FLYHT Aerospace Solutions Ltd.'s (FLYLF) CEO Bill Tempany on Q4 2020 Results - Earnings Call Transcript

FLYHT Aerospace Solutions Ltd. (OTC:FLYLF) Q4 2020 Earnings Conference Call April 8, 2021 9:00 AM ET

Company Participants

Bill Tempany - Chief Executive Officer

Alana Forbes - Chief Financial Officer

Conference Call Participants

Jaeson Schmidt - Lake Street

Marc Berger - MKB Associates

Operator

Thank you for standing by. This is the conference operator. Welcome to the FLYHT Aerospace Solutions Fourth quarter and Year-End 2020 Results Conference Call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there'll be an opportunity to ask questions. [Operator Instructions].

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 e-mail to [e-mail].

I would now like to turn the conference over to Bill Tempany, Chief Executive Officer for FLYHT. Please go ahead, Mr. Tempany.

Bill Tempany

Thanks very much, Reese. I’d like to welcome everybody to our year-end conference call. I - as I said in my letter, I think there's nobody in the world that isn't happy to see the end of 2020 and anxiously wondering what's going to happen in 2021. While we're going to go through the numbers for fourth quarter and the year-end, I think it's really important that everybody focus on what's coming as opposed to what's happened in the past.

We've done a major reorganization of the company and our capabilities, our staff, our direction, and our focus on our existing customers. And we now have a place -- a team in place that's been trained and is excited to add value to the data we've been collecting for 20 years, providing solutions to our customers that are going to help them recover from the pandemic. And everybody is kind of waiting with bated breath to see who ends the vaccine versus the variant war. I think Canada is behind most of the other world as far as that battle goes, but certainly indications are from various other parts of the world that the vaccinations are working and people are looking to get back to life as normal and travel and so on.

We're quite pleased that probably 95 or better percentage of our customers survived the pandemic. We had a couple of customers that went into receivership. They've re-emerged as new companies and come back to buy services and products from us. All of our customers have taken a major hit to their fleet size, their staff size, their routes, and therefore a very significant hit to our recurring revenue, but it's a temporary thing.

And the government support that we've got both in the U.S and Canada to help maintain our key resources, our people has been a huge help in getting us to a point where we are really excited and poised to have a very, very good bunch of quarters coming up. And we're not sure when that's going to start. There's so much uncertainty around regulations and government rules and regulations. How are you going to travel? When are you going to travel? What are you allowed to do? What are you not allowed to do? That we need clarity and our customers need clarity before we can give you a real solid picture when that is. But I'm really pleased about the position we're in going into the recovery phase.

We have about $8 million of cash resources available to us, as you saw on the year-end statement. We ended the year with about $5.1 million in cash. We have a couple of million dollars in undrawn down government funds from programs that were approved prior to the pandemic.

We've got a $1.5 million operating line that we haven't touched. And there's a bunch of government programs that we're working with around the clean energy the CO2 reductions that we play a very key role in being able to help airlines meet targets as far as CO2 goes. Our Board has been very focused on making sure that we're part of that shift to a greener environment. And we're helping our airlines get the tools together to be able to do that.

We firmly believe that the roughest months are behind us. The recovery seemed to be going pretty good back in July, August, September. We had month-over-month increases in SaaS revenue, hard revenue -- hardware revenues have been bad because nobody is flying their aircraft and they're certainly not spending capital. But all the indications we have from our customers is that over the next couple of quarters, things will start to get back to normal. And we have the momentum with our staff, with our programs and with our customers to deliver lots of high-value items very quickly.

One of the things that I'll talk about after Alana goes through our results is the work that we're doing to deliver our new applications to our customers. We do have software ready to deliver this quarter. Whether or not those customers are going to be flying or not and generating revenue, it's something that's sort of outside of our control. But we will have revenue from Actionable Intelligence in Q2 or Q3, again, depending on what happens with government regulations and the ability to open up the industry.

So I'm very excited about where we're going in 2021 and 2022. I'm going to talk about more of that in the question-and-answer period. But I'll turn the call over to Alana to review what happened last quarter and last year. And again, encourage people to think about the company and where we are and what we've done to refocus and restrategize the company more so than the results in a year that everybody wants to forget. Alana?

Alana Forbes

Thanks, Bill, and thank you all for joining us on this call. I hope everyone is well. In the fourth quarter, we continued to manage through the challenges to our business presented by the decline in global passenger traffic activity while also preparing for the eventual recovery by investing in technology and sales and marketing initiatives for our software offerings. We remained vigilant on controlling costs and managing our cost position, and we'll retain this focus as the recovery plays out on an uneven basis across our geographies and our customer categories.

I'd now like to review the results from the fourth quarter before visiting full-year results, and then I will discuss some of the key changes to our balance sheet.

In the fourth quarter, revenue decreased by 21% to $3.4 million from $4.3 million in the same quarter last year. High double-digit increases in hardware and technical services revenue were more than offset by decreases in SaaS and licensing revenue. SaaS revenue decreased 40% to $1.6 million in Q4 2020 from $2.7 million in Q4 of 2019, and accounted for 48% of total revenue in the quarter compared to 63% of total revenue a year ago, as hardware sales represented a larger portion of our Q4 revenues this year. The decrease in SaaS revenue was due to the decline in overall customer flights and flight hours during the pandemic with a fewer number of customer aircrafts flying throughout the quarter.

Our net SaaS customer attrition was 7% from Q4 2019 to Q4 2020 and with one of our customers, as Bill mentioned, who left in early 2020 due to Chapter 11 proceedings coming back to FLYHT when they reorganized later in the year.

While our hardware revenue decreased significantly during the year as airline customers delay deliveries and c-checks, in the quarter, hardware revenue increased 127% to $1.5 million versus $658,000 in Q4 2019. The increase was primarily due to recognizing revenue from 23 installation kits in Q4 of 2020 compared to just 13% in the same period last year. And encouragingly, this was up from just one kit shipped in the third quarter last year and represented our highest quarter of the year in this area.

Revenue from licensing fees remained fairly immaterial in the fourth quarter of 2020, decreasing 94% to $48,000 from $772,000 in Q4 of 2019. This year-over-year decrease in licensing revenue was a result of differences in the number of modems and related license fees that were ordered in Q4 2020 versus 2019. Licensing revenues have historically been quite lumpy between quarters, and we anticipate this lag of quarter-over-quarter consistency will continue into the future.

We ended 2020 with $29 million in contracted backlog that we anticipate will convert to revenue on average over the next 2 to 2.5 years, of which about half is future SaaS revenues. While our contracted backlog is much higher than this number, we have been scrubbing our contracted numbers pretty heavily this year to land on a number we anticipate to be realistic, given our customers' near-term adjusted plans for their fleets.

Gross margin in the fourth quarter of 2020 was 56% compared to 63% in Q4 of 2019. The decrease in gross margin mainly reflects changes in the mix of revenue sources as Q4 2020 revenue included a larger contribution from hardware, which has the lowest gross margin among our revenue sources. Operating expenses decreased 13% to $3.7 million in Q4 of 2020 from $4.3 million in Q4 of 2019. The fourth quarter was a bit unusual within 2020 as there were a few one-time people costs included in fourth quarter results, which offset the continued success we've had in our focus on controlling expenses.

Q4 operating expense decreases were mainly in the categories of travel and in governmental support received. In Q1 2021, we'll see people costs fall back to be more in line with previous 2020 quarters, which is also in line with our strategy of increased emphasis on the development and sale of SaaS solutions to our customers as they seek to recover from the pandemic. We funded operations in the quarter, primarily through the proceeds from cash received from sales, including strong collections and various government programs, including the Canadian Emergency Wage Subsidy, Canada Emergency Rent Subsidy, the U.S.

Paycheck Protection Program and contributions from the Western Innovation Initiative.

Finance costs in the quarter decreased by $83,000 over Q4 2019 due to the recognition of a non-cash gain, showing the value of the payment deferrals granted by the Canadian government for our loans that are currently in the repayment phase. This gain was partially offset by negatively impactful changes in the exchange rate between the Canadian and the U.S. currencies during the quarter.

And now looking at our annual results. Total revenue decreased by 36% to $13.7 million in 2020 from $21.2 million in 2019. An increase in licensing revenue this past year was more than offset by declines in our other 3 sources of revenue. SaaS revenue decreased 29% to $7.3 million from $10.2 million in 2019. As discussed earlier, when discussing the quarter, the decrease in SaaS revenue was due to the decline in overall customer flights and flight hours during the pandemic. SaaS revenues accounted for 54% of total revenue in 2020 compared to 48% of total revenue in 2019.

We have received some investor questions recently regarding the impact on -- of the pandemic on the portion of SaaS revenues relating to the weather business. Throughout 2020, while overall SaaS revenues decreased by 29%, the weather sounding portion has decreased by about half. The main contributor to this area of decrease was the closing of the Malaysian borders through the pandemic. This has been offset to a small extent by the progress made in our ability to use AMDAR data available to us to enhance our offering on that side of the house.

Hardware revenue was significantly impacted by the pandemic last year, decreasing by 65% to $2.3 million. The decrease was primarily due to a lower number of installation kits shipped during the year. We recognized revenue from 34 installation kits during 2020 compared to 133 kits in 2019. Licensing revenue increased by 12% to $3.6 million in 2020 from $3.2 million in 2019, which marks a second year-over-year increase in this category. Revenue in this category continues to be lumpy in timing and is dependent entirely on orders received.

Gross margin expanded 68% in 2020 compared to 58% in 2019. The improvement in gross margin was driven mainly by a favorable revenue mix to our higher-margin SaaS and licensing businesses. Operating expenses decreased in the year 21% to $12.8 million in 2020 from $16.3 million in 2019. Just over $2 million of this difference was due to the receipt of governmental support. The remainder of the decrease is due to cost constraints and reductions, particularly in people costs and in travel expenses.

For the full year of 2020, we recognized a total of $2.1 million in governmental financial relief related to COVID-19, which has been applied to offset associated expenses in all 3 of our expense categories, distribution, admin and research and development. Other income of $807,000 earned in 2020 related to the recognition of subsidy payments and reconciling items from the 2018 asset acquisition of Panasonic Weather Solutions, which were all recognized by the end of Q2 2020. This compares to 2019 other income of $4.1 million, which had been received under the same program.

Finance costs decreased by $407,000 over the prior year due mainly to gains relating to our outstanding government loans. The Canadian government deferred the payment due dates on loans that are in the repayment phase and the benefit derived from that delay is a non-cash gain included as a recovery against our finance costs.

And now turning to our balance sheet. We ended 2020 with $5.1 million in cash reserves, up from $4.1 million at the end of last year. Despite the unprecedented headwinds facing the commercial air industry, we offset our revenue declines with disciplined cost control and effective cash management. We benefited from strong collections due to our close relationships with our customers, contributions from various government support programs and $380,000 in proceeds from the exercise of warrants associated with our convertible debenture in the fourth quarter.

At the end of 2020, we had $5.4 million of loans and borrowings accrued on the balance sheet. Of this amount, just under $1.7 million relates to our convertible debenture maturing this July, and the remainder is low and zero coupon long-term government loans. And speaking of those debentures, we do have several options for dealing with this convertible debt, debt that is maturing in July if our share price isn't quite back up to the conversion target by then. One option is to [show] the cash to extinguish it. Other options include requesting an extension, which will require debenture holder approval. There are several extension options available to us for anywhere up to a maximum of 5 years, each of which will require a different level of approval from shareholders and the TSX. But we believe we are likely to have some of these available to us given our relationships with the holders.

At December 31, 2020, we have $8.9 million in liquidity, including the $5.1 million of cash and cash equivalents, $1.5 million undrawn on our credit facility just under $2 million in contributions available under WINN loans and an estimated $325,000 additional funding available to us, representing 6 months of subsidy from the Canadian government.

Looking to 2021, we continue to execute on our AI strategy, working to fund our operations through internal sources as we march towards our goal of profitability emerging from these pandemic times. We've been hard at work to ensure that FLYHT has the cost structure aligned with our current revenue and capital resources to operate through these difficult times. We're encouraged that we're cycling past the bottom, which was in April and May of 2020. And as the industry recovers, albeit unevenly among our customers and geographies, that FLYHT is in a position to deliver very attractive financial acceleration and shareholder value.

I'm just going to run now through a few questions with Bill that we've received in advance of this call via e-mail.

Question-and-Answer Session

A - Alana Forbes

Bill, the first one. Is FLYHT on track to see revenue in Q2 from the new Actionable Intelligence Software-as-a-Service?

Bill Tempany

We're certainly on track from a technology point of view. We had our Board meeting yesterday to approve our annual statements, and we demonstrated some of the functionality that's ready to go to customers. That rollout will happen during Q2. But one of our launch customers, as you know, is Swoop Airlines here in Calgary, their flights have been basically squashed by the federal government's stop travel policies because most of their flights are outside of Canada.

Canadians are discouraged from traveling inside Canada. We're in the process of rolling out to China Express, three of the initiatives. They've got a lot of work to do to get us set up with the data that we need because of regulations in China and we work with Amazon Web Services in China with a Chinese server there. But the Chinese government is very carefully watching anything that's done with a Canadian or U.S. company because of the diplomatic relationships we have going right now.

We're confident that we will get this done because we've been set up to work with those things in China for many, many years, and we've got everything in place to do it. But it seems that the pandemic is a huge problem for aviation and government policies tend to give us an extra headache to the other things. So the short answer is yes. Technically, we have software ready for delivery to our customers. Our customers have reviewed it and are ready to do it. Whether that turns into revenue in Q2 or Q3? It will happen in those two quarters, but not necessarily Q2 because of government interference.

Alana Forbes

Any update to your comments in the March 11 Aviation Week article about client timing?

Bill Tempany

We do have a bunch of clients that are reviewing contracts and reviewing functionality right now. There are a lot of companies that are looking for these kinds of solutions, both existing customers and new customers. We don't preannounce sales. And once the contracts are in, we will be putting them out. One of the things that I've done is rather than do quarterly updates, if there's a significant contract signed regardless of dollar value, we do press releases and we're going to continue that policy to make sure that our investors know what we're doing.

As I said in my opening remarks, 2020 is behind us. And looking forward, I think that you will see a lot of new names and all new opportunities come our way that are driven by our ability to add value to the data that we collect. And I think that is -- that you'll see this quarter, a quarter like Q2 and Q3 and beyond.

There is definitely a feeling in the industry that things are going to pick up. And people are seriously looking now at how they're going to manage that with reduced staff and reduced capabilities. I'm sure you've all seen the news that both Delta and United have had to cancel flights because they don't have enough pilots that are certified to take the flights that they've got booked and they're doing things to rush that.

The same thing happens to them with their operations group, the ground handling groups, all of those departments have been decimated by the pandemic and to recover as quickly as they need to, a lot of the tools that we've got built and ready to roll out are going to help them do that. So I'm very excited about where we're going in the next few quarters here.

Alana Forbes

Great. And the final one, what are you hearing from the airlines about COVID-19 vaccine passport?

Bill Tempany

Well, everybody has got a different view on it. I think personally, if I have to carry a passport that I've been vaccinated to travel, I will be lined up to get my passport the same as I have been for my vaccines. I've traveled for business for 50 years, and had to carry a vaccination passport years ago to go to Brazil to show that I had yellow fever and vaccinations and malaria and all those things. I don't see it as a problem, and I don't think any of the airlines do.

What the airlines are looking for is clarity on what does it take for somebody to go on a trip and come home and not have to go through the rigmarole that we have to go through today to get back home or to arrive in a country. And I was really encouraged to hear that the U.S. has opened it up that if you've had your two vaccinations and you wear a mask on the airplane, you're free to fly and you don't have to quarantine when you come home. I hope the Canadian government comes to some realistic resolution to the silliness they've got going right now with the hotel situation if you fly in from another country. We're watching very closely what's happening in Europe.

Southeast Asia, I don't think has a plan yet. But Europe, they are looking at ways to open the border and get things moving there. We need to get the Canadian government to catch up in a lot of different areas to allow business to get back to business. We've taken a huge step backwards in Canada in the last week, going back to locking down restaurants and other selected facilities that the government doesn't like with no data coming from the government about why.

And it's very frustrating for all businesses to try and operate in a regulatory environment where there's no logic and no reason to anything that they're doing. But airlines are really -- in Canada, particularly, where there has been no government support, are really looking at tell us what we need to do, and we're willing to do it, but let us get back to business. So there's definitely a pent-up demand for travel and there's people wanting to get out and get back to normal. We just got to know what the rules are.

Alana Forbes

Okay. That was the end of the questions that we received in advance. So we'll go back to you, [Reese], for any questions from callers.

Operator

Thank you. We will now begin the question-and-answer session. [Operator Instructions]. The first question comes from Jaeson Schmidt with Lake Street Capital Markets. Please go ahead.

Jaeson Schmidt

Hey, guys, thanks for taking my questions and congrats on a nice finish to a challenging 2020. Just curious if you could comment on what you're seeing from an order momentum standpoint here in Q1? And I guess more importantly, if you've seen any meaningful cancellations?

Bill Tempany

We haven't had any meaningful cancellations. Delays are another thing, though. Everybody has delayed their c-checks because they aren't flying their aircraft, so they don't need to do them. They've delayed orders of new aircraft because they haven't been putting the hours on that they expected. But we haven't had any cancellation of orders to date, but we haven't had any confirmed shipments.

We expect probably by the end of Q3 that everybody will have their fleet decisions made and have their route structures reorganized, so they know what they're flying where. I think as an industry trend, there's going to be more smaller aircraft than large aircraft while the demand picks up. And that change in fleet structure is going to be really good for us because there's a bunch of companies, a bunch of our customers and new customers, they're going to be looking at ways to find smaller, more fuel-efficient aircraft to service their customers. And that's the sweet spot that FLYHT has been part of for many, many, many years.

Jaeson Schmidt

Okay. That's really helpful. And have you seen any big shift in the size of orders or the potential size of implementations, just with customers being a little uncertain given the macro downshifting some of the implementations that they were previously looking at?

Bill Tempany

Well, as I say, every airline on the planet today is evaluating their route structures, their fleet structures, their crew structures, their infrastructure operations, people, outsourcing, finding ways to get a more flexible cost base in their operations. But we've -- I've been on 3, 4 calls in the last 30 days We did a CEO to CEO reach out to all of our customers to talk about what we're doing and the things we're building and what their business is looking for. And bar none, all of them are looking for efficiencies in their operation and flexibility in their operation to be able to manage how many people they need and when they need them to get back into business without incurring a bunch of costs before the revenue picks up.

We've got a very strong sales pipeline that's growing on a daily basis with companies looking at Actionable Intelligence and better use of data, better uses of different data sources to manage that recovery. As far as fleet orders and new aircraft orders, I think if you've been watching the backlog with Airbus and Boeing, they're starting to pick up. They're starting to get back to shipping not as many aircraft as 2019, for sure, but more aircraft on a quarter-over-quarter basis. And we're talking to a lot of customers that are looking at those new aircraft shipments because of the green energy drive and emissions reduction and an opportunity for them to do a fleet upgrade to solve a bunch of problems that are going to be very, very good for us.

Jaeson Schmidt

Okay. I appreciate that color. And then just last 1 for me, and I'll jump back in the queue. Understand that gross margin can fluctuate quarter-to-quarter. But big picture, how should we think about gross margin for 2021, especially considering the SaaS revenue should continue to trend higher?

Bill Tempany

Well, providing everybody gets back to flying. And I looked at our results and AirAsia is 1 of the airlines that's been impacted the most in the pandemic because they fly in Malaysia, and 90% of their flights were international through the islands down there. Since they haven't been able to leave their country, the runway in Kuala Lumpur is just about the full length of Malaysia. So there's not a lot of flights going on in Malaysia. Their ability to get back to flying internationally and get that revenue back up to where it was and weather soundings back up to where it was because 1 of the things Alana talked about was a 50% reduction in our weather sounding data, the vast majority of those reductions were because of AirAsia doing 15% of the flights they did a year ago. And that's where a majority of our weather soundings were coming from.

But the thing to watch as the company grows is the growth in the SaaS revenue and the growth in the margins on the SaaS revenue as we start rolling out Actionable Intelligence. And again, until we know what the rules are and our airlines know what they can do, I can't forecast that it's going to be Q2 or Q3, but I don't think it's going to be on Q3 that you start seeing the impact of both the recovery of flights and the Actionable Intelligence revenues coming into that -- to increase those margins and increase that revenue. So I'm a 1,000,000% believer in we have the right solution coming for our customers. The growth is going to come from the SaaS revenue, not from the hardware. And we have a large installed client base that's excited about what we're doing with technology. They're going to help drive that SaaS revenue without even having to go find new customers.

Operator

The next question comes from [Bruce Krugel], a private investor.

Unidentified Analyst

Hi, Bill, Alana. Actually, you answered my question, which was, people are looking at FLYHT as a potential recovery stock for the back half of the year. And I was going to ask how could we expect to see this recovery unfold? And where could we expect to see it, but I think you've answered that quite comprehensively. So I'll move into the next one. Inventory, I've asked this before on the call, and I was expecting perhaps to see some movement on that front, i.e., inventory to the downside given that you sold 23 units. You've got a -- from my perspective, you have a fairly healthy level of current and long-term inventory. So when could we expect to see some decline in the main part on the long-term inventory side?

Bill Tempany

I'm going to let Alana answer that because that's a numbers question.

Alana Forbes

Yes. So our inventory, we -- like looking at Q4, we had a heavy demand for hardware, but we also have commitments with our suppliers that we have long lead times on a lot of our parts. And so we have to give them detailed schedules pretty far in advance, which through the pandemic has been reasonably tough. But I would say that as we're doing the best we can to try and forecast into the future, but I would say that I would look forward to reduced levels of inventory maybe around the end of the year, but I wouldn't be surprised if they remain fairly constant throughout the year, given our supplier commitments offset with what we think will happen on the hardware sales side.

Bill Tempany

And just to add to that a little bit, Bruce. The long-term inventory, there's a bunch of end-of-life parts that we had to buy so we can build another I think 2,800 AFIRS units, we've got the long lead time and obsolete parts to build. We'd have to buy more to build 2,800 units. I'm not saying we have all of the parts in stock. But with avionics products, you've got certification based on a certain part number and a certain manufacturer, and you can't swap those out without doing a whole bunch of recertification work. So as the product gets a little bit older, you end up buying more and more of these long lead time or critical components for the box. And each year, we go through and do a technology review on any potential obsolescence of those parts. And if something is going to be obsolete, then we have to go buy those parts ready to build those units. So that long-term inventory is not likely to change a lot because of the obsolescence and the recertification problem.

Unidentified Analyst

And a final question. What part of your AI strategy is resonating with clients? Which part of it do they say, that's what I want?

Bill Tempany

That's really geography-dependent. There's a lot of the U.S. airlines that last year didn't really have an interest in emissions reduction, that all of a sudden are looking at what we might be able to do for them for emissions reduction. The operators in Canada, particularly because of the number of layoffs they've had to do and the types of layoffs they've had to do, have outsourced a lot of the ground handling and aircraft grooming and things that were done with staff before. They've now got a contractor doing that, and they need to monitor differently than they did when it was a staff position to make sure that the right jobs being done and they're being charged to right amount and those kind of things. So that turn management IROPS ground handling piece is very important.

There's people that are looking at our capability around preventative maintenance, predictive maintenance, the ability to analyze fault codes from the aircraft and help them make sure that an aircraft doesn't land at an airport where there's no facilities, no mechanics to get it repaired and get it back in the air, that our real-time data gives them an advantage over anybody else to be able to do that. So each 1 of the launch customers have different requirements that they're looking at, which is really good for us because we've structured it so that we have multiple development teams that can work on these things. Again, because we're using existing technology, existing software, existing data, it's a matter of how we use and how we display and how we communicate that information. We're not out building brand-new-from-scratch systems because we've been managing this data for them for 20 years. Now all we're doing is getting it to them in a different format.

Operator

[Operator Instructions]. The next question comes from Marc Berger with MKB Associates.

Marc Berger

Good morning, Bill, Alana. Hope you guys are doing well. Okay. I had about 8 questions I sent in, but I guess you didn't get them, so I'll try to narrow them down to 3 or 4. First one is, you said you expect to have 3 clients using your AI starting in the second quarter. Is that in addition to the 2 launch customers? Or is that including the 2 launch customers?

Bill Tempany

That's the 3 launch customers.

Marc Berger

Okay. So the 3 on the launch. Alright. Could you give us an update on China since there seems to be the fastest one coming back up to full speed? What do you expect or what can we expect in the coming quarters? Do you think you're going to be adding new customers or add a major in there or a lot of the little guys?

Bill Tempany

We've got a lot of activity going on in China right now. We've got a bunch of their cargo operators that have started buying equipment and getting those upgraded. We've got -- it's a really interesting time right now with the positions of the Canadian and the U.S. government in China and what's going on with the trade wars. The U.S. government has come up with some regulations around dealing with Chinese companies that are considered to be [advanced] companies in China, and 1 of them happens to build their commercial airlines that we're working around. So we've got a really solid position in China. We have a very good reputation in China. And I believe that once we get China Express up and running with the full AI suite, we're going to see a very rapid adoption of our technologies in the Chinese airlines.

One of the things that I'm -- that we're working on is we've got a small hardware project that we're going to develop and deliver by the end of this year, a small device that allows us to get the key data of the aircraft when it lands instead of using satellite. It can be hooked up to existing aircraft regardless of what technology is on it, and we can drive a lot of the AI data in a very cost-effective manner. And I think that that's going to be a homerun in China. Our sales team in China is working with some launch customers on that. And I think that we've got a really large opportunity in China that continues to grow.

I know Marc, you and I have been at this for a lot of years, and we've talked about China 100 times, but we have made incredible progress in China. We have 40-plus airlines in China using our solutions, and we keep expanding every year the amount of services that we provide there. It's a slow, steady progress to get into China, and we're way ahead of any of our competitors in the China market. But I'm concerned about the politics, politics getting in the way of business as a part of our life. And right now, it's pretty scary what's going on between the U.S. government and China, the Canadian government and China, China and the rest of the world. I'm watching it very carefully to make sure that we stay as a preferred supplier over there and are not dragged into the mire that these guys are creating with the policy.

Marc Berger

Regarding our L3-Airbus partnerships, can you give us any more clarity as to what we might expect going forward? And also is the fact that Boeing's problems become Airbus' advantage, has that been helping us as well? And also with regard to the previous customers already have technology on, do we expect to hope that maybe they'll start taking our streaming services, especially with the new AI that you're working with?

Bill Tempany

Well, I think Airbus has a big advantage because they've got the 220 from Bombardier. I think the shift that I'm seeing globally in the aviation world is smaller, more fuel-efficient aircraft instead of the typical 737 and A320 competition, the A220 is filling a need in some pretty major markets worldwide. And we also -- our agreement -- our L3 Airbus agreement is for the 220 as well as the 320 and 330s. But I think that Boeing's problems and the things that they're getting through and trying to get cleaned up, I think they're fortunate that the pandemic came along. It gave them a year to do a bunch of stuff that kind of slowed the erosion of their market share because nobody was doing anything. So it's 1 of the few things that anybody could look at and say, okay, it was a good thing that the pandemic happened.

Our Airbus-Boeing relationship is solid. It has been for years and years. And I think the uptake on the 320 and the 330s is very high. Eventually, there's going to be a new product required that uses the new Iridium modem, the CERTUS modem. And we're working on a solution for that. It's an option in the hardware that we're going to deliver at the end of this year. And we continue to work with it.

Marc Berger

Okay. Last question. There's a new asset class that's being developed. It's called disruptive technology with major players there. Obviously, I would think that your technology would fit that bill right away. Do you see any of these new hedge funds or whatever that are specializing in that, coming to you to ask and get more information? Or are you looking to maybe get your PR people to go out, reach out to them to get them interested, to understand what your technology is about and how that will help them?

Bill Tempany

We're doing both of those, Marc. We're reaching out to all of those kinds of companies, and we're getting a lot of incoming calls from groups interested in what we're doing and where we're going. The investor market certainly is more interested in a SaaS revenue, recurring revenue company that's providing a critical service to a major industry than they are a niche hardware player that has to compete against a bunch of the big guys. I think that the work we're doing with artificial intelligence, machine learning, Actionable Intelligence is going to catch a lot of people's interest over the next 2 or 3 quarters. And that's why I started the call with saying, 2020 is behind us, you got to be looking forward. You got to be looking at what we're doing and the shift we've made and successfully made to help drive value to our customers and value to our shareholders through implementations of disruptive technology. And we've got that in a lot of different areas.

We're working with some very, very top of the -- top-class companies around the IoT, edge computing, taking advantage of our capability to detect and notify with things that could be done differently on the aircraft without major work that can be certified by our people, which is a unique capability of ours to be able to certify. One example of it is 1 of our customers -- everybody that works at an airport has to have a badge and they swipe through every door and they swipe through every piece of equipment they use. One of our customers wants us to put a card swipe in the front galley of the aircraft. And when the cleaner comes on, they swipe in, they swipe out, how long they were on board, how many of them there were, so you can prove that you did the cleaning you need to do for the government regulations. Those kinds of things we can do in a matter of a month or 2 where other companies had spent 3 years coming up with a solution. And it's those kinds of disruptive technologies that we are focused on and going to deliver going forward.

Operator

This concludes the question-and-answer session. I would like to turn the conference back over to Bill Tempany for closing remarks.

Bill Tempany

Okay. Well, I appreciate everybody listening in today. And as I keep saying, it's -- we've, I think, got through the worst of the pandemic. We feel very confident about the position we're in to be able to deliver the solutions that we're putting together. We firmly believe that Q3, Q4, probably even Q2 are going to show some of the recovery and strength. And again, it's -- we got to get governments to make some decisions and give us the rules we got to play by. And we're here with some absolutely wonderful things happening in the company from a product point of view, from a staff point of view and from a market point of view. So I'm very happy with where we're at and where we're going and very confident that we're going to be delivering value to everybody on a go-forward basis. So thanks for tuning in.

Operator

This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.