FIRST QUARTER
FLYHT AEROSPACE SOLUTIONS LTD.
20
23
Table of Contents | |
FLYHT Overview | 6 |
Trends and Economic Factors | 11 |
Environmental, Social and Corporate Governance | 12 |
Results of Operations | 14 |
Selected Results | 14 |
Financial Position | 15 |
Comprehensive Loss | 17 |
Other | 23 |
Auditors' Involvement | 27 |
Condensed Consolidated Interim Statements of Financial Position | 28 |
Condensed Consolidated Interim Statements of Comprehensive Loss | 29 |
Condensed Consolidated Interim Statements of Changes in Equity | 30 |
Condensed Consolidated Interim Statements of Cash Flows | 31 |
Notes to the Consolidated Financial Statements | 32 |
Corporate Information | 36 |
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COMMONLY USED FINANCIAL TERMS AND AVIATION ACRONYMS
ABOs: | Aircraft Based Observations |
ACARS: | Aircraft Communications Addressing and Reporting System |
ACMS: | Aircraft Condition and Monitoring System |
ADS-C: | Automatic Dependent Surveillance - Contract |
AID: | Aircraft Interface Device |
AFIRSTM: | Automated Flight Information Reporting System |
AHM: | Aircraft Health Monitoring |
AMDAR: | Aircraft Meteorological Data Relay |
AMOSTM: | Aircraft Maintenance and Engineering Operating System |
ANAC: | National Civil Aviation Agency of Brazil |
APU: | Auxiliary Power Unit |
BDC: | Business Development Bank of Canada |
CAAC: | Civil Aviation Administration of China |
CARES: | The Coronavirus Aid, Relief, and Economic Security Act |
CERS: | Canada Emergency Rent Subsidy |
CEWS: | Canada Emergency Wage Subsidy |
CPDLC | Controller Pilot Data Link Communications |
DAO: | Design Approval Organization |
DGAC: | Direccion General de Aeronautica Civil (Mexico's certification organization) |
EASA: | European Aviation Safety Agency |
EBITDA: | Earnings before interest, taxes, depreciation and amortization |
ECAA: | Egyptian Civil Aviation Authority |
EFB: | Electronic Flight Bag |
ERTC: | Employee Retention Tax Credit |
ESG: | Environmental, Social, Governance |
FAA: | Federal Aviation Administration |
FANS: | Future Air Navigation System |
FDR: | Flight Data Recorder |
FlightLinkTM: An Iridium Satellite Data Unit | |
GAAP: | Generally Accepted Accounting Principles |
GAMECO: | Guangzhou Aircraft Maintenance Engineering Company Limited |
HASCAP: | Highly Affected Sectors Credit Availability Program |
IATA: | International Air Transport Association |
ICAO: | International Civil Aviation Organization |
IFRS: | International Financial Reporting Standards |
MD&A: | Management Discussion and Analysis |
MRO: | Maintenance, Repair, and Overhaul |
MTBF: Mean Time Between Failures
OEM: Original Equipment Manufacturer
PAC: Panasonic Avionics Corporation
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Paycheck Protection Program
PWS: Panasonic Weather Solutions
QAR: Quick Access Recorder
QTD: Quarter-to-date
R&D: Research and Development
RPK: Revenue Passenger Kilometers
SaaS: Software as a Service
SADI: Strategic Aerospace and Defence Initiative
SAAU: State Aviation Authority of Ukraine
STC: Supplemental Type Certificate
TAMDARTM: Tropospheric Airborne Meteorological Data Reporting
TCCA: Transport Canada Civil Aviation
TCFD: Task Force on Climate Related Disclosures
WINN: Western Innovation Initiative
WVSS: Water Vapour Sensing System
YTD: Year-to-date
3- | FLYHT AEROSPACE SOLUTIONS LTD. Q1 2023 REPORT |
LETTER TO SHAREHOLDERS
We start 2023 in a strong strategic and financial position. FLYHT's transformation into a provider of Actionable Intelligence ("AI") over the past three years is enabling us to offer the aviation industry the tools and solutions it is increasingly demanding as it undergoes its own transformation.
Our pipeline of potential business continues to increase and currently stands at the highest level in company history. In addition to a tailwind from the ongoing recovery of global passenger traffic, there is sustained demand for our legacy flagship products anchored by AFIRS 228™ and surging interest in our new and innovative solutions built around our AFIRS Edge technology and SaaS solutions.
FLYHT's AFIRS 228 solution is a leading Iridium satcom solution with a proven track record and an installed base of over 4,000 aircraft. Sales of the AFIRS 228 continue to be strong and account for a significant portion of our SaaS growth of 44% during the quarter. This quarter Transport Canada awarded FLYHT a Supplemental Type Certificate ("STC") to install the AFIRS 228 on the Boeing 737 MAX-8, one of the world's most popular aircraft types, creating additional growth potential for FLYHT. Airlines can now request that their aircraft come off the factory line with Iridium satcom provisions, and our new STC allows for updates to those provisions to accommodate FLYHT's AFIRS 228.
Additionally, FLYHT continues to make progress toward the commercialization of the AFIRS Edge™, the Company's 5G-enabled Wireless Quick Access Recorder ("WQAR"). During the quarter we received DO-160 environmental testing certification, which means the AFIRS Edge is now ready for installation on commercial aircraft, and we are currently in the process of obtaining STCs for the product on multiple aircraft platforms. There will be a number of new products and services built off the AFIRS Edge infrastructure that will drive our SaaS model.
Weather is fast becoming another driver of growth for FLYHT as we leverage our solutions to address environmental imperatives for the aviation industry. FLYHT's WVSS-II water vapour sensor system, in conjunction with either an AFIRS Edge or AFIRS 228, is a significant aspect of Aircraft Based Observations ("ABOs") for both meteorologists and airlines. These observations support weather forecasting models and aviation operations including playing a key role in detecting and avoiding contrails which may be responsible for up to 50% of aviation's climate impact. In March it was gratifying to see our own Meredith Bell testify before the Subcommittee on Environment of the United States House of Representatives to discuss a collaboration with NOAA and the airlines using FLYHT's weather sensor technology.
Financially, we delivered expected results in Q1 2023, considering we had just completed two of the strongest quarters in years in the back half of 2022. Revenue decreased 5% year-over-year but would have increased when adjusting for last year's large licensing orders. Our gross margins remain robust at 57.3% and I am particularly pleased that our cash balance increased by $564,000 to $3.2 million as we collected on the large OEM order that we fulfilled last year.
FLYHT was named to the 2023 TSX Venture 50, an annual ranking of the top 50 performers on the TSX Venture Exchange. We were thrilled to be recognized as a top 50 performer amongst 1,700 TSX listed companies for superior market capitalization growth, share price appreciation and shareholder returns.
I'm truly excited about the outlook for FLYHT in 2023. I look forward to working closely with our new Chairman, Captain Mary McMillan, and the rest of our Board of Directors, including our new members Pete Large and Nancy Young. Also, I want to thank former Board members Nina Jonsson and Jack Olcott for their guidance and unwavering commitment to FLYHT.
In closing and as a telling indication of FLYHT's rising industry stature, on June 20-22, 2023, we will welcome hundreds of our industry peers from around the world to Calgary for the semi-annual AEEC/IATA Electronic Flight Bag ("EFB") Users Forum. The EFB Users Forum is a joint activity with AEEC/IATA that provides a unified forum for airlines, system integrators, hardware and software providers, regulators, and other interested parties to present and discuss topics of interest to the EFB user community.
I am proud and grateful for the level of commitment and engagement shown by our incredible team at FLYHT. I would like to thank our customers for the opportunity to continue serving them, and to thank our shareholders for their loyal support.
Yours truly,
Kent Jacobs
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MANAGEMENT DISCUSSION & ANALYSIS
This management discussion and analysis ("MD&A") is as of May 10, 2023 and should be read in conjunction with the audited annual consolidated financial statements of FLYHT Aerospace Solutions Ltd. ("FLYHT" or the "Company") as at and for the years ended December 31, 2022 and 2021 and the accompanying notes. Additional information with respect to FLYHT can be found on SEDAR at www.sedar.com. The Company has prepared its March 31, 2023 condensed consolidated interim financial statements and the notes thereto in accordance with International Financial Reporting Standards ("IFRS"), as issued by the International Accounting Standards Board ("IASB").
Non-GAAP Financial Measures
The Company reports its financial results in accordance with International Financial Reporting Standards (IFRS) or Generally Accepted Accounting Principles (GAAP). It also occasionally uses certain non-GAAP financial measures, such as working capital, non-current financial liabilities and earnings before interest, income tax, depreciation and amortization (EBITDA). FLYHT defines working capital as current assets less current liabilities. Non-current financial liabilities include the non-current portion of loans and borrowings and lease liabilities. EBITDA is defined as income for the period, before net finance costs, income tax, depreciation and amortization of assets. These non-GAAP financial measures are always clearly indicated. Working capital can be used to assess a company's liquidity, operational efficiency, and short-term financial health. Non-current financial liabilities can be used to assess the solvency and leverage of a company. EBITDA can be used to analyze and compare profitability among companies and industries, as it eliminates the effects of financing and capital expenditures. The Company believes that these non-GAAP financial measures provide investors and analysts with useful information so they can better understand the financial results and perform a better analysis of the Company's performance and profitability. Since non-GAAP financial measures do not have a standardized definition, they may differ from the non-GAAP financial measures used by other companies. The Company strongly encourages investors to review its financial statements and other publicly filed reports in their entirety and not rely on a single non-GAAP measure.
Forward-Looking Statements
This discussion and the letter to the shareholders accompanying this discussion includes certain statements that may be deemed "forward-looking statements" or "forward-looking information" that are subject to risks and uncertainty. All statements, other than statements of historical facts included in this discussion, including, without limitation, those regarding the Company's financial position, business strategy, projected costs, future plans, projected revenues, objectives of management for future operations, the Company's ability to meet any repayment obligations, the use of non-GAAP financial measures, trends in the airline industry, the global financial outlook, expanding markets, R&D of next generation products and any government assistance in financing such developments, foreign exchange rate outlooks, new revenue streams and sales projections, cost increases as related to marketing, R&D, administration expenses, litigation matters, and sales order backlog may be or include forward-looking statements. Although the Company believes the expectations expressed in such forward-looking statements are based on a number of reasonable assumptions regarding the Canadian, United States (U.S.), and global economic environments, local and foreign government policies/regulations and actions, and assumptions made based upon discussions to date with the Company's customers and advisers, such statements are not guarantees of future performance and actual results or developments may differ materially from those in the forward-looking statements.
Forward-looking information is based on the opinions and estimates of management at the date the statements are made and are founded on the basis of expectations, assumptions and hypotheses made by the Company, including, but not limited to, the following: projected costs, future plans, projected revenues, objectives of management for future operations, trends in the airline industry, the global financial outlook, including, but not limited to, the effects of the COVID-19 pandemic being experienced worldwide, expanding markets, foreign exchange rate outlooks, sales projections, cost increases and/or decreases as related to marketing, R&D, administration expenses. The forward-looking information included in this discussion and the letter to the shareholders accompanying this discussion has been prepared using assumptions (all of which are supportable and reflect the Company's planned courses of action for the next 12 months) as to the most probable set of economic conditions. Such assumptions are consistent with the purpose of the information but are not necessarily the most probable in management's judgement. Factors that could cause actual results to differ materially from those in the forward- looking statements include but are not limited to production rates, timing for product deliveries and installations, Canadian, U.S., German and foreign government activities, volatility of the aviation market for FLYHT's products and services, factors that result in significant and prolonged disruption of air travel worldwide, global military activity, market prices, availability of satellite communication, foreign exchange rates, continued availability of capital and financing, and general economic, market, or business conditions in the aviation industry, including, but not limited to, the effects of the COVID-19 pandemic being experienced worldwide, worldwide political stability or any effect those may have on the Company's customer base. Investors are cautioned that any such statements are not guarantees of future performance, and that actual results or developments may differ materially from those projected in the forward-looking statements.
Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, there can be no assurance that such expectations will prove to have been correct. The Company cannot assure investors that actual results will be consistent with any forward-looking statements; accordingly, readers should not place undue reliance on forward-looking statements. The forward-looking statements contained herein are current only as of the date of this document. The Company disclaims any intentions or obligation to update or revise any forward-looking statements or comments as a result of any new information, future event or otherwise, unless such disclosure is required by law. The forward-looking information has been provided to the readers to assist in assessing the
5- | FLYHT AEROSPACE SOLUTIONS LTD. Q1 2023 REPORT |
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FLYHT Aerospace Solutions Ltd. published this content on 10 May 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 10 May 2023 22:11:02 UTC.