AVTECH Sweden Ab: Fuel Savings for Airlines

Stocks
1

AVTECH is a small Swedish SaaS company with sales of a few million euros that develops software for airlines. The aim is to reduce fuel emissions by optimizing flight routes and to help aircraft avoid unpleasant turbulence. The company has been listed since 2011, but its focus has meandered a bit over the years. The current CEO started in 2020, and the company’s operations have become clearer since then. Currently, the main source of income is the Aventus product (providing more accurate weather data for flight routes). Another selling product is Clearpath, designed for turbulence avoidance. Other products have been under development for years. The staff consists of 11 people, and the company is recruiting more to support growth. The company is very profitable, with an EBIT margin of over 30%. Cash flow is being generated (though in Q2, late payments from some customers turned cash flow negative), and the company has even started paying dividends.

As I understand it, Aventus is at a more mature stage, and the question is how large it can be commercialized and how well new products will then sell. There are about 30,000 commercial aircraft flying in the world right now, but I doubt every single one will become an AVTECH customer. :smiley:

Revenue and a few highlights from recent years regarding the mentioned products that I’ve noted down:

2017 10.4 MSEK: Met collaboration, SIGMA (turbulence warning system), Nowcast.
2018 12.5 MSEK: SIGMA, TTAM, proFLIGHT app.
2019 15.5 MSEK: Proflight delays
2020 12.2 MSEK: Terrible pandemic year, talking about Clearpath now, CEO David Rytter took the helm (at the firm since 2012), proFLIGHT commercialized, Rytter bought shares as one founding partner left.
2021 11.8 MSEK: Clearpath progressing, collaboration with Volotea etc.
2022 21.4 MSEK: 1,300 planes using the service commercially, 300 planes in the queue at the start of '23, AVENTUS, SIGMA, proFlight and ClearPath as products, 2.5% fuel savings with these products.
2023 27.5 MSEK: 1,600 planes using commercially
2024: Over 1,600 planes using commercially, new airlines testing the product. Revenue mainly from AVENTUS and Clearpath products.

Here is a screenshot from the Q2 report showing the company’s historical development in light of the numbers:

Screenshot 2024-08-26 at 10.30.00

The market cap is roughly 300 MSEK, or about 27 MEUR. EV/SALES based on trailing 12-month figures is 9x, though valuations for such a small firm are debatable if the company succeeds in significantly commercializing the product. For example, Redeye estimates the revenue potential for Aventus and Clearpath at 72 MSEK once the aircraft in the sales pipeline are onboarded.

Avtech has had a somewhat bumpy history, but now growth seems to have accelerated into the skies. It’s interesting to see how large the sales of current products can actually grow. The firm is small, so the importance of individuals is highly emphasized, but the current CEO’s performance has been exemplary. As I understand it, Airbus and Boeing also make similar software (common sense says planes must have weather and turbulence info from somewhere), but apparently AVTECH does something better since airlines are buying this software tool.

I own a tiny amount of shares at the time of opening this thread.

P.S. While writing this text, which was based on earlier entries in my investment diary, I remembered once again that I don’t know the company very deeply. :smiley: If there are other shareholders or people familiar with the industry on the forum, comments are very welcome!

34 Likes
2

I don’t know much about the company yet, but the (R12month) net sales, earnings, operating cash flow, and free cash flow have developed very well. You rarely see charts this good.
avtech

In the quarterly view, there is more variation.
avtech2

Image from Börsdata. I came across it using the Börsdata screener. I am planning to add it to my portfolio over the course of the autumn.

6 Likes
4

Avtech just published preliminary Q3 figures:

Avtech

https://mfn.se/a/avtech-sweden/avtech-publishes-key-figures-for-the-third-quarter-2024

7 Likes
5

I don’t know anything about Avtech, but an apparently large order came in. The order size is 10-15 million/3 years, when 2023 revenue was 28 million.

" VTECH Sweden AB (publ) and Latam Airlines Group S.A. have today entered a subscription agreement for AVTECHs Aventus and ClearPath services, with a start date in December 2024 and an expected annual value of 10 to 15 MSEK dependent on the number of aircraft and EUR exchange rate.
The ClearPath and Aventus services, both utilizing state-of-the-art high-resolution aviation weather forecasting from the UK Met Office, will provide precise and tailored tactical decision support for Latam pilots to improve the efficiency of each individual flight. By providing flight crews with the latest weather inputs and guidance on the most efficient flight altitudes, Latam can take maximum advantage of prevailing winds and temperatures to reduce its overall total CO2 emissions. This leads to improved flight execution and efficiency, increased situational awareness and reduced workload for the pilots. In addition, ClearPath also warns of turbulence along the flight path which increases the comfort for all passengers travelling with Latam.

The Aventus service will be deployed to around 60 aircraft in December with a planned roll-out to the remainder of the fleet next year alongside ClearPath. The subscription is structured on a monthly renewal basis with an expected term of 3 years.

“I am delighted to welcome Latam onboard as a valued new customer following their successful evaluation of our services. Being chosen as their provider of in-flight tailored weather information and tactical decision support is a privilege. We are committed to enhancing their operational efficiency and look forward to supporting Latams journey toward achieving more sustainable and optimized flight operations.”, said David Rytter, AVTECHs CEO."

7 Likes
6

My own analysis was spot on here. Now if only I could manage to follow that “let your profits run” advice…

2 Likes
7

Greetings! Does anyone know what the number of Avtech shares is?

9

If I understand correctly, then about 56 million pcs. in total.

10

Vahvaa suorittamista myös Q4.

AVTECH Sweden AB (publ) (“AVTECH”) today publishes a few preliminary key figures for the fourth quarter of 2024. Net sales amounted to MSEK 9.3 (7.6), compared to the corresponding quarter in 2023 and resulted in an EBITDA for the period of MSEK +5.0 (+3.6) and net earnings of MSEK +4.2 (+2.5). Cash flow for the period amounted to MSEK +2.6 (+1.8). The Board of Directors of AVTECH Sweden AB once again proposes a dividend of SEK 0.10 per share, corresponding to approximately SEK 5.6 million, and will convene the Annual General Meeting for a decision. The Annual General Meeting will be held on Wednesday, May 14, 2025.
FINANCIAL KEY FIGURES FOR THE PERIOD

2024 2024 2023
MSEK Quarter 4 Quarter 3 Quarter 4
Net sales 9.3 8.6 7.6
Operating earnings before depreciation +5.0 +3.8 +3.6
Net earnings +4.2 +2.7 +2.5
Net earnings per share, SEK +0.074 +0.047 +0.043
Cashflow +2.6 +4.1 +1.8
Cash and cash equivalents 27.4 24.8 22.8
Equity 47.1 43.0 40.2
Equity per share, SEK 0.83 0.76 0.71
Equity ratio, % 91.4% 89.9% 92.7%
  • Net sales in the fourth quarter increased by 22.1% compared to the same period in 2023, thanks to new customer agreements.
  • Net earnings increased by 70.4% compared to the same period in 2023.
  • Cashflow increased by 45.1% compared to the same period in 2023. Overdue customer invoices from previous quarters have largely now been paid and the remaining overdue accounts receivable are expected to be paid after the end of the period.
8 Likes
11

Official results are out, even though the numbers are already known, let’s save the overview in the thread. :slight_smile:

Let’s also quote Rytter’s comments on the next steps from the overview. The staff is already 12! +20% growth.

"Preparation for the Next Step

The goal for 2025 is to continue significantly increasing AVTECH’s revenue while reinvesting a large portion of these earnings into further developing the organization and product offering. In 2024, the sales department has been restructured and strengthened under the leadership of a new Sales Manager. Today, the team consists of salespeople based in both Sweden and other European countries, with diverse backgrounds and previous experience. In addition to pilot expertise, we also have experience from the customer side (fuel efficiency manager) and many years of experience in selling IT services to airline customers. Investments in the sales department will continue in 2025 with further resource enhancements, which should result in a wider sales pipeline leading to more frequent announcements of new customer contracts. During the year, the technology department has grown with two additional software developers, and further strengthening is planned for 2025. With these resource expansions, AVTECH will be able to manage more new airline customers in the pipeline and those being deployed while continuing to develop our products in close collaboration with our customers throughout 2025 and beyond. In addition to this, work continues on mapping opportunities for further expansion of the product portfolio in related areas with clear synergies. For example, through solutions that involve ground staff at the airline and data sharing with air traffic control, with the aim of optimizing air traffic flow to and from airports; something expected to further enhance the airlines’ potential for savings. Additional funds have been allocated this year for these activities, which include collaborations and co-financed research initiatives with other stakeholders alongside airlines."

10 Likes
12

Greetings!

What do you think about whether the products offered by Avtech truly bring added value to the customer? By this question, I mean, are the company’s products genuinely economically beneficial, or are they more of a good advertisement for airlines, e.g., “we are environmentally friendly and with this product, we reduce carbon dioxide emissions?”

I’m wondering what customers’ motives are for buying these products? Of course, they improve comfort, for example, if there’s less turbulence, but are the fuel savings really significant, or are they more of a great advertisement for environmental friendliness?

I kindly request factual and considered answers, thank you.

1 Like
13

The company quantifies those effects on its website, and apparently, implementing the software that runs on an iPad is easy.

I can’t answer this in more detail… :frowning:

New owner included:

Previously, CEO Rytter bought shares from the major shareholder:

4 Likes
14

Yeah, thanks for the honest answer!:grin:

Perhaps for both reasons, i.e., on the one hand, fuel savings, and then its effects on carbon dioxide emissions, I don’t know.:relieved_face:

It would be nice to know which one weighs more in the balance. I mean, when a potential customer considers purchasing a product, do they think that this will genuinely provide economic savings, for example, in terms of fuel, or more that the product’s reputation adds value to advertising and can positively influence customers’ decision to choose this particular airline’s flight?

Would an airline buy this product if there was no talk about aircraft climate emissions at all, but only about the airline’s savings in fuel costs? I don’t know.

1 Like
15

A very strong guess for the latter, if the airline is considering it. So, savings will decide.

2 Likes
16

Does anyone have any insight into how tariffs affect Avtech?

If the global economy weakens significantly, airlines will certainly cut costs, and then it might be difficult to sell products to customers.

But I don’t have a personal view on the tariffs themselves; I don’t know if they have a significant impact.

1 Like
17

TUIlta laajennus Aventus-tuotteessa, tosin ei iso euroissa joku 30-40TEUR vuositasolla.

TUI Airlines is extending the existing service agreement for the Aventus NowCast Full-Flight Wind Uplink service to also include TUIfly GmbH Germany. This means that the existing service agreement now covers the entire TUI aircraft fleet. The additional portion is expected to have an annual value of SEK 0.3–0.4 million, depending on the number of aircraft and the USD exchange rate."

7 Likes
18

Here is the report.

2 Likes
19

I had missed that. Preliminary information for Q2, looks good!

https://avtech.aero/pressrelease/avtech-publishes-key-figures-for-the-second-quarter-2025/

4 Likes
20

Even if it doesn’t show in today’s share price, good news as Wizz Air’s cooperation deepens!

A three-year agreement was signed at the end of 2023, with an expected revenue of 1.1–1.6 MSEK over three years. Now, the new agreement would bring an estimated 4.2–5.8 MSEK in revenue annually – meaning a nice increase in billable revenue.

I would see this contract update as a positive recognition - Aventus and Sigma, which have been in trial use, have clearly proven to be functional and valued. Hopefully, they will also attract interest from other airlines.

Wizz Air expands existing agreement with AVTECH’s Aventus and SIGMA services to the rest of the Wizz Air Group - Inderes

4 Likes
21

So I guess I’ll have to update my own charts.

And wouldn’t you know it, a couple of days ago I lightened my position on this due to the strong rise, hoping it would drop before earnings. Well, maybe I’ll get lucky now…

:see_no_evil_monkey::clown_face: I don’t know which one I feel more again

22
3 Likes