June 2024 Appendix 4C and Quarterly Update
Highlights
• SMS (“the Group” ) recorded a maiden quarterly profit before tax of $0.51m for the quarter ended 30 June aided by the launch of the new MTP136D forest service radio product
• The Group recorded EBITDA of $1.21m for the June quarter, an increase of 123% on the prior year. This can be attributed to the continued strong performance of the AEM Avionics and Contract manufacturing businesses
• The Group recorded gross revenue for the quarter of $7.97m up 34% on the prior year. Both the AEM Avionics and Contract Manufacturing business segments continue to perform strongly, experiencing growth across all key metrics contributing to achieving this excellent result
• SMS Group recorded a positive cashflow from operating activities of $1.01m for the year.
• The SMS board and management team finalised the budget and plan for 2024/2025 and will be reporting on this in the coming weeks
• AEM saw its new modern MTP136D forest service radio receive critical Federal Communication Commission (FCC) and Innovation, Science and Economic Development Canada (ISED) certifications
• AEM also submitted a new MTP136D Supplemental Type Certificate (STC) application for the AS350/H125 aircraft to Transport Canada
• The board and management team continues to identify and grow key international markets and expand partnerships to facilitate growth in these high value markets
• The AEM team continues to work towards completion of the final testing procedures required to finalise the certification of the Company's CVM™ Smart Sensors for the Aft Pressure Bulkhead (APB) inspection – Boeing Service Bulletin 737-53-1418 with an updated anticipated timeline supplied by Boeing
• The new SMS investor website and domain was successfully launched during the period further integrating the SMS and AEM businesses from a digital and operational perspective
Report on AEM operational activities and achievements across business segments for the quarter
AEM Avionics Update
Anodyne Electronics Manufacturing Corp. (AEM) experienced another solid quarterly performance for the June 2024 quarter.
Avionics revenue for the quarter and the year to date are set out as follows:
During the period AEM saw its new modern MTP136D forest service radio receive critical Federal Communication Commission (FCC) and Innovation, Science and Economic Development Canada (ISED) certifications.
These certifications keep the radio on track towards formal acceptance by the United States Forest Service (USFS), and towards a pending Supplemental Type Certificate (STC).
AEM also submitted a new MTP136D Supplemental Type Certificate (STC) application for the AS350/H125 aircraft to Transport Canada.
Pending their approval, the new STC will significantly streamline the process for operators and installers to have AEM's new forestry radio installed on the special mission industry workhorse, AS350/H125 helicopter.
The MTP136D remains on track for its United States Forest Service (USFS) testing and approval, which represents a major milestone which will allow the installation and use of the AEM's new forestry radio by US operators.
During the period, representatives from AEM attended the Police Aviation Conference (PavCon) 2024. The conference was held at Airborne Technologies in Wiener Neustadt, Austria, from 27-29 May 2024.
AEM products were on display at the tradeshow and AEM's Sales and Marketing department attended the event to strengthen and build new relationships with key contacts in the European market.
CVMTM Smart Sensor Solutions Update
The AEM team continues to focus on satisfying the final testing requirements in order to finalize the certification of the Company's CVM™ Smart Sensors for the Aft Pressure Bulkhead (APB) inspection – Boeing Service Bulletin 737-53-1418.
The Company announced on 6 June 2024 that Boeing was undergoing evaluations of the final testing, which was completed in May, with an update on the evaluation process expected following the August 1 meeting of the Structures Technical Design Review.
An updated timeline for this process was released earlier this month which is again listed below.
CVMTM anticipated timeline
May 2024 – Circulation of draft copy of proposed new service bulletin to the four largest US carriers (South West, United, Delta, American) COMPLETED
June 2024 - Completion of Low-Stress Coord Sheet Test Requirements CONFIRMED
July 17 2024 –Cert Plan resubmitted to FAA (& send to EASA)
Aug 1 2024 - Boeing Structures Technical Design Review Meeting
Aug 15 2024 – FAA acceptance of Cert Plan
Aug 30 2024 –Cert Plan Deliverables completed
Sep 3 2024 –CVM deliverables to routed to Boeing ODA for approval / recommend approval
TBD – Submit CVM deliverables to FAA (Service Bulletins & Compliance Report)
TBD – FAA Approval of Deliverables
TBD – SB Release with AMOC
As previously reported, Boeing has declined to confirm expected dates for the last three steps of the process outlined above and we continue to expect a more certain milestone plan after the Technical Design Review on the meeting scheduled for August 1.
As also previously stated, we remain confident in achieving a positive outcome, and in the meantime are actively engaged with Delta, United, Southwest and American who are the largest potential customers for this application while concurrently progressing two further potential applications for our sensors.
During the reporting period, representatives from AEM attended the MRO Americas 2024 in Chicago from 8-10 April 2024 to promote our CVMTM sensors.
The CVMTM sales and engineering teams were in attendance at this key industry event, where they showcased and demonstrated CVMTM Smart Sensor Solutions - including the APB application - to major US airline decision makers, engineering teams and Maintenance Repairs and Overhaul (MRO) personnel.
Group Chief Technical Officer, Mr Trevor Lynch-Staunton P.Eng, also presented at the ILA Berlin Air Show and attended the EWSHM conference which took place in Potsdam Germany in June.
The focus was on Structural Health Data Acquisition & Diagnostic, which covered current Structural Health Monitoring solutions and applications, as well as trends and future applications.
CVMTM's installation and installation training partner, TESTIA, presented a new co-authored paper titled: An Exploration of Leveraging CVMTM Sensors to Monitor Structures Across Various Industries - Part 1: Mining, Infrastructure and Marine. The paper was co-written by TESTIA's Aswin Haridas and Holger Speckmann, and AEM's Trevor Lynch-Staunton, and Dennis Roach.
While the CVMTM business segment continues to be challenged by the final certification item required by Boeing, we remain confident and are observing increasing interest from our US airline customers despite the ongoing delays and look forward to providing you with a further update in the very near future.
CVMTM recorded no material revenue in the quarter.
AEM Contract Manufacturing Update
Contract manufacturing revenue for the quarter and the year are set out as follows:
Corporate Update
On 28 June the Company issued 553,845 CDIs to various management staff under the Employee Incentive Plan. The CDIs are escrowed until 20 November 2024 being 12 months from grant date. The issue was made in recognition of the significant efforts made by senior staff across the Group during the year.
The SMS Board's focus remains on achieving growth in key international markets for the company's avionics products, as well as satisfying the final testing requirements for its CVMTM smart sensors to Boeing's ultimate satisfaction ahead of submission to the Federal Aviation Administration (FAA) according the to timeline supplied above.
The Company also launched a new SMS investor-relations focused website and domain during the period further integrating the related entities.
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SMS Executive Chairman Ross Love commented:
“The June quarter has again seen solid progress for SMS, notwithstanding the continuing delays in final Boeing approval for the Aft Pressure Bulkhead CVMTM application which we have outlined above and in prior announcements during the quarter.
“Recording a maiden profit before tax in excess of half a million dollars rounds off a much-improved year for the Group in which significant growth in both revenue and profitability has been achieved.
“The contract manufacturing business segment continues to perform very solidly with the team focused on manufacturing products that deliver high value back to the company.
“Our Special Missions Avionics segment continues to experience ongoing growth, especially in relation to the Forest Radio product, which is now certified in Canada and on track for formal acceptance in the United States.
“As we have communicated previously, we remain confident about the progress of the CVMTM certification and its ability to meet the demands of both the FAA and the market, albeit remaining adherent to the timelines imposed by Boeing in relation to this process.
(20min delay)