Innovative Solutions & Support - Earnings Call - Q3 2021

Transcript

Speaker 0

Good day, and welcome to the Innovative Solutions and Support Third Quarter twenty twenty one Earnings Conference Call. All participants will be in a listen only mode. Should you need assistance, please signal a conference specialist by pressing star then 0. After today's presentation, there will be there will be an opportunity to ask questions. To ask a question, you may press 1 on a touch tone phone.

Please note this event is being recorded. I would now like to turn the conference over to Mr. Jeffrey Hedrick. Please go ahead.

Speaker 1

Morning. This is Jeff Hedrick. Welcome to our conference call to discuss our performance for the 2021, current business conditions, and outlook for the coming year. Joining me are Sharon Ascupar, our president, and Will Winand, our CFO. Before I begin, I'd like Will to read the safe harbor safe harbor message.

Speaker 2

Thank you, Jeff, and good morning, everyone. I would remind our listeners that certain matters discussed in the conference call today, including new products and operational and financial results for future periods, are forward looking statements that are subject to risks and uncertainties that could cause actual results to differ materially, either better or worse, from those discussed, including other risks and uncertainties reflected in our company's 10 ks, which is on file with the SEC and other public filings. Now I'll turn the call back to Jeff.

Speaker 1

Thanks, Ralph. It was another reasonable growth quarter with revenues up both year over year as well as significantly on a sequential basis with backlog increasing over 40% in the last three months. Margins remained strong, and we have one of the best cash flow bottom and bottom line profitability quarters in quite some time. Results were once again driven by a balance of OEM and retrofit programs and reflect the sales of a range of various products. We believe this strategy is both diverse both diversifies markets and products and will provide a strong foundation for continued growth.

And a sign of emerging rebound in general aviation, Textron Aviation reported the delivery of 33 turboprops in the second quarter, more than double the 15 delivered in the same quarter a year ago. They also noted that new equipment order order activity continues to be strong and appears to be sustainable. That result is a been a strong demand for the King Air three sixty and King Air two sixty with our autothrottle on the production aircraft. We are pleased to be working with the most some of the most respected names in the aviation industry, Textron, Boeing, Pilatus, and others. Cover story in a recent issue of Flying Magazine prominently mentioned, excuse me, the ThrustSense technology.

In the previous issue, we were selected by Flying magazine as a, editor's choice finalist, selecting three of the most innovative companies in the that for for that year. Among those two of three companies were SpaceX for landing their booster rocket on an island in the in the in North Atlantic, Garmin for automatically landing its five its its single engine airplane, and ThreatSense, our autothrottle, is one of the three most innovative products. In in the most recent issue, Flying Magazine mentioned our ThrustSense technology and and and its application in the King Air three sixty. The IS and S full regime autothrottle prevents the pilot from over torquing and over temperaturing the engine. This step since provides, most remarkably, VMCA protection.

That VMCA is, in fact, the loss of control loss of control of a twin engine airplane when you lose the engine, one engine. This has been a problem for a hundred years that have that has solved in a in, very high thrust turbofan aircraft, but has but causes more fatalities in in multiengine airplanes than even singles. We're especially pleased that the industry has embraced our autothrottle technology. It's the product is covered by multiple US and foreign patents and provides full authority digital engine control protection for existing installed engines on a retrofit basis. The revolutionary feature is the protection against fatal loss of control actions in which a loss of an engine causes the airplane to the the causes, I'm sorry, causes the pilot to lose control of the airplane, causing it to flip on its back and crash.

I was pleased at I I would we also noted that in an order in an order for 11 state of the art cockpit IP primary flight navigation systems for a premier online retailer that is upgrading its purchased seven six seven Boeing aircraft in response to expanding demand of air cargo operation. This has been noted before this has been noted before that the trend toward older aircraft being reconfigured for cargo operations remains strong.

Speaker 3

Excuse me.

Speaker 1

Main strong, and these aircraft provide a cost effective ease of entry for legacy carriers, also for newer operators initiating or expanding their air cargo platform. While revenues are growing with an increase in demand for aircraft on which we can have long term production contracts, we are also seeing strong demand for our legacy and retrofit products. In particular, air cargo remains robust as represented by previously mentioned order from a well known air airline retailer. This is very good business utilizing our standard flat panel displays, requiring only minor modifications as required. We continue to book orders and add to our backlog.

We continue to supply Eclipse with credit card upgrades. In addition, they have indicated additional needs, and we are currently discussing those needs with them. First nine months of the year have been very good as it affects as the effects of global pandemic were moderating. Nonetheless, we remain vigilant in watching for any signs of conditions to that change, including any impact on our supply chain. With a strong order book and momentum building, we feel that we've reached an inflection point.

The goal is to leverage the success for future growth and build value for our shareholders. I'd like to turn it over to Rell.

Speaker 2

Thank you, Jeff, and thank you all for joining us this morning. Looking at the third quarter, revenues were 6,200,000 an increase from $6,000,000 in the same quarter a year ago, but also up over $1,000,000 sequentially from the $5,100,000 in revenue in the second quarter of this year. As Jeff mentioned, we are building momentum in the business. Revenues were generated primarily from our OEM production contracts, including the PC-twenty four and King Air autothrottle programs, followed by sales in our air cargo customers. Gross margins for the quarter were 54%, consistent with our historical and recent margins.

Speaker 1

Total operating expenses for the second As everybody else tried. Of

Speaker 2

for the 2021 were $2,200,000 unchanged from the year ago quarter. Research and development expense decreased from the year ago quarter primarily due to the transition of programs from primarily STC development and certification to production. Research and development expense was almost 11% of our quarterly revenues, reflecting continued strong commitment to innovation and new product development even as production volumes increase. Selling, general and administrative expenses were up from the year ago quarter as a result of an increase in headcount and professional fees. We've selectively added to our organization to support current and anticipated growth.

We continue to emphasize tight operating cost controls and currently believe current quarterly operating expense levels will be maintained in the current range for the balance of the year. For the quarter, operating income was unchanged from a year ago at $1,200,000 We recognized a noncash $1,500,000 or $09 per share tax benefit in the quarter. In the 06/30/2021 quarter, valuation allowance were released for all federal and most state deferred tax assets. The company continues to be in a three year cumulative income position as well as continuing to have future forecasted income As a result, net income was $2,700,000 or $0.16 per share in the quarter, up from $1,300,000 or $07 per share in the year ago quarter. The company remains in a strong financial position.

Cash flow from operations was $1,500,000 in the quarter and $3,800,000 on a year to date basis. Despite the payment of approximately $20,000,000 in dividends this fiscal year, we've ended the period with cash and equivalents of $7,500,000 One quick note is that we did take a deposit for an order from a customer which added to cash and also correspondingly recorded in our current liabilities. This order is expected to be completed by fiscal year end. We anticipate being operating cash flow positive for the full year. The company is debt free.

Consequently, we believe the company has sufficient cash to fund operations for the foreseeable future. Now I'd like to turn the call over to Sharon.

Speaker 3

Thank you, Rael, and good morning, everyone. This was a rewarding quarter as we grew our revenues and increased our backlog, both indications that the demand for our products is increasing. The increased demand is from many sectors of the market, air cargo and general aviation, and for both OEM production and retrofit products. So let me provide additional information around some of our revenue generating programs that are driving our success. On the production the production side, we have mentioned that we have three foundational OEM products that we expect to generate recurring revenues over the next several years.

The Pilatus PC 24 program is continuing to grow as Pilatus steadily increases their production volumes for this successful aircraft. Our government contract on the KC 46 continues to run at expected production rates. We're also seeing interest from Boeing for additional systems for export. The conditions in the general aviation market are improving, and Textron noted the shortage of available used aircraft is driving demand for new aircraft. As a result, we are experiencing increased production rate for our King Air ThrustSense autothrottle.

Consequently, in addition to providing a stable base of recurring revenue on the OEM side, our autothrottle production line is also becoming a growth engine on the aftermarket side with Textron. We expect we expect to rebound in this market to generate increased activity in the general retrofit market for the King Air as well as the PC 12 autothrottle through our other dealer and maintenance center networks. As previously articulated and as illustrated in the article by Fire magazine, our autothrottle is getting a lot of attention and therefore is the focus of our research and development efforts. Growth potential is very strong in many different markets, and we are in the process of responding to requests from OEMs for additional Orothol platforms. Despite overall market sluggishness in the air transport sector, we are having success in the retrofit market by serving the growth demand for our cargo capacity.

One high profile program is a contract we announced with a well known retailer that continues to grow the Boeing seven six seven fleet and is retrofitting the cockpits with our display system. But the growth of online shopping has attracted a host of other players into the market as well, and a fast way to build air cargo capacity is through a seven five seven or seven six seven conversion. With over 1,000 operational seven fifty seven and 767s available for cargo conversion, we expect to see our flat panel display business remain strong. New orders in the 2021 were $9,000,000 That is a steady increase from $7,600,000 in the second quarter and brings our total new orders for the year to 22,000,000 Backlog as of June 30 was $9,500,000 up $2,800,000 from the end of last quarter. Safety protocols throughout our industry from those at the FAA to those restricting travel to certain countries have been an obstacle we have had to navigate in our business development efforts.

In addition, as Jeff noted, they also have added complexity to the supply chain that burdens our production process. Fortunately, we have managed to successfully negotiate these challenges by anticipating potential issues and have minimized their impact on our business. This has us confident in our future as we believe the eventual relaxation of COVID-nineteen related restrictions will provide our business a healthy tailwind. Before turning the call back to Jeff, let me quickly applaud the ongoing efforts of our employees to integrate new safety protocols into our standard operating procedures and which has enabled us to maintain productivity without jeopardizing their health, safety or well-being. I'd now like to turn the call back to Jeff for some closing remarks.

Speaker 1

Thanks, Sharon. It was a real strong third quarter with progress achieved across virtually all of our key performance metrics. Remember earlier this year, we distributed nearly $20,000,000 in dividends to our shareholders, and we now have been building our momentum across the business to reward our loyalty even further. We've increased our cash by 50% from operations. We expect this momentum, a recovering market, and a strong balance sheet, and a growing backlog to lead to continued success.

Operator, please turn this over for questions.

Speaker 0

We will now begin the question and answer session. You are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. Our first question comes from David Campbell with Thompson David and Company. Please go ahead.

Speaker 4

Hey, Jeff. Hey, it's Rob and Rob. Congratulations. What a quarter.

Speaker 1

Good morning. How are you? It's Good talking to you.

Speaker 4

It's finally coming through. Well, I'm looking for look. We we we have a

Speaker 1

good we have a good situation. You've been a a a staunch supporter. Things are starting to all come together. We survived the pandemic pandemic happily, so we're not in a recovery mode, but rather a continued operations mode. I give the the the the entire team incredible credit.

But, importantly, this retailer we're talking about, will probably build a fleet of over 500 aircraft over the next three to five years. And we're happy that he's chosen to put our equipment on the latest conversions and more than 50% of their fleet.

Speaker 4

What about FedEx? They're expanding. They're adding aircraft. Are you are you do you have business there?

Speaker 1

But but FedEx is focusing now on buying things like MAXs because the MAXs now, as you can imagine, inexpensive relatively, and they're re and they have a re reasonable volume. So, I think for FedEx and some of the other package carriers, they're focusing focusing on on new airplanes from Boeing. Boeing look look at you you know there's gonna be big demand for it. Look at Airbus. Airbus has just announced a three their three thirty cargo, a cargo version of the three thirty.

Speaker 4

Right.

Speaker 1

And so what we believe is we're I we think that we see a number of smaller package carriers seeking a large volume of seven sixty seven, and that's our cockpit. And our the only com competitive cockpit takes four times as long to install almost a month, costs significantly more, and has a much lower proven reliability.

Speaker 4

I'm looking for problems, and I see supply chain problems with some companies largely because of the shortage of semiconductors. Is that likely to impact your deliveries?

Speaker 1

Well, look. I'm I'm I'm concerned about supply chain. We haven't had serious problems yet, but there's two problems in anything that's semi semiconductor related. Increasingly, the lifetime for a given semiconductor is getting shorter and shorter. They're coming up with new technologies, almost every year, which forces the obsolescence of some of the existing technology.

That's always an issue. To date, we haven't had a serious problem. But we design our designs are materially different than most designs in that we make our designs up of a series of smaller subassembly boards such that if we have a problem with a given technology, a given circuit as an example, which either goes obsolete or or you can't get, we're able we're able instead of modifying an entire system, we can take a small subs part subsystem part of that and modify that real readily. And we've been doing this kind of thing for over thirty years. It helps it.

It'll solve the problem entirely, but it sure doesn't mitigate it.

Speaker 4

So the simple answer is

Speaker 1

we're watching it. It's obviously an issue, but to date, we've been able to manage it very well.

Speaker 4

Uh-huh. That's great. That's great. And you'll you'll probably get some Airbus conversion business for is that a possibility?

Speaker 1

It's a possibility as well. But right now, we're we're delighted to be focusing on Boeing's five sevens and six sevens. We've as you know, we've got something five or 800 of them done already. And Mhmm. And it's been a a huge success.

The reliability of the of the equipment is is the best I've ever seen in my career. So we're we're we're delighted. We keep our fingers crossed, try to continue to keep our Well,

Speaker 4

based on your momentum and based on the 1,200,000.0 that you earned pretax in the June, I'm estimating you might make 2 and a half million pretax in the September.

Speaker 1

Yeah. Yeah. Yeah. You know what? I feel like I'm I'm a hurdler, and you're running ahead of me and raising the hurdle height every time.

But that's okay. Listen. You've been a great supporter. We appreciate it. Look.

I'll I I I need to get together with you. Next time you go up to New York, let me know. I'll meet you up there. I'll buy you a bunch. The I'm I'm being I'm being very, very circumspect because, you know, we're talking about another potential wave of COVID.

God knows what the politicians are gonna do. So I'm I think our best bet is is to execute on what we got and and just keep putting our our shoulder to the wheel. If we can grow faster than than we have in the past, I'll be delighted, but I'm not planning on

Speaker 4

Well, Jim, I I'm not flying around that much as I used to. I'm not coming to New York as much as I used to. The last trip I had to New York was was canceled by the host because of the COVID thing. So I I suggest you get in your King Air and fly down to Richmond, and I'll buy you lunch down here. Last last time I came down King Air?

Speaker 1

Last time I came down to see you, I came on a on a train, and I thought I

know it. I I I didn't see I didn't see any lights for two hours.

Speaker 4

But you didn't You didn't.

Speaker 1

You're right. I we got an airplane. I'll get me down there. We gotta do some flight testing anyway. Yeah.

Speaker 4

Thank you. Thank

Speaker 1

you, David. It's good talking to you.

Speaker 4

Yeah. You didn't have the king here the last time you came.

Speaker 1

You're right.

Speaker 4

Now you got the king here. There's no excuse. You gotta come down here.

Speaker 1

Yeah. I will. I will come down. You're right. I'll

Speaker 4

let someone else ask questions. Thank you.

Speaker 1

Thank you, Patrick. Good talking to you.

Speaker 0

Our next question comes from George Marimo with Pareto Ventures. Could

Speaker 5

you guys comment on the cadence of the retrofit business now on the autothrottle?

Speaker 1

It's much slower than I would like. That's principally be because we need to hire salesmen. All the business we have on retrofit now is principally coming through Textron and Textron service centers and upgrades of present owners of of King Airs through Textron. We now wanna directly attack the the the FBO separate, and we believe that that's a huge opportunity yet untapped. I can only tell you that I've now taken a personal interest in making that happen.

Speaker 5

Okay. And on the OEM business, like Textron, for example, what is the approximate time lag between when you need to ship your product to them for them to put it in their plane and ship their product? What's is it? A month, three months, six months? How how far ahead do they order the autothrottle to put in their plane?

Speaker 1

I I honestly can't give you an exact date, but I can tell you it's six to nine months. It's six to nine months because in the production cycle of the airplane, it takes that long. So they phase in the installation of it somewhere in the middle of of the manufacturer of the airplane. So it's more determined by the by how long it takes to build the airplane than it is anything else. And we've been servicing servicing them in in in many cases in a matter of weeks.

So and we're we're building now inventory so that we can deliver in in very short lead times times for our FBO customers and for Textron.

Speaker 5

Yes. Because looking at Textron numbers, they're planning on producing dramatically more planes in the back half of this year than the first half. So just that's why was sort of wondering about that.

Speaker 1

But we're loving it. But we're loving Yeah. But what and we're we we have we have already we're already looking at, automating certain functions just to to be able to get, repeatability. Not so much to save labor, but but to assure their quality and repeatability, especially as the volume grows. If if if there's any reassurance, the company has a history of growing its revenue very quickly.

And during the RBSM period, we increased production rates month over month by two:one. Don't wanna do it again, we did

Speaker 5

Well, I do.

Speaker 1

I know you do. It was it wasn't as bad as this happened, but we, we grew very, very quickly. And and the company honestly, the company's always been designed to do that because in the retrofit business, you have to assume that you have a potentially short lead time. And the company is geared to do that. So we're geared to accommodate the rapid growth we believe I hope Textron appreciates.

I think the industry, we've gotten tons of accolades for the autothrottle. And if you read the latest, verb edition of flying, it's almost like they said, gee, this is a great autothrottle. I'm looking what you can fix to it, an airplane.

Speaker 5

Yeah. Well, the way Textron's talking, I think you better be ready for a big back half here. So Right. About a conference call or two ago, you were talking about a new sort of lighter, lower cost version of autothrottle, if I have the words right. And I was wondering, is this sort of sort of version, be would applicable to sort of like a Cessna type plane?

Or what kind of plane would that be used for?

Speaker 1

Well, as an example, the the immediate target would be the Textron or Beechcraft 58 that which is a they're small like twin that periodically experiences these loss of control accidents. Mhmm. It's less critical in some of the smaller airplanes than it is in the King Airs.

Speaker 2

Yep.

Speaker 1

But we remember, King Airs is 5,000 King Airs. They're all potential market. So it it it's possible to to deliver 50 to a 100 a month for the foreseeable future. That would be a very nice thing if we could do that.

Speaker 5

And I I'm assuming that these autothrottles will go on the new remodeled c 90?

Speaker 1

They will. That hasn't been a prime target at this point. And the reason is it's a different, certification, group so that it will be a little bit more work to get certification. Not designing it, not applying it, but getting the FAA to approve it. It's it's approved under a different certification than the king the the February and three hundred.

Speaker 5

Okay. And how is the progress on new commercial OEMs and military?

Speaker 1

In military, it's good. Military military programs had to take a long time. You know, you sort of start, and it takes two or three years to get them going. But we're progressing and, we're progressing in a number of fronts, and we're pursuing that as we speak. There are, as you're aware, a significant number still of turboprop airplanes in the military all over the world.

So we we continue to to to bring our technology into those. To be perfectly fine with you, if I could if I could find 12 salesmen today, I'd hire them all.

Speaker 3

Okay.

Speaker 5

Well, man, you you might be recruiting me if it's like shooting fish in a barrel like that.

Speaker 1

It's not I don't know of any place where you shoot fish in a barrel, but I'll tell you one thing. It's rewarding, and they do love the product. They they just are thrilled. So I we were we we've been we've really enjoyed this. And we've got a lot of other products.

We were in a recent show, and we presented this autothrottle. And they said, oh, by the way, we'd like to take a look at your FlightCheck upgrades. So we got a a dozen people that were inquiring on that. So that's good business too.

Speaker 5

Yeah. It's great. Yeah. It sounds like you have a lot of momentum coming with the, and you and you're hitting all cylinders here.

Speaker 1

I've been doing this a long time. And every normally, I ever learned this. I got to keep pushing on the wheel all of the time because the minute you take your ride off of it, you you find out you got a very abrupt change in velocity. So far, so good. We're gonna keep at it.

I'm more concerned about a nice, steady, continuous, and predictable rise in our revenues and profits. And I think that's possible, and that's what we're focusing on. We look. We managed to actually grow the business in this pandemic pandemic when every every when the

Speaker 4

when our

Speaker 1

customers got decimated from the pandemic. So we're optimistic that we will continue to grow now that there's some general recovery.

Speaker 5

You for taking my questions.

Speaker 1

You're more than welcome. Thanks for asking, actually. Go ahead.

Speaker 0

Our next question comes from Michael Friedrich, a private investor. Please go ahead.

Speaker 6

Good morning, gentlemen. Yeah. Great quarter. Certainly, the new orders and the uptick in the in that area is very, very encouraging. I I just wanted to touch a bit.

I think the last caller went over most of my questions, but I want just go over some of the some of the things that really weren't touched on. So on current the current state of the FAA, and I know this is always sort of a a moving target, but I believe last quarter, I had asked if, you know, you guys had any any pending applications up there right now. And, you know, and have there been any approvals during the last quarter that that just basically things you didn't bother to or things you didn't didn't let us know about?

Speaker 1

We've got we've gotten, some STCs issued. I don't know precisely how many, but I can tell you that that I would be I would I would be more aware of serious problems, and I haven't heard of any serious problems. So that's the good news. To be blunt with you, this is probably as good a working relationship. Reminds me of the old days when I started the industry, and there was a a lot of mutual respect and confidence between the manufacturer and the FAA.

The FAA has been, in general terms, very, very cooperative and and and and diligent at the same time. So the reality is that they're they're work they work hard to try to get the, you know, to get make sure all the work is done, but yet it gets done in a reasonable period of time. So I Okay. Yeah. I never thought I would not complain about the FAA, but I can't complain about the FAA.

They're doing fine.

Speaker 6

That's awesome. Alright. So, Jeff, are there any, STCs right now pending that would be for other aircrafts other than the PC 12 or the, King Airs?

Speaker 1

Let me think for a minute. I I really need to I I need I need to get back on that. I

Speaker 6

am Yeah. And that would be just just on the just on the yeah. Just on ThrustSense, not on any of the other parts.

Speaker 1

That, we're constantly have probably no no new aircraft per se because they don't come along too often. But updates to the existing aircraft and making sure that we get the various versions of the King Air done so that we can accommodate, you know, that that whole 5,000 aircraft.

Speaker 6

Great. Great. So the previous caller had mentioned the and and touched back on the the cheaper version of the of the that might be available. Is would would there be a you know, I'm guessing there'd be more significant OEM possibilities in that area since there are so many more of those planes that are that are produced out there. Is that the way you're seeing it, Jeff, or do you do you believe it'll be, you know, kind of in line with the turboprop numbers?

Speaker 1

I honestly don't know. I can tell you that I've I've looked at the possibility of coming up with a lower cost, smaller version for application and less expensive aircraft. You know, the the King Air is probably on average five to seven times the cost of the smallest wins. So the owners don't wanna spend a lot of money. At the same time, it it's still a critical it still could be a critical component.

And I think people are now recognizing that it's not simply the auto throttles simply a cruise control. That is a significant and a very valuable reduction in pilot workload. And as that's becoming acknowledged by the people in the industry, the the market increases. In the meantime, we're it took me seventeen years to come up with the autothrottle we got. I'm hoping that the new one will take one.

I don't think I have seventeen years left to come up with another autothrottle. But this one Sure. But I think we could do it. And if there's a real demand for it, I believe we could we could fulfill that demand. Good news is we got we must have almost a half a half a dozen patents now on the autothrottle.

Various functions of the autothrottle. And Mhmm. So we have a pretty strong position. I'm happy to say.

Speaker 6

That's great. And, Jeff, did you just say in the within the past answer that you guys could do 50 to a 100 retrofits a month, you know, kind of ideally?

Speaker 1

I'd love to do it. The way but well, I need to we we need to go out and talk to the MROs. I mean, the the not only the MRO, but the FBOs, the the the individual shops all over the country as well as Textron. Textron has done a great job, but you really they're even looking now at putting together a a dedicated team to do these installations, which means that they can do them a half or a third of the time. So look.

Textron has been as as as cooperative as any OEM I've ever known. They've been wonderful. And we're working with them, but we wanna expand that. The market's there. We think we can get it accepted.

So we're gonna work at it. Get some salesmen out there.

Speaker 6

That's great. That's great. And, the online retailer who we use name, we cannot use. Of those 400 planes, I think that they'd have to add, do you expect to be a player on a majority of those? I mean, would those all be seven I don't

Speaker 1

think it we will either be on all of them or none of them. Oh, okay. We know we're on about 40 of them. So we think we're gonna be on all of them. If we treat our customer the way we should, we won't have a problem.

And you can it's it's the largest largest retailer of that kind in the world.

Speaker 6

Yeah. Yeah. Yeah. I could take a wild guess. Yeah.

Speaker 1

Well, I

Speaker 4

I Yeah.

Speaker 1

And and so we we just gotta do our job and support them. But but it's a unique system in that it's capable of even if you have any one of the components failure, you can still fly the airplane for for ten days. And that means that if the airplane's in Upper Jebeth in the middle of, Croatia or something, you know you're gonna be able to get it home and service it.

Speaker 4

And that's

Speaker 1

that's really important.

Speaker 6

And Yeah.

Speaker 1

You know, we're just trying to do our job and do it well.

Speaker 6

That's all. And and yeah. And one and one more question, and this is more for the people who might be listening today that haven't heard before. But can you just kind of quickly touch, Jeff, on the limited amount of downtime that that these planes have when when they're having a retrofit, if it was an active plane or a correction as compared to a normal flat panel display switch out?

Speaker 1

Well, there there's only one other system that's certified for five seven six seven retrofit. And from what we hear, I mean, our feedback is that it takes about fourteen hundred man hours to install it and roughly thirty days. Now that doesn't become a problem if you're doing a conversion from a passenger airplane to a cargo airplane because it's gonna be down for three months anyway. However, if you actually wanna bring an airplane in and that already that is already converted into a cargo airplane, and there's a lot

Speaker 4

of them, as you say,

Speaker 1

and wanna update the and wanna update the cockpit. And, with our equipment, we've had it done in as as little as twenty four hours. But, traditionally, it takes three to five days to install ours as opposed to three to four weeks, for our competitor. So we feel that we have a strong market advantage. There's only two of them that that I know that are certified for the five seven six seven.

Speaker 6

That's great. And and and there's a lower price point for the actual equipment as

Speaker 1

well. Correct? I think you need I I I'll I'll just briefly address that. The price point may really not be very important. I I I know we all think about it.

When we sell it, we think about it. But if you keep up a $7.06 7 on the ground, it costs you about $75,000 a day in lost revenue on that ship, on that asset. Okay? Well, guess what? If you put the airplane down for thirty days

Speaker 6

Yeah.

Speaker 1

I can't I can't I can't say if I'm gonna find it to even come close to it. You're talking about you're talking about, you know, orders of magnitude more. And so now that's not always true because a lot of times, it's installed during a a a passenger to cargo conversion. But when they're not, we have a distinct advantage, and and we do have a price advantage. But but I think all the other features more than compensate for any difference with deficiencies if there were, and we don't have any.

It's been a good product. It's got a good reputation and incredibly reliable. You're talking about 250, 300,000 MTVF. Lead time between value. It's a 100.

Speaker 6

Fantastic. Fantastic. Well, Jeff, everybody, thanks again. Great quarter. And, yeah, things are definitely looking very positive.

Hopefully, I'll be talking to you again in three or four months.

Speaker 1

Okay. Thanks.

Speaker 6

Alright. Take care.

Speaker 0

And our last question for today comes is a follow-up from David Campbell with Thompson David and Company. Please go ahead.

Speaker 4

Hey, Jeff. This is David. I've been trying to reach you several times on the telephone and your office number, and no one ever answers it. And I'm not sure you're you're getting the messages because I guess it's got with the COVID thing, you have a limited staff in the app.

Speaker 1

I'll send you I'll contact you. I've I've been, I've you know, I'm spending some time in Florida now, so I'm on the row on the road more often than not. And, I've had some some, a little bit of surgery done. So, one thing or another, I've been a little out of touch. I'll send you a note and and, make sure you got my number.

Okay?

Speaker 4

Yeah. Make sure if I if I got a cell number, that would be good.

Speaker 1

I will. But I don't wanna give it to you on a yeah. Yeah. Where am taking a time? Sure.

Yeah. Okay. Look forward to seeing you, David. Thanks.

Speaker 4

Thanks a lot.

Speaker 1

Actually, I just wanna skip my phone number. The hell is going on with my stock? Hello?

Speaker 0

Next question comes from Michael Wieser with Wieser Partners. Please go ahead.

Speaker 7

Hi, Jeff. Thank you for all your good work. I'm relatively new to this, but thought occurred. Just wondering about your commentary on whether you've had much contact with the liability insurance carriers who, particularly for commercial users of King Airs, are insuring the owners of those aircraft. It seemed like

Speaker 1

I remember the question, and I remember you doing it. And and and I applaud that. I actually think strange enough. I would have thought that Yeah. The the insurance companies would be all over it.

I guess insurance companies are like the rest of people. Don't do anything until somebody runs over their foot. And then when they run over their foot, then they get serious. I suspect they're preoccupied with other things. Well, actually, has talked to them Yep.

And commented and has comments. So I'm gonna turn it over to Ralph to answer your question. So yeah. So

Speaker 4

Thank you.

Speaker 2

Insurance people, we have been educating the underwriters. We are sending them information, trying to talk to them. We just sent them sent out the flying article to many of the underwriters. But it seems, to what Jeff just said, hard to get traction. I mean, you'd think it's a no brainer, but we're yet to, you know, get some more traction.

So we keep following up and keep doing it, and, the light bulb will come on. Because I think if it comes on to one, it'll come on to to many.

Speaker 1

Sadly, I think what's gonna what I'd anticipate in a way is that if I were to lose a family member in a crash, I would be angry, obviously. And they and they would probably say, look. You knew this technology was available to make your airplane safer, and you didn't employ it. And I'm gonna go after you. And when you have one of those happen, then then you you relook at the problem in a different way.

Speaker 7

It seems like if you're a commercial user of the King Air or a corporate user of a King Air, and this technology is available and you can meaningfully reduce the perspective liability of operating that aircraft that that you are malfeasened.

Speaker 1

And why do you know that's exactly the words I would use? I agree with you a 100%. I would say, are you crazy? You knew that this was that this could happen. Well, I found I actually asked a an attorney in New York what he thought.

And and the malfeasance, if as it becomes more obvious, then you can really make the case. Well, there's a case for malfeasance, but you need it's gotta be pretty well understood. The recent articles in Flying Magazine has so strongly publicized the advantages and the safety issues associated with the autothrottle. It's probably getting to that tipping point. We'll see.

Look.

Speaker 7

Well, not to not to belabor the point, but to the extent that you reach out to the trade publications in the liability insurance arena, They may find this technology interesting. I, you know, I'd encourage your continued efforts. It it seems like it seems like it would be an important factor in in delivering services to the 5,000 King Airs that are extant. So, anyway, thank you for your good work and for responding.

Speaker 1

Your point's very well taken. I can tell you that when the FAA told us that they lost a 100 people a year and what we were doing would save their lives, It was humbling. I mean, I don't know about you, but nothing I've ever done in my life saved anybody's life. So including my home. So it is it is a it is a wonderful opportunity to sort of give back for good fortune, which I've had plenty of.

So I'm Good. I'm I'm I'm I'm I agree with you a 100%. Hopefully, we'll get some traction.

Speaker 3

Good. Thank you.

Speaker 1

Thank you. For your interest continued interest. Thank you. Alright. It looks like it.

Speaker 0

This concludes the question and answer session. I would like to turn the conference back over to Mr. Jeffrey Hedrick for any closing remarks.

Speaker 1

No. We're done. We're done. Thank you. The

Speaker 0

conference has now concluded. Thank you for attending today's presentation. You may now disconnect.