AgEagle Aerial Systems Q1 2023 Earnings Call Transcript

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May 16, 2023

There are 2 speakers on the call.

Operator

Good day, everyone, and thank you for logging into AgEagle's corporate update webcast. Joining us from AgEagle is Chief Executive Officer and Chairman of the Board, Barrett Mooney. Before I turn it over to Barrett, I would like to remind you that during today's call, including the question and answer session, statements that are not historical facts, including any projections, statements regarding future events or future financial performance or statements of intent or belief are forward looking statements and are covered by the Safe Harbor disclaimers contained in the company's public filings with the SEC. Actual outcome and results may differ materially from what is expressed in or implied by these forward looking statements. With that said, I would now like to introduce AgEagle's CEO, Barrett Mooney.

Operator

Barrett, The floor is yours.

Speaker 1

Thank you, Cat, and good afternoon, everyone. Since we just hosted our year end call early last month, For today's call, I'll be keeping this brief. In the Q1, we remain committed to continue building a robust foundation across our core business units. We dedicated our efforts to optimizing and streamlining our cost structure. What I mean by that is reducing our burn, while growing our top line.

Speaker 1

On our last call, I outlined our priority to deliberately pursue profitable growth and we've made significant progress towards that goal. During the quarter, we generated a total revenue of $4,100,000 marking a 5.6% increase from $3,800,000 in the Q1 of 2022, While significantly reducing our cash burn compared to the same quarter a year ago. The increase in our top line performance was driven predominantly by strong demand for our sensors during the quarter. Over the past several quarters, we've been working diligently to improve our supply chain. With this in mind, we established a network of vendors that enable us to simplify our structure and facilitate a more efficient procurement process.

Speaker 1

The progress we've made in streamlining our supply chain has culminated in tangible results and has helped us improve our gross margin Over 1300 basis points in the Q1 to 48.8 percent, significant jump from 35.5% in the same period last year. And looking deeper at our profitability metrics, our loss from operations totaled $4,200,000 during the quarter compared to a loss of 7 point $5,000,000 in the Q1 of 2022. The improvement in our operating loss was largely due to the progress we've made in aligning and co locating our business units Into a more geographically concentrated footprint and the reduction or elimination of redundant expenses. While there's still much work to be done, it is clear, We are making steady progress in reaching cash flow breakeven while simultaneously generating top line growth. One of the keys to our long term success The momentum and expansion of our highly effective value added reseller network.

Speaker 1

As I mentioned on our prior call, we have a very strong network of trusted resellers who worked diligently to drive sales in their respective territories, leveraging location based expertise to collaborate with customers on a case by case basis. Currently, our network consists of more than 200 value added resellers, affording AgEagle an expansive collective presence in a vast array of geographies worldwide. With much of our integration efforts nearly complete and a talented team of resellers in place to capitalize on both large and small sales, We have a healthy foundation to propel us towards our long term objectives. We have the means to not only scale our presence and drive top line growth, but to do so while spending a lot less cash. During the quarter, our Board of Directors authorized the company to issue up to $25,000,000 of preferred stock to support our future operations and growth strategy.

Speaker 1

I want to stress that we currently view our ongoing need for additional capital as decreasing. As we continue to march towards cash flow breakeven, we will be less reliant on raising outside capital. As you can see from our performance over the last several quarters, we are moving in the right direction, both financially and operationally. We built a solid foundation, grounded in sound fundamentals, We are continuing to improve. Now I want to dive into our segment results during the quarter starting with our drugs.

Speaker 1

While last year was focused heavily on securing regulatory approvals and expanding our EV lineup through our consistent innovation. We started this year with a solid fixed wing drone lineup ready to push into the market. Upon releasing our latest product innovation, the EV Vision Drone in the latter part of Q4, we began to see strong initial demand for the new UAV. During the quarter, we successfully delivered several of the EB Vision drones to 3 separate branches of European military forces. According to the European officials, the EB Vision successfully filled the gap of the low endurance quadcopters and larger military fixed wing drones making it a valuable addition to their technology stack.

Speaker 1

Looking at our results for this segment, we generated drone sales of $2,000,000 which compares to $2,700,000 in the Q1 of 2022. Decline in our year over year drone sales was largely due to the decrease in sales from our older EV series drones like the X and the Ag Geo outside of the EV Vision. As we put our focus on EV Vision going forward, we expect sales in the segment to rebound in future quarters, giving a comprehensive market initiative involving on-site demos Government and Military Agencies across Europe and the U. S. Coupled with active sales support of our reseller network.

Speaker 1

Our sensor segment on the other hand doubled in sales to $2,000,000 in revenue during the quarter compared to $933,000 in the Q1 of last year. The year over year increase in sensor sales was primarily driven by growing demand for our RedEdge P and Altum PT panchromatic sensors, As well as our newest addition to our sensor lineup, the RedEdge P Blue, which we announced this morning. Our sensor segment was a high performer for us in Q1 and we expect continued demand in coming quarters. As we focus on building our commercial presence within our sensor segment, we're working hard to enhance our value proposition. Despite working through a significant amount of backlog during the quarter, demand for our sensors remains high and we will continue to look for ways to capitalize on this trend.

Speaker 1

In recent quarters, our high end sensors have gained significant recognition for their superior quality and advanced capabilities. Our efforts to establish ourselves as a premier distributor to businesses across a wide range of industries have yielded impressive results, particularly in the agriculture sector. Subsequent to the end of the quarter, we signed a 2 year supply agreement with Wingtra. Under this agreement, we'll be supplying our RedEdge P sensor kits for integration with their Wingtra 1 Vertical Takeoff and Landing Drones. Wingtra plans to utilize the Micasynth Outfitted Drones to generate plant level detail and high precision resolution for Commercial Agriculture, Forestry, Environmental Research and Water Management Use Case.

Speaker 1

This is an exciting development as the contract represents approximately $2,000,000 in revenue over the next 2 years. Furthermore, this collaboration supports our belief that the adoption of UAS on a global scale will only be possible if drone solution providers work together To deliver technologies and capabilities that benefit commercial drone operators. Moving on to software, During the quarter, subscription sales of Hemp Overview and Ground Control totaled 121,000 compared to 170,000 in the Q1 of 2022. While software still represents a small portion of our revenue, we continue to make progress in expanding our software value proposition with innovation and key partner integration. Following the end of the quarter, we announced the launch of a new ground control feature FieldCheck.

Speaker 1

This new innovation feature enables users to verify the exposure, overlap and sharpness of the aerial images immediately following a flight ensuring accurate data collection. In situations where the flight and data collection parameters fall short of expectations, Our software automatically generates a new flight plan to gather the missing or problematic images most efficiently. Moreover, our ground control software has and interest across various markets, thanks to its seamless integration with our sensor group and the growing support for drone flight logging. This increased market opportunity allows us to expand our offerings and provide even better experience for our customers. Recently, we won a federal contract with the U.

Speaker 1

S. Department of Defense's Defense Innovation Unit to deliver our EV Vision drones to the DoD and Support their software development and integration efforts to securely connect and bridge the EV vision of specific government networks. This custom software paid for by the DIU We'll be compatible and in full compliance with the DoD Robotic and Autonomous Systems Air Interoperability profile, demonstrating our ability to develop Highly Innovative Solutions that meet the needs of our customers. With this agreement, we secured an upfront payment for the development of the custom Command and Control Software and the right to sell the EV Vision Drones within the U. S.

Speaker 1

Department of Defense going forward. Adding to the inroads we've made with the civil and government agencies, We were recently awarded a 5 year multiple award schedule contract by the U. S. General Services Administration, which is a centralized procurement arm in the federal government. This contract marks yet another example of our deepened penetration into the government sector.

Speaker 1

Upon hinging this deal, we also decided to take the next step in solidifying our presence in the space by recruiting a Director of Government Sales. As said, we look forward to growing our presence as a critical partner for civil and government applications by providing the industry's most innovative UAS solution. We continue to believe that our participation in government related contracts will play a meaningful role in our overall growth strategy, Which includes selling our full stack set of drone solutions through an expansive network of highly trusted value added resellers. Overall, our focus during the quarter was to continue to build a strong foundation and further optimize our cost structure while pursuing attractive opportunities for growth That put us on a path towards cash flow breakeven. We continue to maintain strict financial discipline and have already achieved a reduction in our operating costs.

Speaker 1

We expect to continue seeing the results of this effort flow through to our bottom line in the coming quarters. As reflected in our results in my comments here today, We are moving in the right direction both financially and operationally by cutting costs, growing our top line and streamlining our business units for better efficiency. Even amidst the challenges of the current macroeconomic environment, we remain confident that our growth plan will lead AgEagle to long term success. We will continue to remain cost disciplined As we steadily expand the AgEagle brand and continue on a path towards profitability and maximize value to our shareholders over the long term. We are pleased to have the opportunity to showcase the vision and progress of our company on these webcasts.

Speaker 1

We would like to express our appreciation to all of our stakeholders for their support. We continue to thank you for joining us today. So with that, operator, back to you.

Operator

Thank you. This does conclude today's teleconference. We thank you for your participation. You may disconnect your lines at this time and have a wonderful day.

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Earnings Conference Call
AgEagle Aerial Systems Q1 2023
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