After a troubling half complete with delays, losses and adjusted forecasts, Adacel Technologies (ASX: ADA), a company providing advanced air traffic management and air traffic control simulation solutions, has secured a new contract from its existing customer, the US-based Federal Aviation Administration (FAA). This infuses confidence in the Company, which is attempting a return to form.
The contract spans a one-year Base Period and includes four one-year Option Periods. Adacel will deliver ATC Tower Simulation System (TSS) Software and Support Services to train Air Traffic Controllers at selected FAA Air Traffic Control Towers (ATCTs). The contract’s total value over the five-year term is about $10.2 million, subject to the exercise of optional years.
Adacel’s CEO, Daniel Verret, said, “As the FAA TSS software Original Equipment Manufacturer (OEM), we are thrilled with the confidence the Federal Aviation Administration continues to place in our team, products, and services. Adacel consistently improves the performance of its ATC simulation software, while maintaining the highest levels of availability and reliability. We look forward to successfully supporting the FAA TSS software and deploying our latest ATC training software solutions to the FAA.”
Adacel specialises in creating air traffic control simulation and training systems and solutions for air traffic management. Its clientele comprises international air navigation service providers (ANSPs), military, defence, security entities, universities, and airport authorities.
The contract covers TSS software assistance and upkeep. It also improves the TSS simulation engine and speech recognition software and moves the FAA’s current Image Generator to AeroScene, Adacel’s newest and best image generator solution.
Verret added, “We are fully committed in supporting the FAA to successfully recruit, train, and enhance the skills of Air Traffic Controllers at critical National Airspace System (NAS) terminal facilities and ensure each day is a training day with Adacel’s high-performing simulation and training solutions.”
Just last month, the United States Air Force (USAF) awarded Adacel a new contract to continue its service for the USAF’s TSS program. The agreement initially covers a base year and could be extended for four more years until February 2029. Adacel anticipates the contract’s total value over the five years to reach $41.3 million.
Despite these wins, Adacel’s recent financials painted a disappointing picture. In H1 FY24, its revenues totalled $20 million, down from $21.5 million in H1 FY23. The Company’s EBITDA declined by 90.1%, going from over $3 million to just about $300k, mainly due to decreased revenue and a shift in revenue mix. It reported a loss after tax of $1.9 million, contrasting with a profit of about $333k—an over 700% decline.
Due to delays in scaling up recent contract wins, the Company reduced its earnings guidance for FY24. It now anticipates EBITDA between $1.2 million and $1.5 million—down from the initial forecast range of $7.6 million and $7.9 million—and a loss before taxes ranging from $2.7 million to $3.1 million, down from a profit guidance of $4.5 million to $4.9 million.
The FAA contract is set to help Adacel get back on track. The Company will continue to improve its air traffic control simulation and training systems by providing good-quality technology and solutions for the aviation sector.
Adacel’s predictions account for the contract award. There are no significant requirements to fulfil before the contract becomes official and legally binding.
Alinda is a Business Reporter for The Sentiment
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