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spk02: Thank you for standing by. This is the conference operator. Welcome to the Flight Aerospace Solutions second quarter 2022 results conference call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star then 1 on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star, then zero. Due to the volume of questions expected on today's call, we ask that you please limit your questions to three to allow time for others in the queue. If there are any outstanding questions at the end of the call, the company will be happy to take them by email to investors at flight.com. I would now like to turn the conference over to Bill Tempany, Chief Executive Officer for Flight. Please go ahead, Mr. Tempany.
spk00: Thanks very much and thanks everybody for joining our call today. We've got some pretty exciting news that came out on the wire a few minutes ago about growth in our executive team and our capabilities globally on the sales front that we're going to talk about in detail a little later on. I think the important thing for everybody to note is that we're getting attention both in the airline space and in our competitor space with the products we've built over the last two years. So I think our Q2 results show that we are getting traction in that area, that our acquisitions both of Cross Consents and of WVSS are paying dividends to our shareholders and that we're on the growth path that everybody had hoped we'd be for quite some time. I'm going to have Alanna go through the financial results and then I'll talk in more detail about some of the exciting news from this quarter. And then we'll answer questions that anybody may have. So Alanna, over to you.
spk03: Thanks, Bill. I'll take a run through the balance sheet and then the income statement. So starting with the major areas of change on the balance sheet, our cash balance is currently running at $2.4 million. We've got that L3PO that we started delivering on in Q2. We'll continue to deliver on and there will be bigger shipments throughout Q3 and Q4. And those together with our other revenue sources and sources of cash will supply the cash that we need for the foreseeable future. You'll notice increases in both our accounts receivable and accounts payable balances. There were two contributing factors mainly to those changes. one being the addition of a full quarter of cross-consents and several large sales at the end of Q2 that were collected after the quarter. You'll notice also an intangible balance. We continue to work through the accounting for the acquisition of the cross-consents, valuing the assets and the liabilities that we require That activity continues. It's quite a technical exercise, and we do need it to be audited as well. In the meantime, the amounts that we're not certain of in terms of their accounting valuation remain in that intangibles balance for future assessment and finalization. The contract liabilities balance. It's also the IFRS term for deferred revenue. Those amounts represent amounts out of the cross-consens books that are billed annually but delivered monthly. So that line in the balance sheet shows the balance of those items at any given reporting date. Turning to the income statement, our revenue increase This was our first full quarter including all of cross consensus results which we see an increase based on that and then also an increase in our licensing revenues as we see here the impact of the first few licensing shipments on that PO for 5.65 million USD. Cross consensus contributions We are not segmenting their results, but we can say that their contribution to the quarter was about 1.1 million top line, 70% of which was SAF, and they also contributed a small profit to the bottom line. All right, back over to you, Bill.
spk00: Okay, thanks, Alana. There's a couple of things that I'd like to note about particularly the revenue side. We ended the quarter just short of $5 million, but in the first week of July, we shipped over $900,000 worth of product that was intended to be shipped in Q2. A lot of that was high-value, high-margin license business, which would have really pushed us very, very close to breaking even. You know, it's one of those good news, bad news stories. We didn't get it recognized in Q2, but it's going to make Q3 even that much better. So we've told everybody on all the conferences and seminars we've been to in the last quarter that it is our full intention that we will be EBITDA positive, cash flow positive on the year in 2022. And we continue to maintain that that is the intent and we're on track to do that. barring any unforeseen circumstances. Some of the other things that happened during the quarter, there were, again, some one-time charges around the edge, the completion of the design and certification work on the edge. That is progressing nicely. We sort of have the hardware, the software, and the customers all converging towards the end of this quarter for the first implementations of the edge. Coral Jet has already paid for the edges. They have people working with us on the STC for the A320, and that installation will hopefully be finished end of this quarter. There was an incident with Coral Jet at one of their MRO facilities while they're getting their aircraft ready to go into service where Somebody drove a forklift through the belly of the aircraft that could cause some delays to them going live with this as they affect those repairs to that aircraft. But things are on track with the EDGE program. We have a 737 STC in development with a Calgary-based airline that is going to give us access to that 737 mark at We got really good news yesterday from UK Met. The installation of the 30 WVSS units that they had announced has been delayed because EasyJet is busy trying to get their business stood back up and doesn't have time to work through a new program with us and UK Met. So the UK Met authorities met this week and approved Logan Air to do the first 12 or 13 units of the Edge and that they'll buy the full 30 units this year. We don't have the contract signed yet, so we can't press release that, but it's been a long time coming. We bought the WVSS system almost a year ago, and this order for just the hardware for Loganair for the WVSS is about $2.5 million for a business that we spent $500,000 on, and it's certainly high margin both now and in the future as we get paid for the soundings from the WVSS units. So very good news on that front. It's going to be exciting to work with Logan Air. They fly Embraer regional jets, ERJ-145s. And we've got a partner in England to get the STC done. So we will have those systems installed probably end of first quarter, first part of second quarter next year. And we continue to work with UK Met and other carriers for the other 13 units that they're going to purchase this year. So WVSS is moving very nicely. We've done a fair amount of work with the folks in Frankfurt on getting our products aligned and everybody understanding all of the products that Flight has to offer. We actually have Axel from Frankfurt in our office this week working with our team to put together a plan for how we're going to do the training in September for everybody so that we can go out and sell all of our solutions to all of our customers around the globe. That is ongoing work, but right now things are moving very nicely with the traditional cross-consensus business. We're making good progress with the customers. The customers are happy. Now we're going to go and expand our footprint in Europe with the resources there and additional resources that we talked about in our press release this morning. If you saw the press release that came out a few minutes ago, we've hired three new salespeople, which makes six salespeople that we've added in the last 12 months to the crew. A year ago in June, we added Willie Cecil to the mix, and he's helped a lot in the design and development of the Edge product. We've had a couple more people join us that were colleagues of Willie's for many, many years. Scott and Murray have joined and are going to look after sales in North America, South America, Europe, Middle East, Africa. We hired a person about six months ago in Japan that used to work with Willie and these other guys. And we actually had a team go to Japan about three weeks ago and present to 16 airlines in Japan and it was extremely well received. Japan obviously being a technology leader is moving to 5G quicker than other parts of the world and they need a solution for their aircraft and we brought them one that works and is ready for market. So after that trip the guys went down to Indonesia and presented to some airlines in Indonesia Indonesia, Malaysia, the Philippines have all been more affected by COVID than any other part of the world. And it shows in our revenue, both in our weather and in our SAS revenue. AirAsia in 2019 was by far our largest SAS customer, and they're still at a position where they're only flying 10% of their fleet. The same thing is happening to Lion Air and other big carriers in Southeast Asia. The waves of the pandemic continue to disrupt air travel and business as normal down there. But there is light at the end of the tunnel. The governments are opening up and allowing people into the country and they're trying to get their economies restarted. And we will be a big part of that because we have people on the ground in Indonesia as well that are talking to these people and helping them see our actionable intelligence solutions as a way to reduce the amount of manpower they need to get back on their feet and get back moving. So overall, Q2 was a solid quarter. We'd hoped for a little better, but if you take the one-time charges and the supply chain issue of not getting $900,000 worth of product out until a week late, it would have been a tremendous quarter. It would have been one of the first EBITDA-positive quarters for a long time for the company and gives us great confidence that Q3 is going to hit that mark and upwards and onwards from there. So again, I think key points are that our team is growing with people that are industry experts that don't take a long time to get up to speed. The acquisitions that we made last year are panning out extremely well. and adding value to the business on a day-to-day basis the product is nearing completion and and being rolled out there's probably close to 30 units that have been committed and another you know two to three hundred that we're working on contracts for so i believe we're in the best position this company's been for many many years as far as resources people the market, the industry, and our ability to deliver. So we're very excited about where we're going and we're looking forward to all of the quarters coming, but the next two quarters particularly, and a really aggressive growth path with the addition to our sales force. So with that, we'll get Alana to read some questions that have come in by email and then open up the lines for any other questions.
spk03: Okay, so the first one, there's an email here. There's several points. We can go through one by one. The first one is an update on the 30-unit order for WVSS weather sensors from UKMET, which I believe you've addressed previously in your remarks. And then there was the second question here is, can you comment on the pipeline, so the sales pipeline, I guess, involving more than 15 prospects of 7 million or greater?
spk00: Well, It's actually more than that now, and it continues to grow. And I think the pipeline is going to grow even faster with the addition of the new people. So, again, very excited about that pipeline.
spk03: The next portion is in reference to any new opportunities through partnering with CETA.
spk00: That's an ongoing process with CETA. It's what we call dancing with the elephants. You've got to watch your toes. CETA is a very large organization, and they're doing their due diligence on our products and all of those things. In the old days when we did the AFERS 228, you had to go through a certification process, I think called ATP and OQP or something. with both CETA and Air Ink to get your products on the ACARS network to be able to transmit data through ACARS. A similar process is going on right now with ACARS over IP with the Air Ink guys. And summertime, it's very difficult to get anything done in any part of the world, and it's been slowed down by vacations and so on, but on track, and there are several opportunities that are being worked with CETA today.
spk03: Okay, and I'll combine a couple of them together. Can you comment on China recovery, the effect on our orders, and in particular, progress with installations on the COMAC aircraft?
spk00: The COMAC aircraft certifications have been disrupted by the lockdowns in China. We actually had five AFERS units sitting on the Shanghai dock when they did the test flight of the C919. That equipment has now been delivered to the factory and is installed. It was designed in. It was just a matter of logistics, very similar to what happened to us at the end of June with our shipments, not being able to get it to the right place at the right time. The ARJ is live. I think we are working right now on orders for five more ARJs, and we're continuing to watch China come back from COVID. And China's rules when COVID strikes are different than any other part of the world, when they have a lockdown, it means you stay in your apartment, you don't go outdoors, and everything grinds to a halt. And we experienced that over the last few months. It's starting to open up. But let's wait and see if there's another wave in China. Our relationship with the airlines and the regulators in China is very strong. Being a Canadian company has kind of helped us with some of the geopolitical things going on these days. We've been accepted now that we let Ms. Guangzhou out of jail here. We're back on friendly terms with China as Canadians and have never really had any problem with our commercial relationships the way things are. China continues to play an important role in what we're doing and where we're going, and we look forward to stronger and better relationships with China in both the AFERS, AFERS Edge, and the weather business as they look at how they're going to collect better data for their own weather.
spk03: Great. Can you comment on AirAsia's recovery in particular with a return to weather data revenue highs?
spk00: I think I talked about that. AirAsia is running about 10% of their fleet today and recovery is slow. They're talking Q1, Q2 next year. But we do have a good relationship with them and we're working with them to get through. One of the things that deal we made with them a couple of years ago was we'll keep service to your aircraft if you pay your current charges and something against your debt each month and They have been doing that religiously. We've been getting monthly payments and the bad debt reserve we set up for them is being eaten away on a monthly basis. So I've got really strong faith that AirAsia will come back and be a good customer as they were before once they get through the issues that are facing them.
spk03: Great. Is there any update on our efforts to get prior boxes sold through Airbus turned on?
spk07: Yes. Next question, please.
spk03: Good answer, Bill. And then finally, effects on research coverage.
spk00: We're working with a new group out of Minneapolis to get research coverage. I certainly don't have any guarantee that we're going to get it, but we're working on that. I think as prices and volumes increase, we're getting more and more interest from investment banks, both north and south of the border. And I think we've... proven to a lot of them that what we did over the pandemic is paying dividends and we're on the path to more than recovery to accelerated growth and hopefully we'll get stronger analyst coverage from all the efforts we've put into the business and the investor relations part of the business.
spk03: Okay, so on to the next email questions. The first When will the edge be certified on the A320?
spk00: When will the forklift holes in the aircraft be repaired? It'll be this year. The work is ongoing. We expect to have all of the STC package done probably by the end of September, maybe the end of October because of access to the aircraft. And then the application is filed. We're having... all kinds of fun like everybody is with any government agency with the work from home policies with the governments. The people that have to sign off on the certification for the aircraft are working from home. If you want a passport, they're working from home. Just wait a year, we'll get right back to you. The disruption in government services for a lot of the things that we're doing globally, we don't know the answer. We don't know when they're going to come back I was on a call a couple of weeks ago with the president of Conair, the firefighting company out of BC, and they had done some modifications to a water bomber for the US. They put those modifications in for approval to to the US government for approval of the STC. It's almost a year later and it hasn't been approved and the fires can't be fought because the aircraft can't be flown until the government employees get back from work from home and actually do something. So a lot of things outside of our control as we recover from the pandemic.
spk03: Okay, and a follow-on question. Is there a contract for the Edge with Airbus like the AFERS product has?
spk00: No, there isn't today. And we haven't been working on that. We've been working with a couple of large suppliers to Airbus on some opportunities that could end up there, but nothing yet at this point.
spk03: Okay. And then some backlog questions. First, what is the current orders backlog for the Edge product?
spk00: The signed backlog, counting UK Met, which the contract isn't signed, but they've told everybody in the world they're buying 30 of them, is in the $3 to $4 million range. The opportunity pipeline for the edge is significantly higher than that. We've got several multi-hundred aircraft opportunities that we're working on right now, and You know, we're in the typical aviation chicken and egg thing where, yeah, it looks like a great product. Show it to me on an aircraft and working. And we've got launch customers for at least four aircraft types now. So by the end of the year, we'll be able to help the people from Missouri that show me state that this actually works. And we've got... the products that everybody expected to be there. So I think next year is going to be a tremendous year from both the sales and delivery point of view. And we're on track to deliver the show me state people.
spk03: Great. And then overall backlog, and I can answer this also, what is the total orders backlog for all products? That's currently sitting at 20, just over 28 million. And has this number been revised up due to the increase in travel? In previous quarters, this number would scrub down. We scrub it every month and therefore every quarter. It's been revised up and revised down as we include backlogs from cross-consents and then increase in travel in North America, decrease in travel in some areas of Asia. It is the scrubbed number. There were some questions from this investor about weather, AirAsia, UK Met, I think all of which have been addressed. How much of the $5.6 million from our OEM partner has been recorded as revenue in this quarter? That was $1.4 million. If you look at the licensing line of revenue on our financials, that is directly related to that relationship. So you can look at the historical. Oh, and then also this investor is wondering about the impact of cross-consents in our financials, which I believe I've addressed. So that's everything that we received by email. Shan, would you like to take questions from investors who phoned in?
spk02: Sure. Thank you. We will now begin the question and answer session. To join the question queue, you may press star then 1 on your telephone keypad. You will hear a tone acknowledging your request. If you're using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star then 2. We will pause for a moment as callers join the queue. The first question is from Jason Smith with Lake Street Capital Markets. Please go ahead.
spk01: Hey guys, thanks for taking my questions. I just want to start with the supply chain. Obviously it had some impact in Q2 and it seemed like the push out into Q3 has already been shipped, but just curious what your expectations are for the second half. Are you expecting any sort of incremental improvement in the backdrop?
spk07: Yes, we are.
spk00: There's several orders that will be delivered in the second half, and on the license revenue, as Alanna said, the full $5.6 million will be delivered this year, so there will be a significant part of it delivered in second quarter, or in second half, sorry. The supply chain issue we had was strictly trucking. It wasn't material shortage of suppliers or anything like that. It was just logistics getting the material from Europe to Canada and into our shop in time to ship. And what we've been doing on maybe even a weekly basis, but certainly a monthly basis, is go through our delivery backlog and make sure that we've got all of the components we need and have them in-house at least 30 days prior to shipment to make sure that we don't run into issues with this. The delivery of the licenses required modems from Iridium, and their supplier got slow in delivering them. We're working really, really hard on supply chain to make sure that it doesn't become an issue to us. And one of the advantages of our increased SAS revenue and our reliance on revenues for services and SAS from cross-consents is that we're not subject to supply chain issues with those revenues. They're installed equipment and SAS revenue as it grows is exempt from supply chain issues. We're working hard to increase the percentage of revenues in SaaS and services and making sure that we don't have problems with supply chain in the financials going forward.
spk01: Okay. That makes sense. And then just want to make sure I heard you correctly, Bill. You expect to be EBITDA positive in Q3? Yes. Okay. Yeah. Perfect. And then just the last one from me, and I'll jump back into Q, obviously the announcement with some new hires. Just curious if from a sales infrastructure and personnel standpoint, everything is now in place.
spk00: Yes. Yep. We've got people in Japan, Indonesia, Europe, North America, South America. Our sales force is complete.
spk01: Okay. Thanks a lot, guys. Thanks.
spk02: The next question is from Bruce Krugel, a private investor. Please go ahead.
spk08: Hi there, Bill, Alana. I've got several questions. I suspect they're all interrelated, so I'll ask in one fell swoop, and perhaps you can decipher the correct way to answer it. So in your letter to shareholders, you said that this is the biggest opportunity, the edge is the biggest opportunity in 20 years for the company. You talk about developments coming this quarter, alluding to Q2, and then you make the announcement of these three salespeople hires. What I find interesting about the salespeople hires is they come from Teledyne, which is effectively one of your competitors. So... Can you just put that all together and are these statements interrelated and how does hiring people from Teledyne help you?
spk00: They're definitely related. The edge is the biggest opportunity flights ever had because there's a mandatory change coming to the world for 5G. Aviation typically lags behind any other changes in that kind of industry by 10 to 20 years because that's how aviation works. They don't have a choice on the 5G networks. Globally, more and more countries are moving to 5G because of demand from consumers and from the telco industries. They don't want to maintain multiple versions of equipment and software and from the hardware manufacturers apple would love to sell everybody a brand new 5g cell phone they don't want anybody using a 3g cell phone anymore and now go out and buy a new one so a lot of pressure to move to that we went looking for industry expertise in our sales and marketing team i think This is a very unique industry and what you need to know, your relationships in the industry, your technical ability to represent the product properly. And we went on a search to find the most qualified people to take advantage of this 5G opportunity that is coming down on us very, very quickly. you know, through existing employee contacts and searches of available resources, all of these people kind of bubbled to the surface as the key players that would help us drive this solution quickly into the marketplace. And we were very pleased that they were available and willing and anxious to come work for us. They'd seen our product at a couple of shows. They'd seen what we were working on for futures to that product and saw it as an opportunity for themselves to contribute to the industry making the shift as painlessly as possible to 5G. So I'm very, very excited and pleased about the people that came. Don Wilson has been in this industry for 30 plus years. selling hardware, keeping track of it through the ILS system, has contacts with pretty well every airline in the world, and has joined us to help bring some sales expertise to Cross Consents outside of their focus area, which is aviation maintenance software, to help expand the capability in Europe into our other product lines. Very key hires for us. I think extremely good fit with existing staff and existing customers for these guys to come in and be knowledgeable and effective immediately in the market.
spk08: Okay. Two other questions. In the quarter, you sold 12 APRAS boxes. What's the APRAS pipeline looking like for the balance of the year?
spk07: It's not, it'll be solid.
spk00: It's not going to be strong. We've talked about this every quarter for the last six quarters, but the airlines are using the aircraft that don't need to go into sea check as they recover so that they can manage their overhaul costs and their maintenance costs. So that is starting to come to an end as flights increase Those aircraft are getting their cycles and times in where they're going to have to go in for sea checks. So I think the backlog will start to be drawn down slightly higher over the coming quarters, each quarter over quarter. We are continuing to sell AFERS. AFERS is a great product and it solves a lot of problems, but the focus is going to be on edge sales because that drives our actionable intelligence capabilities. We announced a relationship with WestJet for APU monitoring about, I don't know, four months ago or five months ago. And people are paying attention to that. It's something that is a real measurable benefit to the airline from a cost perspective and to the industry from a greenhouse gas emissions point that we can save emissions and save money. with the software that we've got, and you need the edge on board to be able to do that. So over the next two or three quarters, I think you will see the number of edge units far exceed the number of AFERS units, and shortly the revenue from the edge units will exceed the revenue from the AFERS unit. But that doesn't mean we're not going to be selling AFERS. It doesn't mean that people still don't need certified SATCOM, and we will continue to build and sell AFERS for the foreseeable future.
spk08: Okay. And then finally, technical service REVs increase quite nicely. And the way I've looked at technical services is normally this is a prelude to revenues down the line because you have to complete engineering and clients pay for the engineering. Is that the correct way to look at technical services now?
spk00: It's definitely STC work, but it's also part of cross-consensus. Revenues are viewed as technical services as opposed to SaaS. So it's a mixture in there of both cross-consensus and engineering revenues. But engineering revenues are growing because we are charging for STC work on the edge.
spk08: Great. Thanks, Paul.
spk07: Yep.
spk02: The next question is from Peter Davis, a private investor. Please go ahead.
spk06: Hi, Bill and Alana. Not quite as good a quarter as I hoped for, but still better than the last quarter. I was really struck by today's news about these two guys from Teledyne. Your Edge Plus product, I believe, is the one that's targeting But the box that they sell, which they don't have 5G for yet, you advertise it as being the cost of adding Edge Plus is the cost of an upgrade to 5G. And they have an install base of over 14,500. How many of these do you expect to get before they've got the 5G working?
spk00: Well, I can't comment on what Teledyne may do from a development point of view, but the Edge has been designed with more than just the 5G upgrade. The capabilities that we announced in March with MBS and being able to do remote data loading of avionics software is a big plus. The Edge is an aircraft interface device with a compute program on board where we can run third-party software. We have all of the AFERS technology moved on to the edge so we can do basically real-time FOCWA on the aircraft and transmit only the data that's required. We have CERTUS capability on the edge, which I don't believe anybody else is working on as far as the wireless QAR technology goes. And we have the wireless QAR technology working to do everything the legacy boxes do through 2G and 3G. So it's something that, you know, we built this product over the last two years, which is kind of a record in the aviation industry to get a product from pencil to approved and certified in two years. And the main reason we could do that was because of the technology we brought over from the AFERS unit. So we've got a jump on the competition, I think, of anywhere from three to five years because it's going to take that long if they started today to build something to come up with a solution. That lead with the sales force that we've put together should stand us in good stead to win a significant number of those upgrades, I believe. But I don't do forecasts, as you know, so I'm not going to. tell you what I really think, but I'm excited about it.
spk04: Thanks, Bill. That's all from me.
spk07: Thanks, Peter.
spk02: Once again, if you have a question, please press star, then one. The next question is from Mark Berger with MKB Associates. Please go ahead.
spk04: Hi, Bill. Sorry, but Bruce took most of my questions, and I'm pretty much questioned out. So thanks very much. But the future looks pretty good. Teledyne guys look like we're going to make a big dent in that $14,000, $15,000 aircraft out there.
spk07: I agree.
spk02: The next question is from George Mellis with MKH Management. Please go ahead.
spk05: Good morning, Bill and Alana. Good morning, Drew. So great developments, lots and lots of information. Can I ask you to sort of summarize it in a way by sort of going through the big chunks of revenue at flight? So we're going to have eight years. We'll have edge. To some extent, we'll have AI. We have cross-consents. We have the weather. We have the licensing. It's sort of going down one by one and see where the opportunities lie. Because it seems you have a lot of things going on at the same time. And how are they connected to some extent, too?
spk00: OK. I mean, our focus is to drive SAS revenue and increase the percentage of total revenue in SAS year over year, every year. To do that, we've got to get the hardware platforms on board. And whether it's WVSS or the Edge or the AFERS unit, each one of those will contribute to us being able to drive SaaS revenue. And I think maybe the deal that's coming together with UK Met and Logan Air is a really good example of how I see building out this market and kind of becoming the Apple store for aviation with the Edge. If you look at Apple's financial statements today, I think you'll probably see that 30% of their revenue is hardware and 70% of it's coming from the Apple store from applications. And that's where I want to take this. So if you look at the deal that we are working with UK Met and Logan Air, they're going to pay, let's just throw a number out, $30,000 to put a WVSS sensor on the aircraft. They're also going to spend another, say, $20,000 to put an edge with CERTUS capability on those aircraft because they're flying across water and you can't get the weather data via the cell network, so you need an Iridium capability on there. So we got hardware revenue coming up in 23 for the hardware, the edge, the CERTUS, connectivity and let's say that's going to be $3 million for the fleet and I'm just picking numbers out of the air. The contract for the SAS for the weather observation services off that box are going to be another $5 million over the next 10 years. So there's a recurring revenue going to happen from putting that hardware on board. that will continue to grow and it'll be accretive year over year as it continues to expand with the number of units we've got out, number of aircraft flying and so on. On top of that, once Logan Air has got an edge installed and we can help them with APU usage or we can help them with fuel burn or we can help them with turn management, we will install other applications on that edge device that could very easily exceed the SAS revenue from the weather data over the 10 years that they were contracting for the weather observation on those aircraft. The picture will change year over year and increase the percentage of SAS revenue over hardware revenue as we expand our capabilities, as we expand the number of units out there, and as the airlines find new applications for the things that we can do on these boxes. So SAS will continue to grow and we are working very hard to get that growing as fast as we can. The next couple of years, hardware could continue to be kind of the dominant part of our revenue stream as we build the base to be able to generate that SaaS from there. Did that help?
spk05: It sure did. It sure did. And then tell us how cost incentives sort of are part of that picture.
spk07: How quickly what? Sorry? Cost incentives is part of the picture. Sorry, I missed it again, George. My computer beeped.
spk05: How does the German acquisition fit in the picture?
spk00: Very, very nicely. I mean, Cross Consents has got 20-odd customers in Europe that are very solid. You know, EasyJet, Wizz, Lufthansa, Condor, Norse. Very, very good airlines that are very, very forward-thinking companies. And they've got great relationships with the maintenance departments. What we're doing right now is getting the people trained to go back and talk to those customers about the edge, about some of the software that we have for APU or fuel burn or airport management and expand that. The people, the relationships, their ability to work with those customers and be the flight representative in Europe is very, very strong. And we're in the process of making that happen. We didn't get the acquisition finished until March. But since March, we've been working on this as an ongoing process. And we've got a couple of joint customers that we're working with. that are looking really good, one in North America and one in Europe. And I think that the ad of Don and Murray in Europe are going to accelerate the opportunities and the growth of that part of our business.
spk05: Okay, great. Sounds very good. Thank you.
spk07: No problem. Thanks.
spk02: The next question is from Mark Berger with MKB Associates. Please go ahead.
spk04: Sorry, Bill. I did remember a question. With regard to the communication companies shutting off 3G, 4G, is there a time limit as to when that's going to happen? And when that does happen, is there any alternative other than the box that we have for those 14,000 planes that are out there?
spk00: You'd have to go through. I know that AT&T announced the 3G networks are going to be shut down the end of February. I don't have a list by jurisdiction of when those things are going to be shut down. But if you don't have 3G, a lot of the existing technology out there today does not work. And so there's more than just the Teldyne boxes out there that are reliant on 3G. A lot of it, I think, is political, too. China, Japan have all gone 5G. I think Malaysia has gone 5G. I think Indonesia is in the process of it. Not sure where we are with India. Europe, each country is different in when they're rolling that out. But I think France is way ahead of the curve as far as 5G at airports. They don't have any 3G around airports anymore. I think they've gone straight 5G, including private 5G networks for De Gaulle Airport to manage the volume of traffic that's coming from aircraft there. So it's something that I haven't had any research done on what the schedule is. I just know it's coming. And I went and upgraded my cell phone to 5G because I found it was getting so slow on 3G, you couldn't do any... researcher looked stuff up, but this took forever to get things. And that drive by consumers is what's going to affect the airlines.
spk04: So, therefore, with regard to major amounts of orders, I can assume that the orders that we ought to get should be coming within the next six to nine months. Well, I'm hoping we got lots, yeah. Okay. Thank you.
spk02: This concludes the question and answer session. I would like to turn the conference back over to Mr. Bill Tempany for closing remarks.
spk00: Okay, thank you very much. Well, thanks everybody for your questions, your attention. Hopefully you can see the excitement we have around this company about what we've done and where we're going and what we've got as an opportunity. I think this morning's press release about the quality and number of people that are joining the team should show that the industry is starting to pay attention to what we're doing, and that's what we've been looking for for a long time. I think that we've got an incredible team pulled together with incredible talents and products that are going to drive some pretty exciting results for our investors in the short and long term. Thank you, everybody, for your time, and look forward to the Q3 results in November.
spk07: Alana, anything you'd like to add?
spk03: I think we've covered it.
spk07: Okay.
spk02: Thank you very much, operator. Thank you. This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.
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