Good morning, ladies and gentlemen, and welcome to the Innovative Solutions & Support fourth quarter 2018 fiscal earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. If your question has been addressed, you may withdraw from the queue by pressing star then two. Please note that this event is being recorded. At this time, I would like to turn the conference over to Mr. Geoffrey Hedrick, Chairman and Chief Executive Officer. Please go ahead, sir.
Good morning. This is Jeff Hedrick. I'd like to welcome you this morning to our conference call to discuss our performance for the fourth quarter and fiscal year 2018, current business conditions, and our outlook for the upcoming year. Joining me today are Shahram Askarpour, our President, and Rel Winand, our CFO. Before I begin, I'd like Rel to read the safe harbor message. Rel?
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 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 10K, which is on file with the SEC and other public filings. Now I'll turn the call back to Jeff.
Thank you, Rel. In fiscal 2018, revenue and operating results were both down from fiscal 2017. These results are disappointing, but with our strong financial position and by entering the new year with a portfolio of cockpit technology products that we believe are ideally positioned to capitalize on the growing demand for technologies that improve both safety and performance of aircraft in commercial, military, and general aviation markets. Over the past 12 months, we have focused on preparing for the growth opportunity we see with our patented ThrustSense Autothrottle. At the board's recommendation, we engaged an outside consulting firm to perform independent assessment of the market opportunities and review our four-year business plan. FLYING Magazine chose our ThrustSense Autothrottle for its nine-page November cover story. In this article, they said our technology transforms the turboprop single and called the backup display that doubles as brains of the system ingenious.
They concluded that for owners of the PC-12, an upgrade to the IS&S NextGen 2015 cockpit can make sound operational sense by providing maximum flexibility and access to the 21st-century aerospace tools. Not to mention it removes 60 pounds of weight. Because it is designed to function in virtually any Pratt & Whitney PT6 powered airplane, they see a very, very large market opportunity. To date, both Pilatus PC-12 Classic and NG have been certified, and an STC for the King Air is expected shortly. By note, this is the first and only STC the FAA has issued to a turbo prop autothrottle. Certifications on these models provide a blueprint for a quickly expand out into the manufacturers of other PT6 aircraft so that we are continuously enlarging our market opportunity.
Consequently, we have realigned and strengthened all of the various functions needed to support the growth of our Autothrottle business. As mentioned in the last quarter, this stronger technical and product expertise at the point of the customer contact is expected to improve market development and increase penetration. Excuse me. We have also eliminated peripheral and other spending that was not core to our future plans and strategy, thereby reducing any drag on operations and lowering our cost structure. We are now focused on the kind of product innovations which built IS&S. We believe that there is no product currently on the market like the patented AutoThrottle. Consequently, throughout development, we understood that to be a success, we are going to have to make a commitment to marketing commensurate with our engineering effort. The market has just needed to be informed about this new functionality.
Our initial marketing efforts have yielded very encouraging results. Shahram will go through them in more detail, but from an aviation experts and FLYING Magazine that conducted a flight test and an owners and operators at the recent NBAA show, the reception has been extremely encouraging. Let me turn it over to Rel for the discussion of financials.
Thank you, Jeff. Thank you all for joining us this morning. Revenues for fiscal 2018 were $13 million compared to $16.8 million for fiscal 2017. Gross margins for the year was 47%, down slightly from 48% a year ago. The relatively unchanged gross margin on lower 2018 sales reflects increased customer service revenue, which yields higher gross margins, and the workforce reduction which occurred in the third quarter of fiscal. Total operating expenses for the year were $10.3 million compared to $8.2 million in 2017. However, total operating expenses were actually down approximately $1.5 million in 2018 compared to 2017, if you exclude the fiscal 2017 bad debt reversal that reduced selling and general and administrative expenses by $3.6 million in fiscal 2017. Research and development was down approximately $900,000 in 2018 from a year ago, in part reflecting the impact of the workforce reductions undertaken in the third quarter.
While R&D expenses were down on an absolute basis, we continue to make a significant commitment to R&D as a proportion of total revenues. For the fiscal year 2018, selling, general and administrative costs were down $600,000, primarily reflecting reduced legal expense from a year ago after giving effect to the bad debt reversal in fiscal 2017. Even though we're already at low base, we believe that the workforce reduction undertaken in the third quarter could result in further decreases in the future selling, general and, administrative expenses. For the year, we reported a net loss of $3.7 million or $0.22 per share. A year ago, the $3.6 million reversal of a bad debt reserve, a $4.1 million legal settlement, and $700,000 earned on the sale of Pennsylvania R&D tax credits enabled us to report net income of $4.6 million or $0.27 per share.
For the fourth quarter of fiscal 2018, we reported revenues of $3.6 million compared to $4.2 million in the fourth quarter of fiscal 2017. Due to the cost savings generated by the third quarter fiscal 2018 reduction in force, gross margin was 50% as compared to the fourth quarter 2017 gross margin of 44%. Also reflecting the workforce reduction, research and development expense was down $500,000 or 44% in the fourth quarter of fiscal 2018 as compared to the fourth quarter of fiscal 2017. The fourth quarter fiscal 2018 net loss was $414,000, or $0.02 per share. The fourth quarter of 2017 net loss was $186,000 or $0.01 per share, which benefited from the sale of the Pennsylvania State R&D tax credits.
For the year, cash used in operations was $1.7 million, while we also used cash of $2.6 million in investing activities, primarily to purchase the King Air. Nevertheless, as September 30, 2018, we remain in strong financial condition with over $20 million of cash on hand and no debt. We believe the company has sufficient cash to fund operations for the foreseeable future. Now I'd like to turn the call over to Shahram.
Thank you, Rel. Good morning, everyone. Back in August, we indicated that our next few quarters may be a bit bumpy as our new strategy takes root. Efforts in the near term have been primarily focused on certifying our autothrottle on the King Air and other platforms, as well as establishing a formal autothrottle sales and marketing program that we believe can best capitalize on this compelling opportunity. From that perspective, we have made progress on several fronts. We have obtained several STCs for our patented ThrustSense® Autothrottle technology. Several others are imminent. We have adopted a new marketing strategy, which is product-oriented, aiming to improve our market penetration. We have also been building the infrastructure needed to ensure that the formal launch of our autothrottle into the market is fully supported.
Finally, we have reorganized such that we can concentrate our resources around our most valuable programs, which have enabled us to reduce costs and improve efficiency. We look into 2019, autothrottle remains our prime focus. Because ThrustSense AutoThrottle is a first of its kind patented technology, the process for obtaining our initial STCs has been quite exhaustive and time-consuming. Now that we have been through the process, we have a template that can be repeated to pursue STCs on other general aviation platforms, importantly, to do so expeditiously. We are in the enviable position as the only source for a product that, as Jeff mentioned, is receiving enthusiastic praise from the industry. To ensure the formal launch is successful, we have built an infrastructure that can quickly scale with demand.
All of the details have been worked out, manufacturing, fielding experienced business development professionals, writing training manuals, establishing a strong customer service capability. While we have yet to formally launch, market is already on the rise. Most recently, we experienced a warm reception from OEMs, installers, operators, and other attending NBAA. This has resulted in opportunities for our sales and marketing team to fly our autothrottle-equipped King Air and PC-12 to prospect locations where they are conducting live demonstrations. This is the most direct path to new orders. Headed into calendar 2019, we feel that we are well-positioned, the market is getting primed to capitalize on the innovative safety features, such as engine protection, speed envelope protection, and VMC protection in the case of multi-engine aircraft, as well as significant fuel savings that our autothrottle offers the general aviation market.
Looking at some of our ongoing programs, the PC-24 program is going well, having booked $3.4 million in orders over the course of fiscal 2018. Based on the success of this new aircraft, we may be in line for orders exceeding 40 ship sets per year over the coming years. The military market is showing renewed strength. Our KC-46A program continues to trend well, while in June we were awarded a contract to develop a new F-5 data computer for the US Navy. This new system will update antiquated analog equipment with new digital technology that is next-gen compliant, which makes this a product that will likely be of interest to other military aircraft operators. We also continue to ship products in the air transport retrofit market, where we have established a strong presence for the 737, 757, and 767 cockpit upgrades.
We are following the plan we have laid out to very carefully and deliberately bring our existing new autothrottle technology to market. Our goal is to execute efficiently from the start, we have dedicated time and resources to assuring that we are prepared to do so. We appreciate your support and confidence in our ability to continue to create value by bringing innovative new technologies to market. Let me turn the call back to Jeff for some closing remarks.
Thanks, Shahram. As you heard, over 2019, we intend to grow platforms for which we have certified the autothrottle while simultaneously developing these markets through aggressive sales and marketing program. The autothrottle's value proposition is compelling. It is the first and only Part 23 FAA certified turbo prop autothrottle, and it is patented in both the United States and Europe, issued. Industry authorities have flown the equipment and are impressed with its ability to reduce pilot workload and improve aircraft safety and performance. The upcoming year should be an exciting time for Innovative Solutions & Support. We thank you for the continued support and encouragement. On a side note, because the turbo prop autothrottle is newer that has never been certified before by the FAA, the certification, as Shahram commented, has been more protracted than anticipated. It included things like a 45-day industry comment solicitation and novelty review.
Application of the autothrottle's VMCA mitigation, which is unique and patented, serve to reduce, if not eliminate, common catastrophic multi-engine aircraft accidents. In conclusion, I appreciate your attention today and look forward to any questions you may have. Operator?
Thank you, Mr. Hedrick. We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If your question has been addressed, you may withdraw from the queue by pressing star then two. Once again, it is star one if you would like to ask a question, and we will pause briefly to assemble our roster.
Go ahead.
Our first question will be from Scott Lewis of Lewis Capital Management. Please go ahead.
Thank you. Good morning.
Good morning.
First of all, just congratulations on getting your expenses close to in line with your revenues. I had a question on the Utility Management System for the PC-24. I know that Pilatus is planning on picking up the pace of manufacturing quite a bit in the next year or two. Are your current orders reflective of the very slow pace they're starting with, or is Pilatus building up some inventory to start?
What we expect is that we will follow their growth, and they're being properly judicious in their production growth. As you know, the demand's there. The book is closed for the time being. We follow the demand closely. That gives us a line on what our expected deliveries to Pilatus are. In the meantime, we continue to support their program, which is growing well. Of course, the acceptance of the aircraft has been exceptional.
Yeah. If your orders, you think may double or triple from here compared to where they were this-
I don't know, double or triple. Remember, you have some initial orders that bring in a fair amount of equipment to stock support locations and support the fundamental inventory and work in process. After that, I would expect it to historically, reflect the actual production rate of the aircraft.
Okay, thank you. On the new air data system you're working for on the Navy, is that just for a single aircraft model for the Navy or for multiple models?
It's actually for the F-5 and potentially T-38 application, although we already make a T-38. It is in fact a reapplication of an existing product that we built for the A-10 that's in service and is showing remarkable performance reliability. We've adapted that technology to the F-5, which has minimized its development cost, accelerated the time for development, and the F-5 is probably one of the more universal aircraft, that desperately need an Air Data Computer. Bluntly, this Air Data Computer can then be, in turn, adapted to a variety of other applications, so that the core air data processes would be identical, and is identical, basically, to the A-10. It's only the peripheral interfaces that need to be adapted, and this new design should accommodate many of the opportunities that are out there.
Okay. Switching to the AutoThrottle, STC for the King Air. I know it's very difficult to say when the government would grant you the STC, Jeff, could you give me any more kind of flavor of where you are exactly in the process? Are you at least done with flight testing? It's all paperwork from here?
We're finished our flight testing, we're in the process of, unfortunately, this hit right at holiday time, everything stopped. We're ready to go for the government flight test, STC flight test. We've already demonstrated it to the FAA, they're well-versed in it. We are waiting for responses from the government now on our certification plan. When that's authorized and ready to go, we had hoped to get it done before the end of the year. It looks like it's going to be early next year that we should get this done. Frankly, the FAA has been unusually cooperative, recognizing this is really very new technology. One of the patented features of this is a system that will potentially eliminate a series of catastrophic malfunctions.
Much so that the FAA, one of the senior people at the FAA commented that we, as a country, lose one person every four days, that means die, due to a kind of aircraft accident that we would eliminate. He quoted that we would save lives with this. If that actually bears out, I would not only be very proud but very pleased.
Yeah. When you say it prevents an aircraft malfunction, are you talking about something different than just the difficulties of an engine out on a twin where you have sort of pilot error, or is there a literal malfunction?
Well, no. An engine out on a twin, as you obviously know, right now, even some of the most sophisticated aircraft are out there, like even the F-14, their solution was to immediately retard the remaining engine to something about half thrust so that you wouldn't have a yaw moment that would cause the airplane to roll over on its back, which is how many twins people crash, twins. Our system actually measures and anticipates the loss of that control and only proportionately reduces the thrust, meaning that you'd still have a thrust left and automatic sensing and haptic feedback of excessive speed or under speed, over speed, all of those conditions. It's quite remarkable, and it's a great feature, especially when a pilot's flying a twin, single pilot.
Got you. Thanks. Last question, a broader question, Jeff. You or Shahram said in the call that as a strategic matter, ISSC was going to go back to kind of its original focus of what made it successful. Can you just talk about what that focus is compared to maybe where you had gone that you thought had not been what made you originally successful? Relatedly, just what areas you're now getting out of so that you can focus on what it was that made you successful?
I think Shahram spoke to it, I'll reiterate. What we're doing is the things that built the business was called Innovative Solutions, not just the name of the business, but what we did for a living. Pursuing products where we could bring real product innovation, which reflected itself in better performance, better reliability, and hopefully reduce costs simultaneously. Simply producing a similar product or an ordinary solution is not an area that we believe that we can best serve. Essentially, we are now focusing on things like the Autothrottle and the Utility Management Systems. Systems that have never been designed or even conceived of before, that we can either get patents on or control the uniqueness of the technology, that gives us a special strength in the marketplace.
Okay. Thank you very much for all that. Good luck.
Thank you.
The next question will be from David Campbell of Thompson Davis & Company. Please go ahead.
Hi, Jeff. Hi, Shahram.
Hi, Dave.
I'm really sorry. I was disconnected. I may have missed some of your comments, your questions, and answers.
I'll try to reiterate them when you have a chance. I'll chat with you and go over with that. I'm more than happy to do that.
This is recorded.
It's recorded.
Okay. Well, thank you very much. I appreciate your help. You bought the King Air in April to essentially speed up the STC process, and I was wondering if you were satisfied that it's doing that.
Well, I think it's been invaluable doing that. I wanted to buy another airplane as much as I wanted another arthroscopic knee surgery. It served its purpose in every single way. The twin application for STC has been unusually, not unusually, but it has been difficult. It's been demanding, is probably the correct way of doing it, and appropriately so. Understand, it's never been done before. What we're doing is all new, and by the way, patented. Without the airplane, I believe we would not be able to do this program. We have extensively tested the equipment and demonstrated it even. Yes, it's been a good investment from that standpoint. I'm starting to feel like I'm playing polo. Anyway.
The use of the plane is about You mentioned that your flight testing has been completed, presumably you-
Oh, it's been completed. It's here, and now we have to demonstrate it for the FAA, so we still have a fair amount of time, but there'll be extensive demonstration flights to the FAA for final testing.
Mm-hmm. The other thing is it not possible to get orders, or you get some feel for companies that want this product, airlines and FBOs that want this product, until there's an STC? I'm surprised you can't take orders before the STC is complete.
Well, it's difficult. We're now in a role where we can take orders for the PC-12, and we will be able to take orders for the King Air, and we've got several other aircraft we're working on as well. We're seeing a significant activity, more activity than we've seen in total in the past, and we expect some very good results. We have a pro with a lot of experience, Tom Grunbeck, who's leading the effort. He has 10 years of experience in autothrottle, so he can help bring this thing to market. It's making an awareness that an autothrottle is something more than a cruise control. Pilots certainly don't feel they need a cruise control, but if you can provide them something that truly reduces their workload and provides significant safety features, you have a winning combination.
Demonstrating that and showing that, and remember, it's all very new. Nobody's ever done this before, and that's part of the certification effort that we're going through right now.
There was a $200,000 consulting fee. Was that in the fourth quarter, charged in the fourth quarter?
Yes.
Fourth quarter charge for consulting fee, what was the consulting fee for?
Consulting fee was, I mentioned it. In general as part of the board's responsibility that we routinely review the direction of the company and make sure that we're doing the best investment of the resources of the company for the stockholders. That's part of our fiduciary responsibility. Coupled with that, we decided that if we're going to go into a new product area like auto throttle, which is an area that we don't have extensive experience in, by the way, the industry doesn't have extensive experience, it was virtually mandatory that we get an informed objective review of the marketplace. We engaged an outside expert firm that does market research and product analysis and business plan analysis. That was a partial payment for a very extensive market research and product research program, which included things like webcasts and various other research into the individual market comments.
It's proving to be very valuable, and we all felt that it was essential because honestly, this market didn't exist except in the higher-end airplanes, because it was always seen to be too expensive in the lower-end airplanes. Lower end meaning $10 million.
What about SG&A going forward? Is that going to be at the fourth quarter level or lower?
SG&A?
Yes.
Well, if you adjust for that, it'll be lower. The first quarter going forward in 2019 is usually a little higher with the audit fees and things like that. We're a 930 fiscal under audit right now. I expect SG&A to be lower.
Yeah.
I think we have a reasonable control over our expenses. We've got focused. I think we're better focused. We have a good team working the issues, so we're not understaffed, but we're definitely not overstaffed. Now it's all a question of execution, and we're focusing very much on executing and getting the programs done on time, on budget.
How many employees were actually let go?
I can't give you an exact number, it was about 50.
Around 50? Yeah.
I'm confident we have a good staff. I remind you, I've watched the company from the time I was the only employee and plugged in a $9.99 telephone into the wall, and watched it grow from there. I believe I have at least an experienced sense of what adequate staffing looks like.
When you begin to manufacture the autothrottles based on orders, will there be an increase in staff to increase the production?
There might be, but it'll be direct labor. Remember, our direct labor represents less than 5% of our revenue. If I doubled it would have a very small impact on the P&L. The point is that we're mindful of is that we want to make sure that we're adequately staffed to support the demand, and the happy good news is that it is a remarkable design that takes very little manual labor. We have automatic stuff that takes care of it. It's really quite remarkable. We have automatic robotic machinery that can virtually manufacture 80% of it.
Right. The KC-46 tanker program, that's continuing?
It is. We're in qualification of a potentially obsolescence issue. It's moving along smoothly, and our support is fine. In fact, Boeing is here today.
Okay. Congratulate them when you see them. They raised their dividend today.
Oh, that's great.
Substantially raised their dividend.
That's a good thing. Well, I can tell you that it's grown a little bit. The stock has grown a little bit, about 10 times over the last 10 years, so that's pretty good. Yep. I guess they make a good product.
Right. Did you give us a backlog figure? I don't have the press release.
$3.6 million. $3.6.
$3.6 million, the backlog is basically unchanged.
Yeah. Remember, the backlog doesn't reflect any of the long-term programs.
Right.
We don't have all of the KC-46 sitting in backlog. We don't have the UMS. We don't have a number of products that are renewed on a quarterly, in some cases or annual basis. It's a lot more than that, obviously. That will always be that way because the days of people giving the 200, 300, and 500 piece orders for over a 10-year period just are gone. They prefer and appropriately renew the order on an annual basis.
Right. When you get orders for the autothrottles, they'll come from fixed base operators, won't they?
They'll come from a bunch of people. They'll come from FBOs. They'll come from fleet owners. For some fleet owners, this is terrific. We're seeing a remarkable growth in the industry. We had somebody record an interview about the autothrottle at NBAA. In the first week that it was online as YouTube, it got like 10,000 people looking at it, which I found amazing. We're beginning to see a real force going. We're working hard to apply it to a broad range of PT6 type of aircraft. There's many of them out there, tens of thousands of them.
There's no other authorities that you'll need to get once you get the STC for the autothrottle.
Well, you're going to get an STC on every aircraft that you have to get an STC, except that once you've gotten the big one is to get the twin and the things associated with twin operation. Subsequent STCs should be much easier. The FAA is showing the kind of prudence that you would expect from them, which is to make sure that this new technology is done and done correctly. They're doing that. As much as I get anxious, and I want to get it done, I respect what they're doing and happy every time I get on an airplane to know that they actually think through the problem. I've got no complaints at all. They've been supportive, obviously within their limits of their judicious approach.
Will you be doing the installations of the autothrottles, or will those be really up to fleet operators, Fixed-Base Operators?
No, they'll be installed by the dealers. It's a very easy installation. Depending on the aircraft, it could be a one-day or two-day installation.
By the dealers?
Right.
Right. Okay.
That gives them additional revenue, so they don't have to make all of their revenue by marking up the product. It's a good answer. It's a good solution.
Yeah. Okay. Well, let's hope we get some orders. Let's get the STC done, then we get some orders. We'll be on our way. We'll be on our way. Thanks a lot, Jeff. Thanks a lot, Shahram, and Rel.
Thank you.
Rel, good to see you. Good to hear your voice, too.
Yep. Thanks, David.
Yep.
The next question will be from Charlie Pine of Van Clemens & Company. Please go ahead.
Hi, good morning. Some of my questions have been answered, there's a few other things I'd like to have you address. In the last quarter, you talked about with the restructuring that you were going to have about $3.5 million of cost savings going forward. You obviously had an impact in the fourth quarter on your R&D line, I guess I'm curious to know with the workforce reduction and everything else, because your SG&A was basically flat in Q1. Are you still on track to be able to deliver $3.5 million of cost savings in 2019?
Yeah, absolutely. You saw it, as I talked to it before, you saw G&A obviously in the fourth quarter was somewhat impacted by what Jeff referred to for the consulting expense. You would've seen more of that, obviously. R&D, you see, you see it in the gross margin. We had higher margin percentage on lower sales. You see it in all the different phases of the cost structure.
Okay. The other thing I wanted to pursue with you was about the STC on ThrustSense. You said that you've completed your flight testing, the next stage is that the FAA has to do their flight test. How many flight tests do you anticipate, how long will they be spending on doing the flight testing?
Well, the flight testing itself per se, is probably only about four hours of testing. Getting all the paperwork done is a big part. Recognize they went out and solicited the entire industry for comments over a 45-day period, and then taking the report and evaluating it, et cetera, that takes another three weeks, and then you have Thanksgiving in the middle of it, then you have Christmas, and then you have New Year's. By the time you finish all of that, they're actually working harder than any other part of our government is, I'll guarantee you that. More effectively, I might add.
Well, that's good to hear. They have to do-
Actually, they're doing, honestly, it is a little painful, but they're doing it in a deliberate way, and I'm encouraged by the fact that they continue to move. I expected that if we came into Thanksgiving, which we did, without the STC, that we would see absolutely nothing until the first of the year, because typically, every business effectively slows down so much that they stop. In this case, they're actually moving on to my delight, actually. I still think it's going to be difficult to get something finished before January.
Okay. In other words, just to clarify, it's not a succession of a number of individual flight tests.
No.
There will just be one four-hour flight test by the FAA.
Probably two-hour flight tests, but right together. Recognize that the FAA has already done a familiarity flight test with the system, and assessed all of these very odd special features like VMC mitigation, the engine out mitigation. They actually sat in the airplane and witnessed it. With a certain amount of discomfort, I might add, myself included. It's terrific. They've been more than cooperative, and they had people from four different branches flying in the airplane to get oriented with the new technology. They've gone out of their way to try to stay up with the advancements that we're going to be certifying. I'm cautiously optimistic. It's just unfortunate that we've run into this holiday time, at a time when we're trying to get flight testing done.
Well, that being said, if the flight testing goes on the timeline that you're hoping for, and they seem to feel pretty committed to making the process work smoothly, but they're being rigorous at it. Do you feel cautiously optimistic that you might wind up having an STC by the end of your second quarter?
Yes.
Okay.
For us, it's important to get it done. We're happy to say that the system works extremely well, and we're seeing increasing applications to a broad number of other aircraft. We're very optimistic. By the way, patents were issued on this, both in Europe and in the United States, in record time, without exception. I have a lot of patents, and I don't remember a application that was signed off by the patent office without some comment, like, "Why did you do this, that, and the other?
Okay
Very enthusiastic about this program.
Okay, a couple other things. Recognizing that nothing is done until it's done, once you do have in hand an STC, how quickly afterwards do you think you'd actually start to be able to recognize revenue from it, from the King Airs?
Some revenue almost immediately.
Okay. Well, that's great to hear.
Once it's certified, we can install it in an airplane, we believe that there's opportunities out there right now that would be ready to go near the end of the second quarter, or the first quarter of a calendar quarter. By spring, we would expect to be doing installations.
Give a little bit more color, if you could, you said that there's actually literally tens of thousands of other Pratt & Whitney planes with these similar Pratt & Whitney engines, which could also be candidates.
It's probably the most universal plane. It's called the PT6. There's literally, I don't remember the numbers, there's 20,000 or 30,000. By the way, our system also works on drones, and we've got a number of inquiries for a new kind of drone that's coming out. We see a lot of application for it, and it's small, compact, extremely reliable, very unique, look, we've just got to get it done. The simple answer is, get the frigging thing done.
Well, we've been out here waiting a long time for it, so we're certainly ready and willing and able for that to occur, believe us.
Believe me, I know. You remember, I'm a stockholder as well.
Yes, I'm well aware of that. Okay.
Listen, I have been great. I have no complaints. I'm trying to give you as accurate a representation of what I believe we have. I got to be careful that my enthusiasm doesn't alter my judgment. That's all. That's in part, one of the reasons why I supported, strongly supported, an outside independent company that would come in and say, "Wait a second, you tell me what you're planning to do, when, and let's look at the market." They had this webcast to analyze the value of an autothrottle. We're trying to be sensible about this approach, so we don't just run off a little too adolescently. All right?
Okay. Last thing, just so I can check myself. You referred to a YouTube video on the ThrustSense® that was out there. Is that still up?
Yeah, it should be on the site, I believe now.
You can look at our site, and I think you'll see a couple of YouTube videos. There's one of them of the system, and there was one at the show. They should be available. If you have a problem, call in R el.
Link.
We'll send you the website. All right?
Okay. All right. Sounds good.
Thanks for your support.
Thanks a lot. Happy New Year, y'all.
Happy New Year to you.
The next question will be from Steve Rudd of Blackwall. Please go ahead.
Hi. First, thanks to all my colleagues for all their questions. Actually, they were all quite good.
I'm glad you're still there. I appreciate it.
Well, I'm glad you're still there as well. Just one last one for Shahram. You started out in your chat by saying that there was going to be some choppiness, which, of course, all of us understand is a euphemism for negative earnings. Is it that we go into the first quarter with that choppiness, and then Q2, we start to see things head in a more positive direction? Is that about a way to interpret it?
I think that's pretty close.
Pretty close.
What we're seeing is that revenues are going up, and the backlog's growing.
Okay, fair enough. Just out of curiosity, you keep calling it autothrottle, and yet to me, the most compelling part are these safety features. That just may be my own orientation. You explored, I take it, other names, that more closely line marketing, safety throttle, optimum throttle, because it did feel like autopilot or what do you call it, auto in the car. I don't know.
I think ThrustSense is what we've actually named it, and it's a trademark.
Okay, fair enough. As long as you get the word out, people will know what it means.
Well, the fun is that it's more than a speed control. It puts intelligence in what thrust you put in the airplane.
Okay.
By common sense, it has ThrustSense.
No, I think that one's better. Because I was focused on what it does, and that probably captures the sense a bit more.
I tell you, I hope that, I would say in the next three or four weeks, we'll have videos of the ThrustSense® actually doing VMC mitigation. It is a remarkable experience to actually see the autothrottle respond to the yawing of the airplane and actually correcting for it and preventing a catastrophic accident. It's quite remarkable, actually. It's never been done before.
Yeah. Sometimes there's a marketing thing you can work through. I've seen other safety devices in other industries. You work through insurers to have them require it as part of issuing their policy.
That's a good point. We hope when we get this, I think the insurance companies will recognize, especially in single-engine applications. Think about the guys that fly twins with their families on board. I can tell you, having flown for years with my wife, she would ask me how I was doing. They're concerned about their safety as well, the kids. All of this adds up. It's not a brutally expensive addition to the aircraft. It represents a relatively small investment compared to the price of the airplane.
You can spend a tremendous amount of time marketing to your direct industry. If you can market to the insurers, they either can.
Very good idea.
Flat out hire. Yeah.
Very good idea.
I'll give you a few examples with some others like that after the conference call.
Yep. Thanks for your idea. All right.
Sure.
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