Q1 2020 Earnings Call
and our companies 10K
Which is on file with the SEC and other public filing now turn the call back to Jeff. Thanks for the New Year is off to a good start four consecutive month, which we generated Revenue growth quarter-over-quarter live in Israel comprised primarily a product sales and customer service Revenue both of which carrier page margins which led to our 58% gross. Margin in the quarter down only slightly from Peak margins achieved last war.
And please that we continue growing the business while maintaining healthy margins last quarter. As I mentioned was the best quarter in the in New York for more than two years and I am pleased to announce last course or were also very strong. Once we once again finished the course for the backlog that was greater at the end than it was at the beginning. In addition. We were also have production contracts that extend over a number of years that we believe have promise of a different additional Revenue not reflected in our current backlog.
the largest of these was a very successful a lot of pc-24
we have previously disclosed that they intend to increase their pc-24 production by 25% this year. This has been a remarkably successful program. Maybe one of the most remarkably successful that I've seen in many many years. We remain pleased with the financial results. We have been recently reporting but some of our most significant recent projects progress is not reflected in our current results most years. We were awarded a supplemental type certificate for the Revolutionary protection system against catastrophic loss of control with one engine inoperative. Milestone achievement was followed by our first agreement with a aircraft manufacturer to supply our thrust sets autothrottle as standard equipment on New Age.
production
They they reflect we believe a market interest too quickly. Adopt the technology not only in a Target at retrofit Market but in the market as well. Already suggest that one engine out loss of control accidents are responsible for multiple catastrophic accident annually and rvmc a birth control system will mitigate or if not, totally eliminate this condition originally developed for the retrofit Market our Auto Carlos receiving interest in both domestic and Thursday. We are pleased to have announced that an aircraft manufacturer that tends to include our Auto throttle has standard equipment in a new aircraft production.
Between the retrofit and aircraft manufacturers systems that have been certified. We believe our potential Market opportunities very large and growing up there for we were undertaking a number of actions to help accelerate the adoption first. We're working on means and methods to reduce downtime required for installation and import consideration. And any retrofit application second. We are we continue to refine enhance the product adding new features that add functionality off value that would be that will improve operational efficiency and safety. Finally. We conclude continue to pursue new opportunities in tom o r Commercial Air transport military and general aviation markets.
We see large.
Potential demand and Military and Regional aircraft markets for our or throttle our plan is to continue to pursue additional thoughts on multi-engine aircraft and retrofit Market with existing large fleets. We're also looking to expand our OEM business summer the aircraft's that we are targeting and these markets are much larger and we feel our our throttle and provide a meaningful Improvement in aircrafts safety and reduced pilot workload.
The order for the autothrottle in both single and multi-engine aircraft secured and the recent qualification of our vmca that is off the loss of engine lots of control problem. That's what GMC a technology and the award of the OEM agreement people leave Auto Thursday technology is position for a very significant growth.
Let me turn it over.
Room for discussion of our financials. Thank you Jeff. And thank you all for joining us this morning revenues for the first quarter of fiscal 2020 with 4.5 million eight thirteen per-cent increase compared to the 1st of 2019 and majority of revenues in the quarter were generated from product sales primarily general aviation and Military as well as the city level of customer service Revenue the small amount of hearing Revenue. We are in this quarter as compared to the first quarter of 2019 reflects the completion of the F5 development contract gross margins for the quarter were 58% of 54% month ago gross margins reflect an increase of first-quarter revenue from product sales and the growth of our high-margin customer service Revenue margins also reflect the leverage obtained when we increase volume across overhead.
Total operating expenses for the first quarter fiscal 2024 2.4 million up from 2.1 million in the first quarter a year ago research and development expense increased from a year ago wage reflects an increase in the amount of internally funded Rd for which is expensed as incurred in contrast and funded are indeed which expensive charge the cost of goods sold with the birth of contracts funded already has been significantly reduced.
so in general and administrative expenses
Grup 230,000 primarily reflecting to increase investment in sales and marketing and a quarter. We are $96,000 of other income $79,000 which was interesting, Okay, doodle tax loss carryforwards. We incurred no income tax expense in the quarter. We reported curly current quarterly. Net income of $328,000 or $200 a month more than double the $139,000.01 per share of a year ago the company remains and they strong financial position.
Spider very modest use of cash and a quarter primarily to fund increase in receivables and inventories associated with our steady growth and December 31st, 2019. We had over twenty two point five hours of cash on hand and no debt. We believe the company has sufficient cash to fund operations in the foreseeable future now, I'd like to call turn the call over to sheriff.
Thank you. Well, good morning everyone in the first quarter be continued to achieve steady progress towards our short-term and long-term goals.
and then
Yeah, you had another quarter of top-line growth and a doubling of a profit longer-term witness two important developments that we believe will bring in the success of Destruction Saudis role.
This is CeCe for our patented technology and a first contract. We don't know yet that intense to make are also standard equipment and production are dead.
I just mentioned as pleased as we are of our string of quarters of Revenue growth and profits you are equally pleased.
Of what these two recent developments mean to our future opportunity.
So let me first provide a little bit more color on each of them.
We Believe rvmc mitigation technology is the first-of-its-kind and we did having been evaluated and approved by three different departments within the f a month also believe as long as she has been validated as a de facto standard for this kind of Tropic lots of control medication feature
Already discussed how independent evaluation by Leading Aviation authority of loaded the product in various Aviation trade Publications.
So relative to competitive product in the market the ability to incorporate the lots of control prevention in our Auto throttle provide the tangible competitive advantage.
The award of an agreement with an aircraft. Oh, yeah that intends to make our orders role standard equipment on the production aircraft has been a
Due to the nature of our agreement with the manufacturer. There's little more we can share with you about this agreement at this time other than what was previously announced off whenever the last we believe that having been chosen by an oem as standard equipment for production aircraft is further Market validation of our order through Thursday. Are you
You're all saying discussion with other aircraft orient's to include fractions as standard fit into the production aircraft as well as retrofitting the existing Fleet.
And the propeller Market they are great number of multi-engine aircraft ranging from smaller part 23 piston too large Air transport part 25 turboprop life as well as numerous multi-engine table fine aircraft that would benefit from rvmc a technology in both, Military and Commercial markets.
On the aftermarket side, you have been pursuing markets through certified installers. And Mr. Rose, you're also pursuing large military fleets through approved integrate a military installers.
Meanwhile strategy is to pursue the larger OEM opportunities directly through our own sales organization.
Yeah, I anticipate also production orders and installations will start this fiscal year. This will be the beginning of what we believe is a ramp up.
That has significantly potential to increase future revenues.
It's Quickly reviewing the program's driving home results in 24 program has been running at the city level that we believe should approximately 50 kilometers aircrafts wage. Again. This is a long-term contract which we believe will span multiple years and generate demand for thousands of units. Only a fraction of ultimate value is in our life.
In the commercial that transferred Market you're experiencing steady demand 4.7 $500.77 fully of costly technology package the revenues from the Air transport side of the flap out will stay on current levels for the near future at least and since many of these are close to off-the-shelf products. These sales tax generated are smart.
In the military Market are flushing kc-46 program continues for what this is an ongoing program, which we believe will provide a continuous Revenue stream for a long time off development and flood testing on the F5 flight. DJ add flight data computer is now complete the company has now received the expected life engineering contract to enhance the design Insurance level of the unit. Additionally, we anticipate receiving a production of the contract for the the u.s. Navy in the near future. We also believe this product has the potential to be sold to foreign militaries as well.
Is off again from last quarter and revenues from backlog continued to be supplemented by Steady demand for customer service in Tripoli shift work and the contribution from long-term contract where only a fraction of the total contract is reported in committed background.
You order?
representative mix of Commercial Air transport military and general aviation programs
as you glance back at the recent challenging yet. We're being invested significantly in the instructions or resolved development and initial certification. We are pleased to begin with the report of that vision.
Let me turn the call back to Jim for some closing remarks sure these results to our discipline commitment better to better leverage our core Technologies innovation in our designs and both the commercial general aviation and Military markets at for a strong fiscal 2018. We're entering the year with new momentum and Erwin's we remain cautiously optimistic. We're obviously excited about our Auto throttle program and we belong this program over the longer-term can generate expanding and expanding acceptance so that as it proceeds the growth will approach an exponential growth rate.
We are.
I'm cautiously optimistic as I said about our current projections. We still will have to work to ensure that we can provide our customers with the high quality reliability on which we have built our reputation. I'll turn it over to the operator for questions and thank you at this time. We will open the floor for questions. If you would like to ask a question. You may press * then one on your telephone keypad. If you're using a speaker phone, please pick up your handset before pressing the keys to withdraw your question. You can press start at this time. We will pause momentarily to assemble our roster.
once again, if you'd like to ask a question, you can press * then 1
our first question comes from George Murray with porretto Ventures.
Hi, good morning. Gentlemen, had a couple of questions in the first question on this new OEM. What do you guys expecting to start shipping on that?
The next six six to eight weeks.
Six to eight weeks from now you'll be in shipping, correct? And are there any is there any commentary regarding like the how many planes they make a year or month? What would what's the size of operation is securing formally announced to the industry in the the late spring of this year. So when asked by the owner am not to comment on it until you know, it's been comes out clear it up. And that's the reason why I'm sorry about this. We're not trying to there's nothing unique about the situation. It's just simply we want to announce it together at the appropriate time, and that's a few months away.
Okay, okay.
And then on the comments you made regarding the military segment. I didn't quite catch all that. What what are the we talking about a military opportunity for auto fence or dead. Yeah. Absolutely. You could you could you elaborate a little bit more than that.
Well is there?
that would
help by a auto throttle and it just hasn't been an auto throttle that was readily installed in the existing aircraft. We have one that came. We have a number of opportunities that we've identified. It is simply a question of adapting our our actual birth into the airplanes. We have we've got two or three targets that we're working on as we speak. And so we think that the markets going to be a dead goat in a big one an addiction the regional aircraft like the ATR 42 and 72. These are twin-engine turboprops. I have suffered from the same kind of loss of engine accidents and our system has demonstrated that it
Can protect against that?
So who as a safety feature and and to reduce pilot workload. It has a compelling. It's compellingly attractive. We have multiple patents on the technology silver. We're we're always cognitively confident, but we think there's an opportunity that we were we were just visiting somebody yesterday and talking about the program and they expressed a great deal of Interest. So we're optimistic about um, yeah and all in all three segments military commercial and business yet.
Or being on the auto Sense on the retrofit Market. Can you give any commentary on what's Happening currently in the in the first place twenty-twenty with that are you shipping now? And we have two installations going on right now for airplanes and Commercial and they're both they're both Pilatus pc-12. We have a a king are we're looking at at we're just about to a Jewish the latest version of our tenure and we'll be supplying that for the first commercial installation. I would say in about three months. So it's it's off building momentum right now. We're we keep refining the product. The twin-engine product has now been served.
hardcore
The loss of engine recovery, but we've enhanced its operation so that it will accommodate birth High rates of of change of the airspeed so that that under catastrophic conditions. It still works and provides recovery. It's very good. It's totally unique scent been done before by any airplane commercial or military.
Have you have you had feedback from the MR owes on their Outreach to the market on this is true. Things are going to happen. Some of the oems have bought a certified service centers throughout the world.
And that's going to be that's already in progress to have them offer it I see for retrofit. It's a large number of all kinds that will be serviced by these service centers and then we deal with the embryos embryos because this is the the the the area that we're dead Mr. Rosewood deal more more generally with the larger aircraft. So we use up and we expect to have moved up to 20 totally as doing installations on a regular basis.
I see okay.
Thank you.
Our next question comes from Rick Taylor a private investor.
Yeah, good morning a two things with reference to what you said in your opening remarks one is that you're still working to reduce that down time. I recall in the last conference call that you were holding up any possible installations pending. You're you're developing these new methods. How how long do you think it would be before you think your installation methods will be kind of what's called a standardized enough that you can I say. Okay. This is this is good enough to go with now were there will continue to improve it. But right now,
The the installations that are going on now. So the the profile we develop and it was very good. Our effort is to try to get this thing down to a couple days so that the owners don't have to tie their aircraft up for for a week or two anybody that owns an airplane hates to give it up Thursday for a day. So that's why we're doing it this way. Also it increases the number of units that can go through the the modification places off. It takes a week if you can do fewer per week. That's simple.
Right. Okay good.
And and one other thing you mentioned you said that you're also trying to improve the product by adding new features or are these features things that will have to go through a process off with the to get a get approval or or or they kind of smaller things that you can just add on without having to do substantial test with most of them are are are small enough so that we can get a a change to the an existing and not get along recertification process other features may or may not be some significant that they'll need recertification, but we're moving in both both areas very quickly and quite bluntly the FAA has been extremely Cooperative. They're they're still being very prudent but dead.
There's no.
We're not experiencing any delays of getting from working on it. They work on it immediately so we couldn't be happier.
Great. Thank you. Again. As a reminder. You can press * then 1 if you'd like to ask a question. Our next question comes from Michael Friedrich a private investor.
Morning, gentlemen, I had a I had a I had a question about the the process of getting the the thrust sent included in a new plane with the OEM. Is that something that requires an FAA approval like the retrofit Market or if it's if it's going in during production, is there a different process they getting that accepted? Well, I mean if off the supplemental type certificate allows an oem to install the equipment on in in Phase them on the line and ship it. So that's it can be used as a to support production in the early stages. Ultimately. The OEM was going to want a to do a job title certificate as opposed what supplemental type certificate and you'll take the supplemental type certificate and submit it to the FAA with an application for a tech certificate wage.
For that exact model and the same installation. So it it's not a it's
Two different situations, but in either case it doesn't hold up the ability to deliver product.
Okay. Okay, and when you're talking about using cents on these larger military type planes is the with the per unit cost of of the of the item go up to larger plane or is it a relatively standard cost across the board a larger airplane. It's going to be more obviously more involved. So you you can be you can figure that the price is going to go up. I mean there are four rings and airplanes that we do that we can do and it's not an issue but you it would the price would go up almost proportional to the number of engines. Okay. Okay, and then and then in general terms a bigger airplane Club more equipment longer distances all those things and therefore it's going to be somewhat more expensive. Okay.
Sure. Sure.
And and I know that there's a a huge number of planes in the in the in the Piston Market is is it eventually will this product be available for the the on a price came out for these these smaller Pistons High Plains? Yes. Okay. Okay, and the system is remarkably off from the very low energy all the way up to the high-end. I owned a I owned a piston airplane for thirty-five years. So I'm acutely aware of where it cost. By the way, none of those you cheap. That's why I'm using I'm using a relative. I'm using a relative term. So right right wage, and I guess that's it. Thanks guys. You're welcome. Have a good day.
Our next question comes from Mike Hebert with Axiom. Hi, Jeff. How you doing? Good morning. How are you doing? Well quick question for you. Is it realistic to expect at the at some point the NTSB might make a recommendation to the the FAA to mandate the autothrottle for commercial applications because of the safety nature song.
I Don't Know.
I you know, I honestly I can't project that they and they obviously mandated wage tossed. Yeah, which was been there was a lot of support from the from the Congress on that as well. Right? I think what's going to happen is if you think about it, if you ever interplay has it and your competitors don't know why would you want to fly in an airplane that if you got to slow with an engine out wage roles on its back on unrecoverable and kills you. I mean if you if you only airplane is five or ten million dollars or even a million dollars, why would you would not want the equipment to do it? And I think you know aircraft manufacturers are very reasonable. I mean, they really do I when they know that something is dead.
Helps the safety.
I don't think they hesitate finding a way to put it on their airplanes. So whether it's mandated or not.
I I don't know it should there be any there been any discussion with with insurance companies to ensure aircraft operators? That's a very strong way to do it and the contact the insurance company is obviously very smart because you know when they do faith is a pretty ugly conclusion. It's there's not there's not too many survivors. So and anyway, it would be the same reason it hasn't been done before it never existed before I think based on our experience today. The manufacturers are very very interested and and and are being very expeditious about their about implementing it.
Thank you.
Thank you.
As we have no further questions. This will conclude our question-and-answer session as well as today's call. Thank you for attending our presentation. You may now disconnect.
Thank you.