FLYHT Aerospace Solutions Ltd.

Thank you for standing by. This is the conference operator. Welcome to the Flight Aerospace Solutions third 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. To the volume of questions expected on today's call, we ask that you limit your questions to three to allow time for others to 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.

Thank you very much and welcome everybody to our Q3 conference call. We're very excited about the results in this quarter and the future of the company looks very rosy. We've been working very hard with the staff and our customers and our prospects to make sure that the products we're building, the services that we're putting together, meet the needs of the industry as they recover from the COVID pandemic. We've invested over the last two or three years in new hardware, additional software, and taken advantage of all of the learnings and software that we've built over the last 20 years. I was talking to an investor the other day and Said that flights a 20 year old company that spent 17 years learning what the industry didn't want to do Building tools that did things the entrance industry wasn't interested in and the last three years taking those tools and those learnings and creating solutions that the industry needs and wants and appreciates we rolled out a lot of those over the last six or eight months we've attended 16 shows in 22. We've got about 19 industry type shows that were booked for in 23. And we now have a sales force of 13 people around the globe to go out and sell these products with relationships with the customers all over the globe. Our recent addition in Europe of the cross consents team has opened doors and companies and opportunities over there that were never open to us before because we were a North American company and focused on smaller aircraft. The Cross Consents team is focused on larger aircraft, larger customers, larger airlines, and have experience and expertise in dealing with those companies. We've since beefed up our European sales force with the addition of Murray Skelton in Scotland. We have a part-time person in England that's helping Jacob talk to customers in the Middle East, Africa, and Europe, and we're very excited about the way the pipeline is growing. We're currently sitting at about $26 million in backlog, customers with signed contracts waiting for us to deliver product, and we've got a sales pipeline near-term sales opportunities that's in excess of $75 million. So we're looking at $100 million of near-term sales opportunities and backlog that we believe are going to very easily fill the opportunity we had this year in our licensing revenues with new hardware and new services revenues. We've got a full suite of products functional and working. We've done trials with several customers. We're in the process of signing contracts with those customers on our actionable intelligence tools. The databases, the Amazon Web Services opportunities are there, and we're continuing to develop those solutions with new customers and old customers. And I think you'll see a significant ramp in SAS revenues over the next 12 to 24 months as the industry recovers, our customers get back to flying, and our new products get rolled out across the industry. So we're very pleased with the results. We think we can sustain that level of opportunity going forward. And it's certainly our intention to have the company continue on the growth path. 100% growth year over year. is significant and the largest revenue quarter in our history. There was one quarter with higher EBITDA, but it was supported by one-time payments on a purchase that reduced the cost to a point where that became a very profitable quarter. I think that everybody in the industry is seeing what we're doing. When we talk to companies at the shows, they look at the products, they look at the legacy of the company, the fact that we've been around for nearly 25 years and continue to develop and build. The staff is really excited to be part of it. We made it through COVID with very few changes to the staff. In fact, we added staff in several areas. And I think we're tools for success for the future. We have a strong sales team. We have a very experienced and knowledgeable development and certification team. Our administrative and customer support teams have been solid throughout the pandemic and 10, 15 years of experience each that is really serving well for our customers. So I'm very excited about what we're doing and where we're going. And I'd like to turn it over to Alana to make comments on the financial results.

Thanks, Bill. Happy to. So I'll just have a look at the balance sheet first, then we'll turn to the income statement. The first thing you'll notice on the balance sheet is a reduction in cash from year end, and then right after, an increase in receivables. They're almost exactly offset as a major portion of the cash decrease is reflected in our AR balance at quarter end. Some increases in the AR and AP balances relate to the addition of cross-consents as of the end of Q1, which carries forward through Q2 and Q3 as they're fully consolidated into our results. Our intangible balance, you'll see a large increase over last year. That again is cross-consents. Work on the allocation of the purchase price continues. It's a highly technical equation, and we'll have that solidified by year end. Basically, we're working on an allocation of the overall goodwill amount into allocating it to various intangibles, the brand, customer contracts, and so on. Something new in our balance sheet as compared to last year is the contract liabilities category, and that's the balance of customer amounts that have been billed and haven't been yet delivered, as some of the cross-consents customers are billed annually for recurring monthly services. And now turning to the income statement, we're really pleased with our revenue increase compared to Q3 21. We showed increases in all categories except for hardware, which has historically been lumpy. And then we showed increases in all categories year to date. This quarter included a large licensing portion, and licensing is our highest margin revenue line as we continue to deliver on that large PO we announced that we received in Q2. On the G&A side, we also see increases due to increased scale of our business in adding cross-consents in Europe. to our consolidated results and also increases in distribution and R&D expense as we focus the organization on the completion and the sale of our edge product. We're really happy to show a return to profitability, both in EBITDA and net income. It was the result of a lot of hard work by the team and some pandemic recovery that have both gone into producing these kinds of results. And so, Gaylene, with that, we'll go to questions from the group.