The Definitive Write Up About FLYHT
FLYHT (FLYLF, FLY:CA) Report
Sam McColgan, Breakout Investors - 6th Apr 2024
Introduction
FLYHT’s business model is relatively simple. FLYHT installs hardware on aircraft at lower gross margins (around 30%). This includes the AFIRS 228, a hub that collects aircraft-related data and communicates it via satellite. It also includes TAMDAR, a sensor that collects weather-related data. Once installed, the hardware generates higher-margin (60%) recurring SaaS for software and data services. In addition to selling directly to airlines and weather agencies, FLYHT also licenses the technology out to OEM line-fit providers. Finally, FLYHT offers some consulting services/app development for airlines.
Currently, FLYHT’s legacy business as described above is not yet consistently profitable. Its revenues fluctuate quarterly based on the timing of hardware sales and especially licensing revenue. That said, the SaaS and other consistent parts of the revenue continue to grow, and by my estimation would grow sufficiently by 2025 to make the company profitable on average. That said, FLYHT is likely to get to consistent profitability much sooner thanks to two new products which are beginning to gain traction.
The first is the AFIRS Edge, a complementary hardware to the 228 that offers different software tools and a different way to communicate the data (5G as opposed to satellite). It’s a first-to-market 5G device, with competitors likely a long way off. It would only take a small market share for the product to be wildly successful for FLYHT, while larger market shares are plausible. The Edge recently received its first STC (regulators approval), and can now be deployed on A320 model aircraft in Canada. Approvals in different jurisdictions and for different models are to follow this year and beyond.
The second is the WVSS-II, a sensor capable of measuring valuable weather variables the TAMDAR can’t. FLYHT has no competitors in this space and barriers to entry are high. FLYHT has new contracts with two of the most prestigious weather agencies (the UK & the US) with deployments in 2024. The contracts have options in place for potential expansion. Furthermore, the momentum from the two deals could open doors to several other weather agencies globally. Finally, the WVSS could also be sold directly to airlines or line-fit to enable aircraft to reduce contrails, a phenomenon responsible for 50% of aviation’s total effect on global warming.
Despite the Edge launching right now with some initial contracts lined up, and despite the WVSS already gaining traction with weather agencies, FLYHT’s share price is at multi-year lows. The only time the share price has ever been slightly lower than now was during the pandemic when the entire aviation industry was crippled. FLYHT is in a far stronger position than it was back then.
In this report, I will first discuss the legacy business, followed by the new growth opportunities. Note all numbers I use will be in CAD, as this is how FLYHT reports its numbers.
Table of Contents
Legacy business
AFIRS 228 (Satcom Hardware & SaaS)
AFIRS 228 - Hardware
AFIRS 228 - SaaS
TAMDAR Sensors (Weather Hardware & SaaS)
CrossConsense (SaaS and Technical Services)
AFIRS 228 OEM Line Fit (Licensing)
Combined Legacy Business - Historic Summary
Legacy Business Projections
Legacy Business - Valuation
New Growth Opportunities
Certification Requirements
AFIRS EDGE
Edge - Introduction
Installation Ramp-up Schedule
Plausible Market Shares and Associated Profit
Current Contracts
Reasons for Optimism
WVSS-II Sensors (Weather Agencies)
Market opportunity
Current contracts
Summary
Growth Opportunities Summary
Risks