profitable quarter or any quarter out. And when we do that, we'll generate the cash and have the cash to look at possible acquisitions. But the real goal ultimately is that we want to be at '30 -- by the end of 2030, we want to be moving towards a $100 million company. That's the goal. Let's see acquisitions. I've talked about that. There were several questions on the CBM. I think I've answered most of these. I don't -- I don't have any other questions that I think I haven't answered, but I'm just thankful of the opportunity to work at AEM and turn this company around for the benefit of the shareholders and the employees and the customers as well. And I'm very confident in the outlook over the next several months and we'll be sharing more as we progress. But we anticipate to be in a positive position in the next several quarters. And that's all I have.

Thanks, Rick. We did receive a quite a number of questions regarding Ross Love and the core proceedings. You may or may not have seen an announcement that was released earlier this morning, following on from some Court orders received yesterday. Terry, would you mind just providing the...

Sure. Generally speaking, proceedings for commenced Stelo. In summary, you were seeking 2 things at first instance. One was to prevent the contract of his consultancy turn in-house from being terminated. The second thing was to have him not removed as a director. And involved in those proceedings was also a suppression order over an investigation report that was received by the company. We received a judgment yesterday and the outcome of the judgment was favorable to SMS. It meant that in general terms, what is described as Mr. Love's applications for intercity relief was dismissed. And then we were awarded because we were successful. The outcome of that is the contract -- house contract has now been terminated. Mr. Love has been removed as a Director. That is not the end of it. Proceedings are still on foot. These are injunction proceedings. And so proceedings are still not in very general terms. It's complex. So want to go into too much detail, and it's also sensitive. So I don't want to get into a situation where I could be saying something which could be contrary to what the other side of the leases. But in general, those proceedings are still continuing. The best thing for people who are interested in the most fair way for people who are interested to get on top of it to have a look at the judgment that was delivered yesterday, and that will be available on the Federal Court website.

Does that go into detail what matter is all about?

Yes, it's 50 pages long. So I don't know if you're familiar with legal cases. It will be a pretty tough read, if you're not a lawyer. The first 25 pages will be dealing with cases, legislation and so on and so forth. So I'm just very low when proceedings are still continuing to provide my version of being so what could be contested I think -- so I think the best thing is to just basically do the judgment in the future. But we don't want to reading all those legal terms, but it would be nice to have some idea as to what the matter is all about in simplistic terms. And then -- Well, a couple of announcements Well, So... Well, there was an announcement on the commencement of the proceedings, and I think there was an announcement Yes, there was some background in Yes. We're pretty low, to be honest with you, to set out -- these proceedings are still being contested. And we're in a difficult situation because when legal proceeding is being contested, there's 1 size version of events against the other side. So the reality is if I come and say version that Mr. Love disagrees with, and we just end up performance speeds. So the reality is the fairest way to have a look at it and dealt judgment. And I'm not trying to be evasive. I'm just trying not to me the situation was.

Post the course, what they have released website.

Yes. Well, look, I'll have to think about that. But the reality is, if it's not already up, it will be up in the next couple of times on the Fineco website. And I'll consider you request. But like I say, is love to China situation we're trying to move on from and move forward look positive if we, as a company, rigs come -- I understand saying just saying that that's where we were just posting in full on your website will be the use for shareholders. No, I restate -- thank you -- are there any questions company. Is that sales? So you can direct that straight to Rick, there's microphones. Rick, did you catch that?

Yes, that's $100 million in sales.

Okay -- are there any other questions from anyone? Any comments?

Yes. In respect to the fact that we seem to be have the whole company's futures tied to 1 company. Are we looking at to put pressure on bombing by going and seeking players like China who's helping their own fleet of aircraft internally so that you don't have to -- you don't have the situation where if they keep on an free, we're in this situation being for year on year on year, maybe put pro over to China and see what they wanted to do to put pressure so that when the develop their craft they implement these fraud pressure on those OEM companies into the aerospace situation. So we don't seem to be putting any pressure on the people that ran in the fleet. We don't have a plan B.

Yes. So the -- that's a good comment, and it's valid. So we have to go where the actual market will actually take this. But in the case of Airbus, it's a known problem on the A320. The first step that Airbus had to do was they had to acknowledge that they've got a profitable. And so these OEMs are very comfortable doing that a lot of times. But now the situation is becoming much more clear and established and they know what causes a burden on the actual operator. So the thing is that Boeing and Airbus and whether or not it's a company airline in China, aircraft manufacturer in China, Embraer in Brazil, other applications, they first have to identify a problem to actually solve this issue with. And that's why I'm kind of interested when you look at Imagine that aircraft would have the application in multiple spaces on the aircraft. The best candidate for something like that is the B-52 bomber, which was something like 70 years old. So they're not planning on replacing things anytime soon there. And that's why when we're looking at something on the military side, we're really in the rest of these aircraft because in the United States, they're going to keep flying in these and they're going to want to have this monitoring on the aircraft. So typically, when you're working with military type customers, they don't have the same requirements for lack of better words, commercial public flying safety that they can move actually a lot faster. And it's the same with any different products that they decided to put on aircraft. A lot of times, they're the first to try the latest technologies because they don't have to go to the same loops of aircraft that are flying in the public around. So there's opportunities out there we're working them for sure. To be honest, China is not on the radar yet. It's usually for aircraft that actually have some service and in-flight problems that are associated with structural cracks -- and that's what we have to focus on. So we're pursuing those type of opportunities, but we really want to get this 1 first application, either with Boeing or Airbus under our belt so that not only nobody hesitates to say that this technology is technically feasible. The question is, can we make that transition to commercial viability -- and we will do that with Boeing probably first, and then we will work it with Airbus at the same time, and then we can go to other airframe manufacturers and develop this opportunity with that. Can I ask -- I thought the commercial viability of this product was the fact that it was going to replace the maintenance loan. And so therefore, that was the commercial liability or minus what you're seeing now is unless there's some sort of structure to identify structural problem, then the replacement of the maintenance burden doesn't make this product convert -- is that what you say? Well, no, that's not what I'd say because on the application of the '26, it does save them time to actually inspection. But that is the basis of this whole product. But there is such a high volume of those aircraft that will need that inspection that is something that they have to do. So I guess the airframe manufacturers are not going to approve an application for basically structural health monitoring if they don't actually have a problem that -- they're not going to work on a problem that doesn't exist. So there is going to be a lot of applications out there, but we're going to just need to work those on a case-by-case basis until the customers start coming to us -- and I think they will because nobody wanted to be the first to actually make this commercially viable on a high-risk area, and that's what we're doing. So we're getting there. We're just not there yet. So can I ask Ben again is that if you went to China, who wants to infiltrate the aerospace system, this doesn't give the this doesn't give the airplanes that they don't have the maintenance regime issue that the other companies have, that doesn't give them a commercial advantage. And then it doesn't give them but doesn't give to put that into their planes and fly it and footprint so that you can put pressure on these people are dragging your feet. So the cost savings, as you probably know better than I because I've only been here less than 4 months, but the cost savings of the app pressure bulk at for Delta Airlines is do you have that aircraft on service for 3 days while you're actually doing the inspection. So the cost savings is basically, you can just check that very, very quickly with the tool. And then you can basically be back in right away or you're never even down to be honest. So that's where the application is, is that you're actually saving the airlines maintenance time to actually verify that their aircraft is still safer flat. Yes. And I also, if you did that over a fleet of aircraft, you would actually need less aircraft because of the fact that you don't have the downturn. So I'm just saying that it seems to me that we're just putting everything to this 1 caricalcetrite OEM that's got a huge problem that is low detune -- and it doesn't seem to me we have a mechanism to try and push them into the direction that we want.

Yes. It's very difficult to push them an infection that we want them to go. But what I would tell you is that the aircraft, there's the number of people flying worldwide is increasing all the time. And it's obviously less costly for them to fly their aircraft that they've already paid off, so to speak, than having new ones. So the fleet is going to be growing. The aging fleet is going to be growing significantly. It's just a question of a matter of where they have the biggest pain that is causing the airlines to lose revenue for not flying their aircraft.

Rick, is there any testing that we've done to AV application that's transferable to the Airbus applications or you going to have uncharted territory in that respect?

No. So -- and that's 1 of the things all the applications are unique. So our tool is actually what we've developed under CVM does not be redesigned for any new application. But we do have to verify that, that product under its specific loans and applications, we are going to be able to figure out how we set the parts that actually stay on the aircraft and monitor the crack. So every application is different, just slightly because you have to understand the engineering, the stress environment that the aircraft is on -- and on the case of the -- on the airframe, we actually have to simulate the stress that, that's under. We're having -- putting it under a very, very large press and hammer it down over a long period of time, several days or weeks, I don't know yet in order to verify that we will be able to duplicate their crack in-house for the application for the A320.

Great. Aircraft over indications that have been pursued in the past looked at in the past and researched by SMN that seem to have dropped off the radar as we've been single pursuit of the pressure bulk it. Are they still viable options, things like rotary aircraft, the central wing box, things like that on the 737 to be looked at in the future? Or are they just line?

No. Absolutely, they are. And that's a very good point. But what I'm trying to do is for the shareholders, I want to show this company is moving forward and progressing quarter year after year. And I've seen some of the stuff that's been on the website about these opportunities, but there are opportunities and no one's agreed to pursue them yet. So I really wanted to focus on the 2 we have right now. We do have another application with Boeing that's out there. We do have a second application with Airbus. But I just want to keep it focused on the ones that we're going to see progressing during the next 12 months and not give you kind of a bunch of different opportunities that just aren't maturing quite to the point that I thought would be interesting to share with the organ. But clearly, there's a lot of opportunities, including rotorcraft, business jets, et cetera.

So Rick, any staff, we got working on this on the different technologies because if we're in kind of like writing mode that we're still employing people for that? Or are we looking at future technologies that they're working on the moment. Yes. So okay. But can you repeat the question just real quickly, just so I can make sure I understood I'm just aware of previous information that come through from this. They've got new factories or new offices here in just a people actually working on the CVM or other technologies, while we're waiting for decisions and moving forward.

Okay. So I understand that while we're waiting for moving forward, what are we working on? So on the chart that I showed you for the avionics manufacturing, you see that the -- I think it was the third 1 down, which is product-wise, we're working on. So this 1 is all the new developments admit are pretty exciting. And let me first digress pro set when I left my last company, I was very, very impressed with my engineering team there. And as you saw that we've taken the company in a consistent money loser, which isn't the situation that our company today is in, but we've taken it and we doubled the sales. And it's a positive experience. The team and the engineering team at AEM is 1 of the -- probably the reasons why it's the most attractive to this company. So when you look at the -- 1 of the applications Avionics products. We just are cleared and developing this brand-new product that's roughly an $8 million investment. And then we have another smaller investment that's also filling the pipeline. So -- what we're trying to do is we validate our concepts with our customers and clearly understand that this is what we're looking for. And now we're delivering it. And that's why the finer fighting radio was so successful so far in a very short period of time. And 1 of the questions that I didn't answer is that, as you know, at the June, July last year, we delivered 50 radios to CAL FIRE. They do have 95 more radios to implement. So we don't know if they're going to do all of them in fiscal year '26 ending in June. I suspect that they'll probably do about 50 of them again as their budgets permit. But we've got a lot of opportunities for this firefighting radio and the new products coming. I really do believe that as we work our different levers otic being 1 of them that we are actually going to be the disruptor and taking over market share of these new products and Canyon Aerospace or Canyon Aero Connect that we're building components for which are used on their radios. They are a $100 million U.S. company today. And they know that -- we don't know if they're going to continue fully on with us because they do see as a competitor, but that is just 1 of the customers that are going to be competitors in the future. that we plan on taking market share away from them. So we're doing that on the CBM products. We're actually trying to get this falling across the finish line. I've been putting pressure on the management at Boeing about the engineering team. I've been putting pressure on with Delta Airlines that get this. Everybody wants this across the finish line, but they don't want it. They don't want to rush it the theoretical expense of putting the quality at risk. So we're doing it there. And then the contract manufacturing, when we're going to keep doing that just so that we can load our shop keep people busy and increase the margins there. And then same thing with the aftermarket repair business where we will almost probably do -- if we go as we expect we'll do not much more, but it's -- we're taking it from a $1 million repair business at 60% gross margin, a $2 million business at 60% gross margin. So -- we're moving forward on working all the levers we have, and we've got them with the 3 main activities, which is the avionics, the CBM and the contract benefactor.

So just in summary, Rick and thanks for your time again. The 3 remaining documents that Boeing need to sign that we've mentioned in previous they're still outstanding all 3 of those? I think 1 was stress testing? And is there any -- and obviously, you're putting a lot of pressure on Boeing delta to push forward they've communicated that it is progressing. Can you just talk about that a little bit?

Yes. So it's kind of a -- so what I believe we've talked about in the past is the number of documents and groups that have to actually do their technical evaluation and -- and in the past, we said, well, I can't remember if there's 46 or 26 documents, don't go own that, but all of them were done except for 3, and 1 of them was the stress report that's going to be done. And so I think we're -- we only have 1 left. But then after that, they have to go through basically a peer review of the whole document at Boeing. And the question is, how long will that take them to do that? We're hoping that we're going to get that done in January. But as you guys are well aware, there's been so many pushouts all the time, I'm reluctant to put some dates associated by what Boeing gets done and by when. But we're moving to putting pressure on them to do that. And then we've got to get into the FDA's hands. And once the FAA has it, then we're going to see if they're going to accept it as is in penciled or they're going to require some kind of additional clarification of information and that's what we're working on right now.

Okay. Kind of cynical question with Trump in the White House because the fact that this is an ASX this could come be an issue? I mean we...

No, I don't think so. I'm not worried about that whatsoever. I mean now we have products that customers want and nobody is going to stop that. I don't see that anywhere. So no, I'm not worried about that. I would say that I was worried about what the U.S. economy was going to look like at least 6 months ago. But now the economy is looking fairly strong. My biggest concern is that we get out there and One of the things I'm asking the sales team to do is sell them. And I'm ramping up the amount of customer visits so that we can touch a lot more customers more frequently -- so when the company was in a financial difficulties, the amount of travel that was done to visit customers and build relationships and close sales was significantly reduced -- and now with our positive position, I'm asking the salespeople to be out at least 1 to 2 weeks, every month, going and pounding on the doors and working on these different opportunities that we have. So we can increase our sales. So it's more or less we just need to get out there. We need to cover all the products in our portfolio. And I believe if we do that, we'll be in a better, better position every quarter.

Okay. I think that's enough guys. Well done. Appreciate everyone coming in. Thanks again, compute here for hosting us, and thank you all for being flexible appreciate so past Christmas. And I wish you all and enjoy all till best of period and look forward to bringing some good news in the New Year. Thank you.