Draganfly Q2 2023 Earnings Call Transcript

Quartr
Provided by Quartr
August 9, 2023

There are 4 speakers on the call.

Operator

Right. To be respectful of everybody's time, I think we will get started. So greetings and welcome to the Dragonfly 2023 Q2 earnings call. My name is Rolly Bustos, and I'm Internal Investor Relations here at Dragonfly. We appreciate you all for joining us today.

Operator

We will start as usual with our CEO and President, Cameron Schell, discussing the Q2 operational highlights. From there, our CFO, Paul Sun, We'll discuss the financials and we will conclude our Lead Director, Scott Larson, facilitating the Q and A portion. As always, you're welcome to reach out to me at any time at investor. Relationsdragonfly.com. Lastly, I want to remind everyone that this presentation may include forward looking information and statements.

Operator

These statements are not guarantees of future performance and undue reliance should not be placed on them. Any future events or financial results may differ from what might be discussed here. The full forward looking disclaimer can be found on Page 2 of this presentation, and I'd be pleased to send that along to anybody upon request. So, Cam, please go ahead.

Speaker 1

Great. Thanks, everybody. Appreciate everybody being here today and taking the time. 1st and foremost, I'd like to thank our employees and team members who've done an amazing job this last quarter on taking Dragonfly to the next level on with all of our customers. 2nd of all, I'd really like to thank our customers and clients who have taken the time to believe in Dragonfly and allow us to help them and their endeavors.

Speaker 1

And foremost, I'd like to thank our shareholders for your trust in what we're building here. So I'm just going to do a screen share here to run through to run through our highlights for the last quarter. So a couple of things noteworthy of mention is that our revenue for the quarter It was $1,899,000 so just shy of $1,900,000 that's $1,500,000 in product revenue And $317,000 in services revenue for the quarter. Slightly down on the quarter on the services side, primarily due to resourcing as it relates to some additional build outs that we are doing with our facilities and certainly looking forward to Our Q3 and Q4 results as our second plant comes on stream or our new plant in Saskatoon comes on stream here at the end of August. So thanks to all of our shareholders for your trust and belief and patience in Allowing us to grow to this point where we're able to ramp up production to meet demand.

Speaker 1

We had a gross profit of $467,000 so that's down slightly As a percentage, again, because we did a little bit less services and solutions revenue this quarter, which we expect to See quite significantly different in the coming quarters. And then we have a cash balance at the end of the quarter of $6,700,000 So We're on budget and feeling quite confident about our performance in terms of what we've done. This is where we projected to be. And fortunately, we're seeing the market react in a manner in terms of demand and us meeting that demand in a responsible manner as we had expected. Just a quick overview in terms of the drone industry and some of the changes and evolutions that we are seeing In the market today, let me just hide that.

Speaker 1

Okay. And so first of all, what a big, big driver in this industry is the regulatory shift or evolution, if you will. And so again, we're seeing a stronger and stronger move towards North American manufacturing, North American security and North American solutions for a number of reasons, not just security, but also quality, quality control, supply chain, etcetera, etcetera. And so where we're now at with Dragonfly is that we have a manufacturer with 2 very well strategically positioned plants in North America, a brand new plant coming online at the end of August to join our new facility that became available at June. And so what we did in the last quarter is basically we brought on our June Our facility in Burnaby and then we're able to take down the Saskatoon facility, Moving into our brand new building, our brand new facility, expanding capabilities, while our Burnaby facility was able to maintain where things are at and as Saskatoon comes up on stream, basically significantly increasing well more than Doubling or well beyond that our capacity and capabilities as well as our additional features that we can now build into our products, We should see some gray scaling happening going forward.

Speaker 1

But really important that these are North American managed controlled All the way from cyber right through to the actual manufacturing capabilities and processes that we've got Really, really important to the customer base that we have. We've also seen as a key industry driver in this last quarter accelerate The FAA and Transport Canada streamlining regulatory environments for drone operations. It was about 3 years ago that the FAA in particular came out with new regulations around BVLOS. And listen, there's a lot of regulations within the drone industry, but BVLOS or SFOC in Canada, which is Certificate of Advanced Operations, are really the key, key regulations that everything else kind of builds around. And we saw significant streamlining both from the FAA and Transport Canada in this regard.

Speaker 1

And I think these are probably more significant than even the initial BD loss type regulation that was introduced about 3 years ago, which really started the industry rolling on total merit. And so in that timeframe alone, we've already been authorized or we've already been granted to SFOC for beyond visual line of sight and advanced air operations, which we'll talk a little bit more later on. But really great to be able to see these things be able to be granted inside of a quarter as opposed to at times where they can take 6 or 9 months in the past. So Advanced technologies are creating incredibly efficient business models and we're starting to see more and more of this. And so the artificial intelligence and data analytics capabilities that we have as well as our data solutions and storage facilities are really, really starting to pay off in terms of inbound and our ability to differentiate between what we do in terms of just producing airframes, but actually providing total solutions.

Speaker 1

And our Vital Intelligence product line has really been an example of this, in particular in terms of artificial intelligence and machine vision. So the adaptation of new markets by verticals, utilizing different drone types, I think it's worthy to note that Our medical supply delivery drones, our first responder drones and a great partnership that we had that came to fruition over this last quarter after Your hard work with Promodrone in terms of outdoor advertising with drones, which has really been effective, But also a dual use for public safety and emergency management. Drone app adoption in the defense industries, It's just staggering that basically now everything from 5,000 feet down in terms of air dominance It's all drone. It's all small drone. It's not even large predator or reaper type drone.

Speaker 1

It's all small UAS. And so we're very well positioned there in terms of our product service lines and our experience. We've got active operations in Ukraine. We're doing demining work, surveillance work and training as well, which is really putting us at the forefront on many, many areas in terms of If you guys know how to train and fly in these areas, in these environments, the experience that we get that then translates back into our product engineering and design and production, again, is really starting to bear fruit for us in our pipeline. So I want to talk a little bit about our products and capabilities, because I do think this is a differentiator for us in the market in a very meaningful way.

Speaker 1

On the bottom left, you'll basically see toy drones, right, bottom left corner. And those are consumer manually operated and fly by stick type drones. And up at the far type right, those would be fully automated military artificial intelligence based type drones. But you can see that All of the work that we do tends to skew up into that area. And the drone industry in many respects is either about saving time, money or lives, one of those three things.

Speaker 1

And in order to do that, you need industrial quality, automated artificial intelligence capabilities. And with the 25 years of experience in bench strength that we have, we're very well positioned to be able to evolve with this market. And this is the market that will really see the inflection point happening over the course of the next year to make this industry truly the multibillion dollar industry that it has promised to be. What you'll see there is in yellow, those are the systems that Dragonfly employees have worked on. The actual Blue dots are systems that we've done contract engineering for with the primes, the defense contractors.

Speaker 1

And then the black dots, those are actual drones that systems that we manufacture. And you'll see more and more of those black dots showing up Over in that top right corner, we have the distinct opportunity advantage to be able to be building our product lines, which I'm really excited about what's coming out next quarter around customer demand. And that's a big difference for us. We're not building things on spec. And so we've been able to scale our operations, Our production facilities and our product market fit exactly where the market needs to hit.

Speaker 1

It's why we've been in business for 25 years and why Previous to this last 3 years where there's been a number of new drone entrants come into the market, every other North American drone companies gone out of business. We've never tried to scale in the past. And this is the first time that we're actually scaling up because we have we've seen the demand, we've got the capabilities And there's actually a real market that's developing here. So it's just an incredibly fruitful time to be in this space and positioned where we're at. So we're very grateful for that.

Speaker 1

Talking specifically about the highlights of some of the products right now. On the far left side, you've heard us talk probably quite a bit about the heavy lift drone, which is a multi rotor VTOL Capable of carrying 30 kilograms or over £70 and this has got unbelievable traction in the market right We have tooled up to be able to start to put this into production. We have been taking free orders on it. And then in the bottom left Corner there, the Commander 3 XL, this has really become our signature drone. It's the Swiss Army knife of drones.

Speaker 1

It's got Dozens and dozens and dozens of payloads that fit on it from different manufacturers that we've already integrated with it. And I'll talk a little bit more about some of the applications on it in just a second here. I did want to highlight our LiDAR system as well. And again, this is something that we don't just make airframes, we make total solutions. And this is a LiDAR system that previously given its weight and power Needed to fly on a helicopter.

Speaker 1

And so this is now a system that can fly actually all the way down to our 3 XL drone. So the cost savings in using this LiDAR system is incredible. The advantages it gives us over other organizations that are trying to fly LiDAR in terms of our services is really distinct and important to us because it enables us to capture data and provide data analytics storage back for our customers in a meaningful way. So while we sell this particular product out into the market, The real differentiator for us here is this is a service differentiator where we can do certain missions that other organizations just simply can't do. And we're going to continue to work on those types of solutions.

Speaker 1

We're very focused on what are the strategic differentiators for DragonFly. And being able to do what we do end to end gives us that capability. At the end of the day, the majority of the drone industry is about data, Even though obviously things like delivery are incredibly important and a significant piece of it, but the data in this industry really will probably account for about 80% of value that's created. So we're going to continue to skew towards data. But on the delivery side, I think it's important to note that we just introduced 2 new payloads that we have engineered for the Commander 3 XL.

Speaker 1

Actually, these will work on the heavy lift as well. But one is the drop down winch system. So the drop down winch system has some incredible engineering capabilities, 30 meters of length, 5 kilograms of payload. It does have a precision camera on it, so you can pinpoint exactly where you're dropping down to account for wind, Etcetera, etcetera. You can fly with this thing deployed as well.

Speaker 1

And then right below that, you'll see our quick release box. Now we the boxes that we have tended to focus on in the past and we're seeing great demand are for have been in the medical delivery side of it. So our differentiator there is that they're thermal managed. And so we can deliver things like pharmaceuticals and vaccines and organs and blood and such. Incredibly important to our customer base and the customer base that we're catering to.

Speaker 1

This particular box is actually can winch down. It can also open on the front. It could also open on the bottom from an altitude. So it has bay doors on it. And so it's got a whole range of different multiple options.

Speaker 1

So if you get into weather conditions or into tight spots where you can't get landed or emergency situations or just typical delivery, You've got multiple options with precision surveillance and aiming camera on the base of this actual unit. And then coming right down to the middle there, the Starling X. 2 drone, this is a collaboration between Promodrone And Jamar, the CEO and his team over there have just done an incredible job with this product. The 3 XL was made to be able Carry this payload with the incredible battery capabilities and lift capabilities. So originally, this was designed as an advertising platform, But there's been tremendous demand in emergency management services, and I think that will probably be their biggest market.

Speaker 1

So it fits in really well with what we've done. It's been a great collaboration, And Promodrone has been a fantastic customer for us. I know they're taking pre orders on it already. They've got very strong demand and of course that translates very well to us selling More and more of this equipment, not just the 3 XL. So we're very grateful to Promodrone and the work that they've allowed us to do with them.

Speaker 1

Some operational highlights, DEFC, who is a very strong partner of ours over in the Ukraine, we've expanded our joint venture With our joint UAV operations, excuse me, with them, and they are deeply involved in both the civil and the defense sectors. This now we now have capabilities for increased inventory and repair and logistics within the country, Which is incredibly important. So it's one thing to be able to deliver drones and some sort of drone capability into the country. But when you look at when larger orders are being adhered to or asked for. The logistics now are really important.

Speaker 1

And not just the logistics, but the training. So the amount of drone activity that's happened over in Theater there has now started to lead to a maturing of standard operating procedures. So that in the command and control structure, You actually know what drones you have, what capabilities they have. And up until this point, it's been a hodgepodge of just whatever anybody can get into theater, Which makes it very difficult to do plan strategy in a number of tactics. But what we see now is a maturing of this.

Speaker 1

And that maturing really is Viewing the purchasing decisions and the tactical decisions to organizations that can provide a consistent, not just supply, But a consistent product that fits within a standard operating procedure that we now had the great fortune of being a part of helping design, which We'll talk a little bit more about here shortly. At the World Police and Fire Games, We were able to unveil our precision delivery system, the winching system and the box. We're a proud sponsor of the World Games, and we're able to carry the closing ceremony flag and turn that over to Birmingham, Alabama, which the next World Police and Fire Games will be at. We did receive a special flight operation for advanced operations and delivery over people in order to do that particular mission. To a number of our customers some of the additional capabilities that our winching system and delivery systems do have.

Speaker 1

So Transport Canada did also grant us another SFOC for beyond visual line of sight operations above 400 feet for wildfire suppression operations, and we'll talk more about that in the coming quarter. But That has been a big area of growth for the drone industry in particular, and we're very proud to be a part of that. And that's all we'll say about that at this point. The other thing I did want to mention that isn't in the operational highlight, but is in our press releases Is the deal that we have done with HEAL Corp. And the Ukrainian National Academy of Internal Affairs.

Speaker 1

So the MOI is the organization that's much larger than the MOD, as a matter of fact, in the Ukraine. And the MOI oversees everything from the National Guard, certain aspects of Presidential Guard, Special Forces, Emergency services, police, border patrol, etcetera, etcetera. So we're training up to 1,000 new pilots per year with them on Dragonfly equipment and Dragonfly payloads. And the big so obviously, great exposure for Dragonfly and the whole procurement process. Really what's important there is, listen, they're the best drone pilots in the world right now in Ukraine.

Speaker 1

We're not going to be teaching anybody how to fly better stick or operations over there. But What is important about this is it's a formalized system to develop curriculum around standard operating procedures, Which gives us incredible insight into how to design our product for that particular theater and or other theaters that are similar to it. We've already seen this type of experience bode very well for us in our pipeline As it relates to incoming sales, nobody again wants to be putting equipment on scale into any type of theater unless they know the capabilities and there's standard operating procedure for all of the assets they've got in that particular environment and they know how they can deploy them, repair them And what operational capabilities they have. These are a lot of the things that when you think about the drone industry, you think, oh, who can lift more or who can Have longer battery life or those types of things, but it's really more about how do you integrate operationally so that you can have successful data collection or delivery. So again, super, super proud of our teams, in particular in Ukraine, who have been going above and beyond in order to serve their cause.

Speaker 1

I touched on this slightly already, but obviously, our production capacity, which has been next to Sales, well, in fact, in front of sales, this has been our focus. So as mentioned before, we brought Burnaby on in June. We slowed down Saskatoon. We have a brand new facility that's very close to being operational. And as that becomes operational, we're going to be able to meet demand and I think we're looking for some pretty nice results in the coming quarters due to that.

Speaker 1

Like I said, we do have very good revenue visibility at this point. And so tough strategic decision not to push the numbers Harder sooner, but very, very pleased what that means in terms of how we'll be able to scale. What I'd like to do now is turn it over to Paul Sun, our CFO, to review the financial results. Paul?

Speaker 2

Yes. Thanks, Ken. Thanks, everyone, for joining. So we look at Q2 here as a year over year comparison on Slide 9 here. Revenue for the Q2 was down 19.8% So $1,900,000 from the $2,370,000 in the Q2 of last year.

Speaker 2

2nd quarter revenue, as Cam mentioned at the outset, comprised of $1,580,000 from product sales with the balance coming from drone services. So the reduction is due primarily to lower provision of services this quarter versus a year ago. Also, we touched on gross profit 4.67. It would have otherwise been 5.90 Excluding a one time non cash write down of inventory, gross margin as a percentage of revenue would have been 31.1%, down 11.7% from Q2 of last year. Again, this was a result of more sales coming from products that generally tend to have a lower margin than that of services.

Speaker 2

Total comprehensive loss for the quarter, dollars 6,900,000 compared to a comprehensive income of $640,000 in the same quarter of last year. This quarter includes, as mentioned, a non cash charge of a write down of inventory of about $122,000 and otherwise would be a comprehensive loss $6,760,000 However, in the same quarter of last year, the income had a gain in fair value of derivative liability of $6,100,000 So it would otherwise have been a comprehensive loss of $5,450,000 So the year over year increase in loss is primarily due to the decreased gross profit that we talked about and slightly higher SG and A. Now on Slide 10, we look at the quarter again, but since we just went through the year over year changes for the quarter. Here, we'll focus on the quarter over quarter changes between this quarter, meaning Q2 and that of Q1 of 2023. So revenue for Q2 increased by 19 percent to $1,900,000 compared to the $1,600,000 that was done in Q1 of this year due to both higher product and sales and services.

Speaker 2

Our gross margin percentage for Q2, again, was 24.6 due to that inventory write down that we talked about and otherwise would have been 31.1% compared to 27.7% in Q1 of this year. So heads on an adjusted basis, gross margin would have been up 3.4% quarter over quarter, and this increase is due to the sales mix of the products sold. Total comprehensive loss for Q2 again was $6,900,000 This compares to a comprehensive loss of 7 point $1,000,000 in Q1 of this year. And again, recall that we had the non cash write down of the inventory. If that was axed out, it would be $6,760,000 while in Q1, there was a small non cash Gain of a fair value of derivative liability of $57,000 and a non cash write down of inventory of 77,000 So excluding that, Q1's 2023 loss would have been pretty much unchanged at 7,100,000 So our loss this quarter was actually a bit better primarily due to higher revenues quarter over quarter.

Speaker 2

On the next slide, Slide 11, you can see our total assets decreased from $14,600,000 at the end of last year to $12,700,000 which is just largely due to the use of cash. Working capital surplus at the end of this quarter was $7,500,000 versus $10,100,000 is $10,100,000 at the end of 2022, again, primarily for the same reason. We do continue to have minimal debt And our balance sheet shows cash at the end of June at $6,700,000 and we compare that to $7,800,000 at the end of last year, December 31, 2022. And with that, I'll pass it back to you, Ken.

Speaker 1

Thanks so much, Paul. Appreciate it. I think we've got a number of questions that either came in ahead of time or have been popping up. So maybe Scott, I will turn it over to you.

Speaker 3

Yes, thanks. We do have a number of questions that keep coming in. I have had a few questions and emails just kind of come in over the course of the last few minutes as well. So I'll kind of organize these as best as I can. And as more questions come in, feel free to send them through.

Speaker 3

So Cam, talk a little bit about incremental sales demand, where that's coming from with regards to geography as well as sector. Are the new sectors opening up? You talked a little bit about high level product versus services, but maybe give a little more granular, if you can, with regards to geography and overall sectors.

Speaker 1

Yes. So geography is still a bit surprising, at least to me, and it shouldn't be because it's been a solid year, year and a half of of seeing this trend. But international is much more strong than what I anticipated it to be. But interestingly enough, it's still the demand for North American products. So it's almost as if the foreign national manufacturing Concerns that are in North America are even heightened in other areas of the world, And there tends to be less regulation in those areas.

Speaker 1

So the markets are moving quite fast in that regard. So that's surprising to me. In particular, the Ukraine theater is an incredible market. You need to be very, very smart or experienced, excuse me, in order to participate there and understand how that will scale. And I think we've paid some dues there to do that and I think we're in a good position for what's about to unfold.

Speaker 1

That said, also it provides us incredible credibility back in the North American front, in particular on the defense market, Knowing that we've got that experience and we've got equipment in theater over there doing that type of work and we're able to bring back expertise And share it around our equipment solutions that's being garnered by our customers here in North America. The India market is Probably the one that has surprised me the most other than Ukraine kind of came out of the blue, if you will, for everybody. But the India market is something where the foreign national drones are just completely off limit. And the demand for a North American technology manufactured in that environment is massive. It's I would hazard to say it's likely the biggest drone market in the world and opportunity in the world, which I wouldn't have concurred with based on experience 2 years ago.

Speaker 1

So we just recently came back from another trade show over there. We've got some great partners. We've got some very deep inroads with the government. We've had first product land over there And a number of members of the team have done significant learnings around how to set up our operations, And I look forward to that in the coming quarters. So India is big, defense is very big, and we see The public safety market here in North America leading the way in terms of regulatory approvals.

Speaker 1

So while there are other markets That may be bigger than public safety on the industrial side. There aren't other markets that will get regulatory approval or adoption quicker Then public safety. So things like drone as a first responder, drone in a box, 4 first responders and public safety, those are the areas that we're focused in because we know those are the areas that we'll Approvals and waivers, etcetera, and budgets, there's ROI on it, so there's budgets that are being allocated for those now. The other industrial applications for sure are coming along and we've got great sales pipeline into those. Where we're not where we remain not overly focused for us is are things like consumer delivery.

Speaker 1

We just They're a long way out and then we'll see where they end up. I mean, they're a reality, they'll happen, but they're not a short term focus us at all. Hopefully, that provides some insight.

Speaker 3

Talk a little bit about the supply chain issues. We've talked about some of the last quarters. There have been obviously supply chain issues that have affected this industry among lots of others. What are your thoughts on that moving forward?

Speaker 1

Yes. So I think supply chain has been an issue for most people. COVID was a part of that for sure. But then coming into a market where you've got a complete vacuum of drones from foreign nationals being taken out of the North American market and many of the other markets and then competition for and then competition to get Product in and specifications being designed and built for an entire new product evolution or an entire new generation of drones and capabilities, We've been dealing not just with supply chain, but we've been dealing with specification kind of freeze. It's like, oh, my gosh, what it like There's so many new things that need to be put in to this next generation of drones, which are now there.

Speaker 1

So real time delivery Is something that through our ERP that we put in place a little over a year ago was something that we're capable of. However, we are skewing A bit more out of necessity to some bigger inventories just because we have that demand there and we don't want So some of that has had some effect on us as well. But what it will do is hopefully prevent us from having things move out to the right on a continual basis, which has been the entire industry has been plagued by that. So the new facilities we put in place are addressing that. Believe it or not, things like storage and how you set up your production lines and etcetera, are all really important To be able to carry inventory, but not too much inventory, but still be able to adjust quickly to just in time inventory when it's applicable.

Speaker 1

So It's all kind of a maturing process right now in an industry that's been around for a while, but it's frankly brand new.

Speaker 3

Do the regulations around drones from China affect what we're doing here at Dragonfly?

Speaker 1

100%, they do. Yes. I mean, it's Our position at DragonFly is that we provide solutions for customers. So there is a significant market for For national drones in North America, and there will be and there will continue to be and they're fantastic equipment. We're not being naive to think that we're going to go into the small drone market and that the opportunity here, there is significant vacuum created And market demand by that reality of and I think some valid concerns around those 4 national drones.

Speaker 1

But the market that we're catering to in Building towards, right, given total solutions and operating procedure capabilities is not about we're not trying to the opportunity is massive maybe because of that born national conundrum, but that's not going to be a sustainable story. What you need to do is build better drones with better capabilities fit for specific operations. And that's why you see our drones skewing to very specific Operations and or to a heavier lift type of category. So this is stuff that's really we're focusing on where the market is, not necessarily just because The opportunity is here because of regulation, because those can change in 10 years from now as well. But yes, so it has a huge effect on us.

Speaker 1

But that's not what we're counting on. I'm not sure if that was the question you're answering asking, but we're not counting on regulation to build a sustainable business. Yes,

Speaker 3

I think that does answer the question. There's been other questions that have come in about production capacity, which we think we've answered ongoing things in Ukraine. We've talked a little bit about Windfall Geotech in the past. Any update on that relationship? What does that look like?

Speaker 3

How does that affect some of the stuff we're doing in Ukraine as well?

Speaker 1

Yes. So the relationship there, Very solid going forward. Love the technology bench that we've been able to collaborate with there on the demining side as well as the Earth Mining, rare earth mining side with them and an important partner as we move forward relating to our total solutions business or our data business in particular on the earth mining side, the rare mineral side, if you will, and then the technical collaboration for demining going forward. We've taken a very pragmatic approach, in particular in Ukraine to demining. There's been a number of companies that went in there, made Wild claims about what they could do, how they could do it, what their technology was about, how AI was going to and it kind of reminded me of the last two drone cycles where Like all these companies just made wild claims that you knew they just couldn't meet.

Speaker 1

And sure enough, to line all pretty much all of those, Not all, but most of those demining claims have now been debunked in the pragmatic approach that we've taken with building our algorithms, Working with multiple sensors, not one magic sensor that does everything or can provide immediate real time results and solve every solution and Deminer field in 10 minute, like just those types of things. And now we see the inbound pipeline on demining, not just in Ukraine, but around the world going Up significantly, because we've established ourselves as a credible player in that market. So yes, so anyway, that all relates To Windfall and we're glad to be glad and working with them.

Speaker 3

Talked to the past recently about acquisitions and opportunities, of the consolidation that's going on in the industry. Do we still see that happening? Anything that are coming off?

Speaker 1

There is significant consolidation opportunities Now in the industry more than we've ever as you would know, Scott, more than we've ever seen, better pricing than we've ever seen before. But kind of the reality for us is it has to be pretty special Now for us to take it on, especially given where we're at with our production capability about to encore here at the end of August. And we've looked at lots. There are a couple that are still pretty interesting. And so we're going down those paths.

Speaker 1

But for the most part, we can build a lot less expensively than we can buy even at the discounted prices now. And at the end of the day, you've also got to integrate different cultures and it's a very, very game if you want to build a scaled business as most people know. So there's a couple of interesting things out there, then And I don't want to discount those because they are pretty interesting. But for the most part, acquisitions at this point just don't like organic growth is what's going to be the ticket for us. Without getting too for us.

Speaker 3

Without getting too far ahead of ourselves, Dragonfly has announced a couple of new products in the last 6 to 8 months, of course, LiDAR, heavy lift and so forth. Anything else come down the pipeline? How much effort is DragonFly putting into new product development?

Speaker 1

Well, we're really excited for September. The product teams led by our COO, Paul Mullen, I think have knocked it out of the park. And in September, there will be a new significant 2 new significant product announcements. In terms of our drones, what they'll do capabilities, lift capability, duration, entire new category and completely driven by demand. So These are drones that are building on our on the industrial strength type of drones that we have today.

Speaker 1

And where our customers that are now lining up in size are saying, hey, if you did this, This is the size of order we'll make. And so we've done that. And it's just killing me not to say what it is, but there's some really great I'm really just incredibly impressed and proud of the team. Also in terms of payloads of our existing platforms, which is really what the DragonFly product line is becoming, is expanding greatly as well. So we have done, as mentioned, our winching system with a precision camera on it, which is really important with some incredible engineering behind it in terms of capacity to fly half winched, length, payload capacity, The boxes with multiple remote opening doors in different directions, but also our partners Who are now building product to fit onto the Dragonfly.

Speaker 1

And probably our most significant or some of our most Significant pipeline opportunities now were brought in by our partners from previous announcements, where they're all selling either their software or their payloads And they're going and they're like the 3 XL in particular right now is the best platform for it. And we've done very, very concise work integrating With those payloads, Promodrone is one of multiple examples. And so we'll see Those things coming down the pipe in this coming queue as well. CUAD, which is a significant drone show in September, will be a pretty monumental event for us. We also have a very large customer event for us happening in September at our air facility in Texas, where we've got A couple dozen customers that are coming out and flying for a few days and taking delivery of equipment And starting training and also seeing some of the new product lines that they've asked for coming down the pipe as well.

Speaker 1

So there's just a whole maturing of how we're able to bring product market.

Speaker 3

Okay. I think there's been a couple of other questions that have come in that probably kind of put touch on A guidance which, of course, we don't give. We don't want to talk about revenue numbers for the next 3 to 6 months. We'll probably stay away from those other than what you've already talked about. I think that kind of wraps up the questions that have come in, either answered with regards to the presentation that Paul gave some of the stuff that you've talked about.

Speaker 3

And so with regards to questions, that's there's been 1 or 2 that have come in over the chat. We've answered those emails as well. So I think with that said and done, I'll be happy to pass it back to you, Cam, and we can wrap it up here.

Speaker 1

Sounds great. This is just I'll just wrap up quickly. First of all, again saying thank you to The team members, everybody, the culture that you've created, the work that we're doing around the world, the commitment, the passion, the weekends, the late nights, Just it's incredible and thank you for that work as a shareholder and as part of management to get to be a part of it. Certainly to our customers who and our partners who are building payloads and entrusting us to work with their customers. Please continue to give us that feedback and let us be of service to you and to our shareholders.

Speaker 1

This is an industry story And I kind of liken it to playing golf. You can go out and you can do your best to shoot a good round and Get whatever score you can, but the reality is you can also go out and shoot around to become a better golfer. And so for the last two years, Yes. Previous to us going public on NASDAQ, it was all about how to learn the industry and sustain within the industry and just survive in the because it just never really came to fruition. And since those BB loss regulations have started to become a reality, the industry has now started to mature to a point.

Speaker 1

But if you want to be that number 1 or 2 player in the space, at least our strategy is, you don't go out to play a better golf game, you go out to be a better player until that market has matured. And we're starting to see that happen. So we really appreciate your patience in terms of being able to see a real market mature, the next generation of drones Come to fruition, which I think the 3 XL is the leading edge of that. And then some of the things that we'll see at CUAV this year, which are put out there because of customer demand. And we appreciate your trust and hopefully you'll see the commitment that we're all making to you.

Speaker 1

So thank you very much and we look forward to a fantastic Q3.

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Earnings Conference Call
Draganfly Q2 2023
00:00 / 00:00
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