Release Date: August 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Secured multiple significant contracts, including a $59 million FAA contract and a $27 million US Air Force contract.
- Increased revenues to $31 million from $27.3 million in the previous year.
- Achieved a target of signing over $100 million in new orders for the Maxim product and related services.
- Strong backlog for FY 2025 with recent five-year renewals and new contract awards.
- Optimistic EBITDA forecast for FY 2025, ranging between $4 million and $5 million.
Negative Points
- Operational inefficiencies and delays in contract timing impacted in-year profitability.
- Consolidated gross margin decreased from $8.8 million to $7.2 million.
- Normalized EBITDA dropped significantly from $2.9 million to $1.1 million.
- Recorded a non-cash impairment loss of $1.9 million related to remote tower assets.
- Ended the year with a net overdraft position of $1.9 million compared to net cash of $0.9 million the previous year.
Q & A Highlights
Q: If you lose the FAA contract, what is the approximate impact on guidance?
A: The range provided takes into account the potential loss of the FAA contract. There is no protest issue with the software support contract, and we have funding through the first year of the contract, which takes us to the end of November. The guidance reflects this potential impact. (Daniel Verret, CEO)
Q: Any update on the FAA hardware support contract? Are you receiving revenue from this contract at the moment?
A: Yes, we are receiving revenue and executing the contract. Almost 30% of the sites have been delivered, and we have funding through the end of November. We expect a decision on the ongoing legal matter in early September. (Daniel Verret, CEO)
Q: Can you update us on the prior protest action lodged against the assignment of the FAA contract?
A: The covenant breach was due to a ramp-up in our working capital. Accrued revenues and inventories combined increased significantly, requiring investments to secure inventory for the FAA contract. The FAA is very satisfied with our work so far. (Daniel Verret, CEO)
Q: Will you need to raise equity based on your FY 2025 forecast?
A: We do not see a situation where we would need to raise equity based on our FY 2025 forecast, both from an EBITDA perspective and a cash perspective. (Daniel Verret, CEO)
Q: What is the intended revenue model for remote ATC contracts?
A: The revenue model will be similar to our Aurora and simulator revenue models. There is significant interest in remote towers, but developing this market has been challenging, compounded by the ongoing conflict in Ukraine. (Daniel Verret, CEO)
Q: Can you explain the difference in guidance compared to the H1 results?
A: Some contract options we expected to be triggered within the first year did not pan out. We chose not to include these in our revised forecast for FY 2025. (Daniel Verret, CEO)
Q: How do you look at gross margins for each respective segment in FY 2025?
A: As we continue to deliver tech refresh with the FAA, margins should hold at their current level. We expect an uptick in margins towards the end of FY 2025 as we start providing more services-related contracts. (Daniel Verret, CEO)
Q: Will services GM naturally increase as there is more revenue from the higher-margin new SaaS contract?
A: Yes, the delay in contract renewal hurt us in FY 2024, but with a full year of revenue and margin potential in FY 2025, we should see a natural evolution in the margin profile. (Daniel Verret, CEO)
Q: For the USFA contract, were you incurring costs associated with this ramp-up before receipt of the corresponding revenue?
A: Yes, we started incurring costs early in FY 2024 to be ready for day one of the contract. We hired over 50 people and incurred costs before starting to deliver on the contract in February 2024. (Daniel Verret, CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
