Innovative Solutions and Support Inc (ISSC) 2018 Q4 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the Innovative Solutions & Support Fourth Quarter 2018 Fiscal Earnings Conference Call. (Operator Instructions) 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 Geoff 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 Relland Winand, our CFO.

Before I begin, I'd like Relland to read the safe harbor message. Rell?

Thank you, Geoff, 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 reflecting in our company's 10-K, which is on file with the SEC and other public filings.

Now I'll turn the call back to Geoff.

Thank you, Rell. 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 4-year business plan.

Flying Magazine chose our ThrustSense Autothrottle for its 9-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 a 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 Turboprop Autothrottle. Certifications on these models provide a blueprint for a quickly expanded -- expand out into the manufacturers of other PT6 aircraft so that we can -- 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 tactical and product expertise at the point of the customer contact is expected to improve market development and increase penetration.

We have also eliminated peripheral and other spending that was not core to our future plans and strategies, 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 in a 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 in Flying Magazine that conducted a flight test and an owners and operation -- operators at the recent NBAA show, the reception has been extremely encouraging.

Let me turn it over to Rell for the discussion of financials.

Thank you, Geoff. Thank you all for joining us this morning. Revenues for fiscal 2018 were $13.9 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 2018.

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.

Our research and development expenses were down. On an absolute basis, we continue to make a significant commitment to research and development as 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 the effect to the bad debt reversal in fiscal 2017.

Even though we are already a 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 bad debt reserve, a $4.1 million legal settlement, a $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 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, at 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, Rell. 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.

And 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.

As we look into 2019, Autothrottle remains our prime focus. Because ThrustSense Autothrottle is the first of its kind patented technology, the process for obtaining our initial STCs have been quite exhaustive and time consuming. However, now that we have been through the process, we have a template that can be repeated to pursue STCs on other general aviation platforms and importantly to do so expeditiously.

As a result, we are in the enviable position as the only source for a product that, as Geoff 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 development professionals, writing training manuals and establishing a strong customer service capability.

And 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.

Consequently, into calendar 2019, we feel that we are well positioned and 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 multiengine 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 shipsets 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 F5 data computer for the U.S. Navy.

This new system will update antiquated analog equipment with new digital technology that is NextGen 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.

In summary, 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, and we have dedicated time and resources 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 Geoff 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 first -- it is the first and only Part 23 FAA certified Turboprop Autothrottle, and it is a 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 Turboprop Autothrottle is newer -- 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, served to reduce, if not eliminate, common catastrophic multiengine aircraft accidents. So in conclusion, I appreciate what -- your attention today and look forward to any questions you may have. Operator?

(Operator Instructions) And our first question will be from Scott Lewis of Lewis Capital Management.

First of all, just congratulations on getting your expenses close to in line with your revenues. I had a question on the Utilities 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 2. Are your current orders just reflective of the very slow pace they're starting with? Or is Pilatus building up some inventory to start?

Build up initial inventory, obviously, to support their production line and spares. But what we expect is that we will follow their growth, and they are being properly judicious in their production growth. As you know the demands there, the book is closed for the time being. And we expect -- 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. And, of course, the acceptance to the aircraft just has been exceptional.

Yes, so if your orders, you think, may double or triple from here compared to where they were this...

I don't know double or triple, I -- remember, you have some initial orders that bring in a fair amount of equipment to start support locations and support the fundamental inventory and work in process. So after that, I would expect it to reflect -- historically, reflect the actual production rate of the aircraft.

Okay. 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 and reliability. So 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 process is -- air data process is -- would be identical and is identical basically to the A-10. But 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. And then 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. But, Geoff, could you give me any more kind of flavor of where you are exactly in the process? Are you at least done with the flight testing and it's all paperwork from here?

Look, we've finished up our flight testing, and we're in the process of -- unfortunately, this hit right at holiday time so everything stopped. But we're ready to go for the government flight test, STC flight test. So that's -- and we've already demonstrated it to the FAA, so they're well versed in it. We are waiting for responses from the government now on our certification plan. And when that's authorized and ready to go, we would hope -- 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. Recognize that 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 so much so that the FAA, one of the senior people at the FAA commented that they -- that we as a country lose one person every 4 days, that means die, due to a kind of aircraft accident that we would eliminate. And he quoted that we would save lives with this. If that actually bears out, I would not only be very proud but very pleased.

Yes. And when you say, it prevents an aircraft malfunction, are you talking about something different than just the difficulties of engine out on a twin, where you have sort of pilot error or is there a literal malfunction that you are...

Well, no. An engine out on a twin -- as you obviously know, an engine out on a twin, if not -- if -- right now, even some of the most sophisticated aircraft are out there like the -- 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 movement that would cause the airplane to roll over on its back, which is how many twins people crashed -- twins. Our system actually measures and anticipates the loss of that control and only proportionately reduces the thrust, meaning that you can get -- you still have a thrust left, and automatic sensing and haptic feedback of the excessive speed or underspeed, overspeed, all those conditions, so it's quite remarkable. And it's a great feature, especially when a pilot's flying a twin, single pilot.

Got you. And then last question, a broader question, Geoff. 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? And relatedly, just what areas you are now kind of getting out of so that you can focus on what it was that made you successful?

I think Shahram spoke to it, but I'll get it right. What we're doing is it means that built the business was called Innovative Solutions, not just the name of the business but what we did for a living. And finding -- pursuing products where we could bring real product innovation, which reflected itself in better performance, better reliability and hopefully reduced cost simultaneously. Simply producing and also a similar product or an ordinary solution is not an area that we believe that our -- that we can best serve. So essentially, we are now focusing on things like the Autothrottle and the Utility Management Systems, systems that have never been designed or even conceived up before that we can either get patents on or control the uniqueness of the technology, and that gives us a special strength in the marketplace.

And the next question will be from David Campbell of Thompson, Davis & Company.

I'm really sorry I was disconnected so I may have missed -- I missed some of your comments, your questions and answers. But...

I'll try to reiterate, when you have a chance, I'll chat with you, go over with that. I'm more than happy to do that.

Plus this is recorded.

And it's recorded.

Okay. I appreciate your help. But you bought the King Air in the April to substantially speed up the STC process. And I was wondering if you were satisfied it is doing that?

Well, I think it's invaluable doing that. I wanted to buy another airplane as much as I wanted another arthroscopic knee surgery. But -- it's served its purpose in every single way. It -- the twin application for STC has been unusually -- not unusually, but it's been difficult. It's been demanding. It's probably the correct way of doing and appropriately so. Understand, it's never been done before. What we're doing is all new, and, by the way, patent. So without the airplane, I don't believe we would not be able to do this program. We have extensively tested the equipment and demonstrated it even. So it's -- yes, it's pretty good investment from that standpoint. But you know I'm starting to feel like I'm playing polo. Anyway...

But you -- the use of the plane is about -- is finished. You mentioned that your flight testing has been completed, so there's no way, you'll...

No, it's not been completed. It's here and now we have demonstrated for the FAA. So we still have a fair amount of time, but there will be extensive demonstration flights to the FAA for final testing.

And the other thing is, it is not possible to get orders or get some feel for companies that want this product -- the airlines and FPOs that want this product until there is an STC. I mean you -- 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 is leading the effort. He has 10 years of experience in Autothrottle so he can help bring us -- bring this thing to market. And it's -- and making an awareness that an Autothrottle is something more than a cruise control. People don't need -- 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 and demonstrating and showing that and remember, it's all very new. Nobody has 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, is that -- was that in the fourth quarter -- charged in the fourth quarter?

Yes.

So fourth quarter charge for the consulting fee and that was for -- what was the consulting fee for?

Consulting fee was, like I mentioned, it's -- we -- as part of -- and generally, 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 as part of our fiduciary responsibility. Coupled with that we decided that if we're going to delve into a new product area like Autothrottle, which is an area that we don't have extensive experience in. And by the way, the industry doesn't have extensive experience, it was virtually mandatory that we get a informed objective review of the marketplace. And we engaged an outside expert firm that does market research and product analysis and business plan analysis. So that was a partial payment for a very extensive market research and product research program, which included things like webcasts and various other research and individual market comments. So it's been -- it's proving to be very valuable, and we all felt that it was essential because this is -- honestly, this market didn't exist except in 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 we adjust it, that will be lower. Now the first quarter going forward in '19 is usually a little higher with the order fees and things like that. So because we're 9 30 (inaudible) under order right now. So -- but I expect SG&A to be lower.

I think we have a reasonable control over the -- our expenses. We 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 and 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 don't -- I can't give you an exact number but it was about 50.

Around 50?

Yes. And -- so we're -- we have a good -- I'm confident we have a good staff. Remind you, I have watched the company from the time I was the only employee that plugged in a $9.99 telephone into the wall, and I watched it grow from there. So I believe I have at least an experienced sense of what adequate staffing looks like.

So when you begin to manufacture the autothrottles based on orders, will there then be an increase in staff to increase the head for the production?

It might be, but first, it better be direct labor. Remember, our direct labor represents less than 5% of our revenue. So I mean, if I doubled it, 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. So it's really quite remarkable. I mean, we have automatic robotic machinery that can virtually manufacture 80% of it.

Right. And the KC-46 tanker program, that's continuing.

It is. We're in requalification of a potentially obsolescence issue. So it's moving along smoothly and our support is fine. In fact, Boeing is here today.

Okay. Well, they -- congratulate them when you see them. They raised their dividend today, substantially raised their dividend.

That's a good thing. Well, I could tell you that it's grown a little bit and the stock has grown a little bit, about 10 times over the last 10 years. So that's pretty good. Yes, I guess, they're making a good product.

Right. So did you give us a backlog figure? I don't know -- I don't have this press release.

$3.6 million.

$3.6 million.

$3.6 million. So the backlog is basically unchanged.

Yes, remember, the backlog doesn't reflect any of the long-term programs. So we don't have all of the KC-46 sitting in backlog, we don't have UMS, we don't have a number of products that are renewed on a quarterly, in some cases, or annual basis. So it's a lot more than that, obviously. And that will always be that way because the days of people giving 200 to 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. Now when you get orders for the autothrottles, they'll come from fixed base operators, won't they?

They'll come from a bunch of -- they'll come from FBOs, they'll come from fleet owners. For some fleet owners, this is terrific. For -- it's got -- what we're seeing -- we're seeing a remarkable growth in the industry. We had somebody record an interview about the autothrottle at NBAA. And in the first week that was online as YouTube, they got like 10,000 people looking at it, which I found amazing. Anyway, we're beginning to see a real force going, and we're working hard to apply it to a broad range of PT6 type of aircraft. And there's many of them out there, tens of thousands of them.

But there's no other authorities that you'll need to get, once you get the STC for the autothrottle?

Well, (inaudible) 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. Then 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, and they are doing that. As much as I get anxious and I want to get it done, I respect what you're doing and happy every time I get on an airplane to know that they actually think through the problem. So I've got no complaints at all. They've been supportive, obviously, within their limits of their judicious approach.

Now will you be doing the installations of the autothrottles? Or will those be really up to the -- to fleet -- fixed based operators?

That will be installed by the dealers. It's a very easy installation. Depending on the aircraft, it could be a 1-day or 2-day installation.

By the dealers?

Right. And that gives them additional revenue, so they don't have to make all of their revenue by marking up the product. So it's a good answer, it's a good solution.

Yes, okay. Well, let's hope we got some orders. Once you get the STC done, then we get some orders, and we'll be on our way. Then we'll be on our way.

And the next question will be from Charlie Pine of Van Clemens & Co.

Some of my questions have been answered, but 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're 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. So I guess I'm curious and all, with the workforce reduction and everything else, because your SG&A was basically flat in Q1, where -- are you still on track to be able to deliver $3.5 million of cost savings in 2019?

Yes. I don't see -- yes, absolutely. I mean, you saw it. As I talked to it before, you saw G&A obviously in the fourth quarter where it's somewhat impacted by what Geoff referred to for the consulting expense. So you would've seen more of that, obviously. R&D, you see, and you see it in the gross margin. I mean, we had higher margin percentage on lower sales. So 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 the -- on ThrustSense. You said that you've completed your flight testing, and the next stage is that the FAA has to do their flight test. How many flight test do you anticipate? And how long will they be spending on doing the flight testing?

Well, the flight testing in itself, per se, is probably only about 4 hours of testing. But 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 3 weeks. And then you have Thanksgiving in the middle of it, then you have Christmas and then you have New Year, so by the time you finish all of that -- I think they're actually working harder than any other part of our government is...

I'll guarantee you that.

And more effectively, I might add.

Well, that's good to hear. So they have to do...

They're actually doing -- honestly, it's -- as we stand and watch it, 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 were -- came into the -- into Thanksgiving, which we did without the STC, that we would see absolutely nothing until the first of the year because typically, everything, every business effectively slows down so much that they stopped. And in this case, they're actually moving on to my delight actually. But I still think it's going to be difficult to get something finished before January.

Okay. So in other words, just to clarify, it's not a succession of a number of individual flight tests.

No, no, no.

So we just get -- there will just be one 4-hour flight test by the FAA.

Well, probably 2 2-hour flight tests but right together. Recognize that the FAA has already done the familiarity flight test with the system and assessed all of the -- 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. But it is -- it's terrific. They've been more than cooperative, more than -- and they had people from 5 different -- 4 different branches flying in the airplane to get oriented with the new technology. So they've gone out of their way to try to stay up with the advancements that we're going to be certifying. So I'm cautiously optimistic. I'm just, it's just unfortunate that we've run into this holiday time at a time we're going to trying to get flight testing done.

Well, so that being said, if the flight testing goes on the time line that you're hoping for, you feel -- and the process, 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. Yes. And I -- we're going to work for much -- for us, it's important to get it done. It's really -- we're happy to say that system works extremely well, and we're seeing increasing applications to a broad number of other aircraft. And we're very optimistic. And by the way, when 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've never -- I don't remember of application that was signed off by the patent office without some comment, like why did you do this than the other. So we're very -- we're enthusiastic about this program.

Okay, couple of 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 served by it and 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 first -- the second quarter or the first quarter of calendar quarter. So -- and by spring, we would expect to be doing installations.

And give a little bit more color, if you could, on -- you said that there's, actually, literally tens of thousands of other Pratt & Whitney of planes with these similar Pratt & Whitney engines, which could also be candidates.

It's probably the most universal plane. It's called the PT6, and there's literally -- I don't remember the numbers. There's 20,000 or 30,000. And 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. So we see a lot of application for it, and it's small, compact, extremely reliable, very unique. And so look, we just got to get it done. It's just -- the simple answer is, get the freaking 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.

I -- believe me, I know. You remember, I'm a stockholder as well.

Yes, I'm well aware of that.

And listen, the tides have been great. I have no complaints. I'm trying to give you the -- 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. And 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." And they have this webcast to analyze the value of an autothrottle. So I mean, 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. Is there actually a -- you referred to a YouTube video on the ThrustSense that was out there. Is that still...

Yes, there is.

Yes, 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 video. There's one of them of the system, and there was one at the show. We'll try to -- but they should be available. If you have a problem, call in to Rell and he'll give you the -- we'll send you the website, right?

And the next question will be from [Steve Rudd] of Blackwall.

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.

Yes. 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 as the 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. What we're seeing is -- we're seeing that revenues are going up, and the backlog's growing.

Fair enough. Anyway, just out of curiosity, will you quit calling it autothrottle? And yet to me, the most compelling part are the safety features. That just maybe my own orientation. You explored, I think, at other names that more closely align marking and safety throttle, optimum throttle, because it did feel like autopilot or what do you call it auto in the car.

I think ThrustSense is what we've actually named it, and it's a trademark.

Okay, fair enough. And as long as you take the word out, people will know what it means, so.

Why is that it's more than a speed control, it's actually -- it puts intelligence in what thrust you put on in the airplane. Like common sense it has ThrustSense

No, I think that one's better. So you guys focused on the -- what it does, and that probably captures the sense a bit more.

It's quite -- I tell you, I hope that I would say in the next 3 or 4 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 yarning of the airplane and actually correcting for and preventing catastrophic accident. It's quite remarkable actually. It's never been done before.

Yes. Sometimes it's a marketing thing you can work through -- I've seen other safety devices in other industries, and you work through insurers to have them require it as part of issuing their policy.

I think that's a good point. And we hope when we get this, I think the insurance companies will recognize, especially in single-engine applications. And think about the guys that fly twins with their families onboard. I can tell you, having flown for years with my wife, and she would ask me how I was doing. They're concerned about their safety as well and the kids. So all of this adds up. It's -- and it's not a brutally expensive addition to the aircraft. It represents a relatively small investment compared to their price of the airplane.

Maybe you can spend a tremendous amount of time marketing to your direct industry. And if you can market to the insurers, they either can...

Very good idea, very good idea, very good idea.

I think you (inaudible) some others like that after the year conference call.

Thanks. Thanks for your idea.

And ladies and gentlemen, that will conclude our question-and-answer session, and it will also conclude our conference call for today. We thank you for attending today's presentation. And at this time, you may disconnect your lines.