— Trends in SaaS and Hardware are Leading FLYHT’s Path to Recovery —
— Recent Private Placement and Debt Repayment Enhance Financial Position –
Calgary, Alberta – August 4, 2021 – FLYHT Aerospace Solutions Ltd. (TSX-V: FLY) (OTCQX: FLYLF) (the “Company” or “FLYHT”) today reported financial results for the second quarter and six months ended June 30, 2021.
“While the COVID pandemic remains an issue around the globe and has continued to skew FLYHT’s financial performance, we are beginning to see signs of recovery in customer confidence and the aviation industry in general which we expect will lead to improvement in our results in the quarters ahead,” said Bill Tempany, Interim CEO. “The decline in revenue in the quarter, which significantly moderated from prior periods, was mostly attributable to the timing difference in license sales as some OEM deliveries have been delayed. Encouragingly, although not reflected in the second quarter numbers, we are seeing licensing revenue start to return. Our customers are certainly not back to any semblance of their 2019 levels, but the increase in SaaS revenue this quarter driven by more customer flights and flight hours over Q2 2020 is a positive sign of recovery.”
Continued Tempany, “Throughout the pandemic we have taken many steps to improve our business which we believe will lead to growth and higher returns to our shareholders as our company and industry emerge from the pandemic. We are strategically shifting from being a Satcom provider to becoming more of a SaaS provider, leveraging our roots in data and significant installed customer base of over 80 airlines around the globe. We have increased our investment in research and development, developing solutions such as AFIRS Edge, our low cost – high value data feed device, which is on track for delivery this year, with launch customers being identified for early 2022 installations. We hired industry veteran Willie Cecil to drive product direction and enhance our sales and marketing efforts. Furthermore, our successful private placement and debt retirement in July strengthen our balance sheet, and provide us with the capital to carry out our growth initiatives.”
Concluded Tempany, “Although new virus variants could always pose a challenge for the aviation industry, we are cautiously optimistic that the worst of the pandemic is behind us. As the commercial aviation industry begins its inevitable recovery, the need for airlines to reduce avoidable operating expenses and to minimize the impact on the environment of their operations is becoming a higher strategic imperative for them, and I am confident that FLYHT is positioned as a critical partner. We will remain focused on developing cutting edge solutions for our customers to help them rebuild their businesses as they emerge from the pandemic. We are excited about the year ahead for FLYHT.”
Second Quarter 2021 Financial Overview
Total revenue decreased by 4% to $2,926,122 compared to the second quarter of 2020, although the decline in revenue moderated from Q1 2021. SaaS revenue increased by 11% from Q2 2020 to $1,446,221 and Hardware revenue increased by 212% from Q2 2020 to $1,404,193. Increases in SaaS and Hardware were more than offset by declines in Licensing and Technical Services. Licensing revenue decreased 99% from Q2 2020 to $7,924 and Technical Services revenue decreased by 5% from Q2 2020 to $67,784.
Gross margin was 52% of revenue compared to 68% in the second quarter of 2020. The decrease in gross margin was due primarily to changes in the mix of revenue sources during the quarter, as Q2 2021 revenue included a larger contribution from Hardware compared to Q2 2020, which has the lowest gross margin among revenue sources, and limited revenue from Licensing, which carries the highest gross margin among revenue sources.
Operating expenses increased by 17% compared to the second quarter of 2020, largely attributable to the Company’s sharpened focus on its growth and product development efforts. A 23% decrease in Distribution expenses was offset by an increase in Administration expenses of 8% and an increase in Research and Development and certification engineering expenses of 138%.
Negative EBITDA was $980,611 compared to positive EBITDA of $153,132 in the second quarter of 2020.
Net Loss was $1,395,889 compared to a net loss of $276,515 in the second quarter of 2020.
Balance Sheet and Liquidity
FLYHT ended the quarter with cash and short-term investments of $3,079,255, a decrease from 2020’s year-end balance of $5,127,963, and slightly lower than Q1 2021’s ending cash balance of $3,871,741.
Trade and other receivables increased by 4% to $1,647,436 compared to year-end 2020, and Trade payables and accrued liabilities decreased by 10% to $1,918,856 compared to year-end 2020.
On July 21, 2021, the Company closed a non-brokered private placement, issuing 8,828,818 common shares at an issue price of $0.75 per share, resulting in proceeds to the Company of CAD$6,621,615. Directors, officers and senior employees contributed 10% of the offering total. The Company used a portion of the proceeds from the offering to repay its outstanding secured convertible debentures, including any accrued and unpaid interest, in the amount of CAD$1,806,425.
Conference Call Information
FLYHT will host a conference call to discuss its second quarter 2021 financial results on August 5, 2021 at 9:00 am MT (11:00 am ET). The conference call will include a brief presentation from FLYHT’s Interim CEO Bill Tempany and CFO Alana Forbes followed by a question and answer session. To access the conference call by phone within Canada and the U.S.A., the toll-free number is 1-800-319-4610. Outside Canada and the U.S.A., dial 1-604-638-5340. Callers should dial in five to ten minutes prior to the scheduled start time.
Management will accept questions by telephone and e-mail. Individuals wishing to ask a question during the call can do so by pressing *1. Questions can be emailed in advance or during the conference call to firstname.lastname@example.org. An archive of the conference call will be posted on the Investor Communications section of FLYHT’s website following the meeting.
FLYHT’s Q2 2021 Report, which contains more detailed information including the CEO’s Letter to Shareholders, Management Discussion and Analysis and Financial Statements, can be accessed on the Company’s website. The MD&A and Financial Statements have also been filed with SEDAR and will be accessible at www.sedar.com.
FLYHT has granted incentive stock options for an aggregate 43,760 common shares, subject to regulatory approval, to new employees and a director under the stock option plan approved at the Annual and Special Meeting held on May 6, 2021.
The stock options are exercisable at a price of $0.93 per share. The options will vest 1/3 on each of August 4, 2022, 2023 and 2024 and will expire on August 4, 2025. A maximum of 10% of the issued and outstanding shares are reserved under the Company’s stock option plan. The options, and any common shares issued upon exercise of the stock options, are subject to a four-month resale restriction.
About FLYHT Aerospace Solutions Ltd.
FLYHT provides airlines with Actionable Intelligence to transform operational insight into immediate, quantifiable action, delivering industry leading solutions to improve aviation safety, efficiency and profitability. This unique capability is driven by FLYHT’s patented aircraft certified hardware products including AFIRS™, a satcom aircraft interface device which enables real-time streaming of flight information, cockpit voice and black box data streaming and TAMDAR™, which aggregates and streams airborne weather data in real-time. FLYHT is headquartered in Calgary, Canada with an office in Littleton, Colorado, and is an AS9100 Quality registered company. For more information, view our latest presentation here, or visit www.cn.flyht.com
Cautionary Note Regarding Forward-Looking Statements
Except for statements of historical fact, this news release contains certain “forward-looking information” within the meaning of applicable securities law. Forward-looking information is frequently characterized by words such as “plan”, “expect”, “project”, “intend”, “believe”, “anticipate”, “estimate” and other similar words, or statements that certain events or conditions “may” or “will” occur. In particular, forward-looking information in this press release includes, but is not limited to, statements with respect to the anticipated/projected revenues and related matters. Although we believe that the expectations reflected in the forward-looking information are reasonable, there can be no assurance that such expectations will prove to be correct. We cannot guarantee future results, performance or achievements. Consequently, there is no representation that the actual results achieved will be the same, in whole or in part, as those set out in the forward-looking information.
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 projected revenues. Such forward-looking information is subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those anticipated in the forward-looking information. Some of the risks and other factors that could cause the results to differ materially from those expressed in the forward-looking information include, but are not limited to: general economic conditions in Canada, the United States and globally; industry conditions, and supply chain delays. Readers are cautioned that this list of risk factors should not be construed as exhaustive.
The forward-looking information contained in this news release is expressly qualified by this cautionary statement. We undertake no duty to update any of the forward-looking information to conform such information to actual results or to changes in our expectations except as otherwise required by applicable securities legislation. Readers are cautioned not to place undue reliance on forward-looking information.
FLYHT Aerospace Solutions Ltd. FNK IR LLC
Alana Forbes Matt Chesler, CFA
Chief Financial Officer Investor Relations
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 EBITDA: defined as earnings before interest, income tax, depreciation and amortization (a non-GAAP financial measure).