Draganfly Q2 2024 Earnings Call Transcript

Quartr
Provided by Quartr
August 13, 2024

There are 3 speakers on the call.

Operator

Thank you. Respectful of everyone's time. Even though I see people still coming in, I think we'll get started today. Greetings and welcome to all shareholders and stakeholders to today's Dragonfly 2024 Q2 earnings call. My name is Rolly Bustos, and I'm the Internal Investor Relations representative here at Dragonfly.

Operator

I've talked to many of you in the past. We appreciate you joining us. We will start with our CEO and President, Cameron Schell, recapping the Q2 earnings headlines. We will then move right into a more detailed financial review with our CFO, Paul Sun. Cam will then jump back in and discuss some operational highlights and subsequent events as well as go through the pre submitted questions we've received.

Operator

Like always, you are welcome to reach out to me at investor. Relationsdragonfly.com@anytime. I remind everyone that this presentation may include forward looking information and statements. These statements are not guarantees of future performance or financial results and undue reliance should not be placed on them. Any future events or financial results may differ from what might be discussed here.

Operator

The forward looking disclaimer will be found on Page 2 of the presentation. Sir, Kam, please go ahead.

Speaker 1

Thanks, Roy. Thanks everybody for taking the time to hook up with us today. We really appreciate it to the Q2 2024 earnings call for Dragonfly. As mentioned, the disclaimer, this presentation will be posted on the website under the Investor Relations tab immediately following the call. The disclaimer can be found on Slide 2.

Speaker 1

So, just to hit the financial highlights, basically in Q2, 2024, we had organic revenue of $1,732,000 That consisted of 1 point $3,000,000 close to $1,400,000 in product sales and then provision of services of $345,000 This is a 30% increase quarter over quarter from our last quarter, which I'll speak to why that's the case and why we now see sales starting to move forward again here shortly. Also in Q2, 2024, our gross profit was $461,000 with a gross margin of 26.6%. Paul Sun, our CFO, will speak to some of the detail around that of why the actual operating gross margin was a bit higher and healthy. And then we have a cash balance of $5,200,000 So let me jump in a little bit into the operational highlights, which will actually speak back to some of these financials and then we'll have Paul run through the details of the financials. But I think most notably, some of the work that we did in through Q2 was a bit of a board shuffle.

Speaker 1

And so we want to really thank our former Chairman, John Mitnick for the service that he provided to the company and to his career moves now where he's moved on to. We're really, really pleased to invite 3 new board members to the Board of Dragonfly. Very notably, Secretary Thomas Mobley, who was the former Under Secretary and Acting Secretary of the United States Navy, the most senior civilian personnel that well, the person that runs the Navy. Thomas also has a very illustrious career, West Point Grad, ran the entire defense division for Bridgewater, Hoax, Coopers for years and we're thrilled with what he is already contributing and bringing to the table. Kim Moody also joined us.

Speaker 1

Kim is a long time tax accountant and audit specialist, ran his own firm for a couple of decades, now consults to it because he sold out. He's sitting on our public board. He's now heading up our audit committee. And Kim is also very well placed politically in the Canadian environment. And so we look to him as well in terms of our government relations and business development work within the Canadian government and the DND up in Canada.

Speaker 1

Tim Dunning, Jr, is a very experienced entrepreneur, particularly in the military space. He's a 3 tour combat veteran, has launched several companies that have had programs of record with different departments within the DoD and brings to us a wealth of operational knowledge, both from an entrepreneurial perspective, but also from a military perspective and actually understanding how we're moving through a bunch of our products and services through particular, but in particular, the DoD. Also of note, Tim was actually a co founder and the CEO of the largest drone services company and which still is in the United States. He doesn't he's not with them anymore. He's moved on to several other ventures since then.

Speaker 1

But he brings incredible, incredible experience. He's also a PhD candidate with the which is specializing in AI ethics with the use of drones. So incredible, incredible depth that has come to our Board and we're really excited about what they're already contributing. On the operational side, a couple of highlights to talk about. Mass General Brigham selected Dragonfly to be their provider, both equipment and services of choice to be setting up their drone delivery programs, in particular as it relates to their home hospital delivery.

Speaker 1

Phase 1 of those are commencing next month. There's been extensive planning that's gone into the launch of these initial services, which includes work with Mass DoD and the FAA to make it happen. This was it's an incredibly prestigious opportunity for us and was basically for all intents purposes, every drone provider out there that has a delivery type service was in the mix to be to win this opportunity and we won it in Q2. So we're really excited about what's unfolding there. Also just wanted to highlight a little bit on the green UAS and blue UAS front.

Speaker 1

These are certifications out there that a number of select drone companies have. We do not have blue UAS and candidly, this is something that way back a couple of years ago, I didn't think was that important because we were already selling into the organizations as an NDA compliant drone manufacturer. However, it's become a bit of a marketing thing and is an important thing to have. It hasn't prevented us from getting any sales because of the history we've got as a company. We are enrolled in the Green UAS program, which is an equivalent and arguably kind of higher type of certification.

Speaker 1

We also are involved deeply in many military certifications that trump these might be the right wrong way to put it, but certainly are harder certifications to attain that we've been working with and complying with for years. So, we are going down these paths though. Again, they haven't prevented us from any sales. And I think we're unique in that regard because of our 24, 25 year history, excuse me. But we are endeavoring and pushing down them quite quickly.

Speaker 1

On the services side, I did want to touch base. First, Atlantic Nickel, we signed a significant contract with them to provide services for property they've got in Atlantic Canada. But this is important beyond just the type of contract it is, it's because it's the type of mineral that they're going after. It is a strategic mineral and it's a massive potential deposit that they've got on hand. And this is really an ideal scenario that's setting up our data division that's enabling us for the AI work that we're doing with the data we're collecting around mining.

Speaker 1

So on the services side, we've consolidated a number of our services into particular areas that we believe that can really scale. So things like forestry are very important to us because we can collect incredible data there that we can feed back to our clients. So it's a service on top of the actual just flight services and equipment that we provide. And this would include mining as a strategic initiative for us as well. So we're going to continue to push down that path.

Speaker 1

The other one that's of note is the wildfire services that we provide. I can't name the actual governments here that we work for, but we have government contracts, multi year contracts to provide wildfire services. And what these services typically are involved with is us flying night missions with our equipment to look for hotspots, host teams having been into a particular area and then looking for route fires. Interestingly enough, over the course of this last quarter, we have also been doing frontline work, flying while crews are active during the day, providing everything from fire direction, weather reports, a number of different environmental sensors. And we've increased this contract in particular from kind of like an on call contract 2 years ago to a couple of full time crews last year to up to 5 full time crews now this year and we expect that that will continue to grow next year.

Speaker 1

We believe that by next year we'll actually be doing equipment and we've done some testing with this, actually equipment delivery dropping things like or bringing in things like chainsaws and hoses and shovels and fuel and a number of different things like that live during active action. So we're really getting incredible experience hands on with this. And we now have a number of other government wildfire services throughout North America that are actually studying and looking at the work that we're doing here. And so we'll continue to expand this service. Just recently, we announced that we have signed after a long process of making a selection, we have signed a distributor in Australia.

Speaker 1

This came out of military that we're looking for particular products that we sell that are of course non Chinese, the heavy lift, the 3 XL and our FPV drones. And so we're very pleased to announce that we've signed a deal with the Drone Institute, the Drone Technology Institute out of Australia, who is the primary seller of drones into the U. S. Military and such. So we'll be down at the Land Forces Conference in September, which is the main military conference, annual conference down there launching our products with them.

Speaker 1

We've got a week long ahead of time demonstrations and stuff throughout many parts of the country with particular products as well. So we expect that it's a 5 Eyes country and very closely aligned with the United States and Canada and Great Britain, etcetera. So we're really excited about the opportunity in getting pulled into that market. We did we have done some private label product with NightScope and so pretty excited about the pipeline that they're building in that regard. And I think that's notable because they're super active in the space.

Speaker 1

And this is somewhat for manned drones, but more it's about drone in a box type solutions to work with their automated security systems as well. Squamish search and rescue, an important contract to us because Squamish is one of the busiest search and rescue units in all of North America. It's an outdoor area, everything from ocean to swift current to alpine recreation. They respond to hundreds of calls per year. They've now gone exclusive with Dragonfly product in particular because of the capabilities and modularity of 3XL that we bring to the table.

Speaker 1

We're providing everything from swift current rescue to alpine observation, alpine rescue, location finding, logistics, dropping of emergency supplies, the wealth of knowledge that we're gaining in terms of working with them and the spin offs of the other search and rescue units that look to Squamish and are looking to the services that we're now providing there have been pretty extensive. So we're pretty excited about the ongoing work that we do with public safety. El Cacho First Nation, they have signed an alliance with us. They're exclusive product supplier for drones. They're using drones from everything from mining surveys, search and rescue, wildfire work, etcetera.

Speaker 1

We have a full training program with them. And it's actually a model now for other First Nations that are looking to build out their drone services. Again, they provide everything from wildfire services right through to security to survey and mining and forestry. ParaZero is a strategic partner of ours. We work closely with them on a number of initiatives as it relates to parachutes, medical delivery, military applications, and of course, commercial enterprise applications.

Speaker 1

Recently, the FAA has announced that for drones that are under £3.5 if they've got a parachute on them, they've got a much reduced or streamlined waiver process to do flights over people. So that's pretty exciting with some additional product announcements that we've got coming up shortly. And then we've also got a strategic alliance or deal that we put together with Doodle Labs to continue to work and grow the excellent work that they've done and that we've been able to provide both in the Ukraine theater and locally in GPS denied environment. So, some pretty exciting things that are unfolding on all fronts. I just want to highlight again the military impact.

Speaker 1

So, the military impact globally is approximately $20,000,000,000 in growth for small, what we'll call category 1 and category 2 drones between now and 2,030. And a very large portion of that is going to be NDAA compliant non Chinese drones. And so there's really 3 or 4 people right now that are positioned to be able to provide on scale and meet this type of market. So it's probably about a $20,000,000,000 opportunity spread across 3 or 4 at least North American companies and probably 3 or 4 other companies in a couple of the other parts of the world. But I think it's really important to understand and this really I was on a board call this morning and the impact really hit me.

Speaker 1

One of our board members explained that less than 4 years ago, any drone operation that was done by at least the Navy had to be signed off at an incredible senior level, actually at the most senior level. And that was only 4 years ago. And so when we talk about the impact of the $20,000,000,000 market for small UAVs just in the military, the issue isn't the demand. The issue is working through the process for that demand to become scalable. And so while the military has come to companies like us and really weeded the rest of the industry out based on, 1st of all, the product, second of all, the people which is reflected in the product, and then third of all, your ability to scale.

Speaker 1

And that's really came down to that last aspect for the 3 or 4 companies that are left to serve this market is they're the ones that are able to scale. But it takes an incredibly long time to work through that opportunity to scale. Much different than, say, some of the activity and much of the activity that happens in the Ukraine theater where they're able to just put together $800 drones as FPVs, Chinese parts, whatever, it doesn't matter. I mean, there's certainly implications for quality control and reliability around those. But we hear about these really big volumes of numbers that are happening in the drone industry, but we fail to recognize that those volumes are actually very low priced drones that are not working at a level that would be satisfactory to many of the NATO or the 5i type of countries out there.

Speaker 1

That said, the Ukraine is a very important market for us, which I'll touch base on. I have gone through this slide before, but it's slightly adjusted because we have added some new product lines into this. In particular, this black dot up here should have FPV in front of it, I apologize. But that's the new FPV product that we've introduced in the last quarter in a bit, which is very unique and I'll talk about it. But it does again emphasize the fact that the work that we're doing is not down in these lower priced drones.

Speaker 1

And so the ability and capabilities to work these through these very sophisticated channels, both on the military, the public safety, the government aspects other than the military and the, I'll call it, the enterprise, which is different than the commercial enterprises. They have many of the same security concerns, many of the same safety concerns, many of the same requirements that the government agencies have. And so working through that product and we've chosen to go down these product lines because we don't want to be in a situation where we're constantly in a race to the bottom in terms of providing a low cost or inferior type of product. So I'm not going to spend much time on this. We've got our heavy lift drone.

Speaker 1

We actually have commissions around a heavy, heavy lift drone, which is larger than this drone here. This drone here carries 67 kilograms, which we are shipping now. In small quantities but growing as we get more airtime on it. And as mentioned, there's even a bigger unit than this coming out that's under commission. We've got our Commander 3XL Hybrid, our Precision Delivery Systems.

Speaker 1

We've got our quick delivery release delivery boxes. These can also be winched down. But basically the Commander 3XL remains at this point to be the stalwart of our sales and efforts, which is really known as the Swiss Army knife of drones, which has dozens and dozens of different, not just applications, but payloads that now fit onto this. And so getting all that integration work, whether it's precision or targeting cameras or logistics systems or whatever the case is, is really kind of winning the day for us and we're starting to see scale on. As mentioned, and I want to go into just a little bit of detail here, the Flex FPV.

Speaker 1

So this is a 1st person viewer drone. This is a very unique drone. It is an FPV drone. It is a full NDAA compliant FPV drone. So it is available to be purchased by Five Eyes, NATO and many of the other allied countries out there.

Speaker 1

It has some incredibly unique features, not a lot of which that I will go into details, but in terms of range, transmission capability and adaptability to be able to fly missions as small as through windows or missions as large as several kilometers away that could carry 6 kilogram payloads all on one airframe is incredibly unique. And we've now trained over 200 Special Ops Forces in the United States on this drone. It is being included in the Ranger School on the training side. And so over the course of next year, again, we do expect to see a significant scaling of this particular product. I think it's important to note that this particular product, all these product lines are all integrated with each other as well.

Speaker 1

So, what you'll what you may have heard about there is the ability for these FPV drones to actually start swarming. And but the capability of this drone combined say with the 3 XL or the heavy lift, if you will, is actually this drone which can fly into a GPS denied environment and actually have laser targeting on it can then drop swarms of these drones here, which have much shorter ranges and don't have the cost on it to be able to put GPS denied counter measures type of electronic countermeasures on it. So this can get deep into a territory and then these things here can be dropped and used for whatever mission profile they have. That's the type of capability that we've been working in and going through several tests with many different militaries out there. So again, we're really excited about where the entire product line is going and where our customers are taking us.

Speaker 1

So on that note, I know that there's lots of questions. I'll come to them at the end. But on that note, I'm going to turn it over to Paul here. And what I did want to just quickly highlight is that this quarter we saw a 30% increase in our revenue. We have seen a flat year overall.

Speaker 1

That's primarily been due to the fact that we've had a requirement to build out the capacity to scale all of these product lines for the large orders to be able to qualify for the military type contracts. And so that has taken a lot of focus for us to do that and to be able to get through all of the certifications and audits that were required in order to be able to continue to meet the requirements of the military products and testing that we haven't gone we've gone through. We were able to complete that right around the Q1 of even toward the end of Q4 of last year. And so we had some hangover in order to kind of clean up and take not a breather, but really just kind of get caught up in Q1. And then Q2, we've started to see this scale both in terms of our military contracts, but also being able to pay attention to our traditional market, our commercial market and our public safety folks.

Speaker 1

So pretty excited about us starting to see that scale start to happen again. And I'll address some of those questions in the Q and A section here as well. So maybe Paul, if it's okay with you, I will I'll throw it over to you.

Speaker 2

Yes, absolutely. Thanks, Cam, and thanks everybody for joining our call. Appreciate it. So, yes, just looking here, we're going to do a year over year comparison. So revenue for the Q2 was $1,700,000 as Ken mentioned just down 8% from CAD1.8 million in the same quarter last year.

Speaker 2

2nd quarter revenue comprised of CAD1.4 million of product sales with the balance being from drone services. Gross profit was $462,000 compared to $467,000 in Q2 of last year, but there was a one time non cash write down of inventory of $134,000 so otherwise would have been 596,000 dollars Gross profit for the same period last year would have been $589,000 So if we took away the one time inventory write down from that period, That's the direct comp. And as Cam mentioned at the outset, our gross margin would have been 34.4% versus the 26.6% percent and the direct comparison would be 31.1 percent for the same period last year. So up a few points year over year on the gross margin side. Total comprehensive loss for the quarter was $7,100,000 compared to a loss of $9,000,000 in the same quarter last year.

Speaker 2

Like usual, this quarter does include a non cash change and comprised fair value derivative loss of $2,600,000 dollars That inventory write down that I mentioned and a small gain on an impairment of a notes receivable of $4,000 So otherwise that $7,100,000 loss would have actually been a $4,400,000 loss versus an adjusted loss of $6,800,000 a year ago. So year over year, quite a bit better on the loss and that's due to lower office and miscellaneous costs, professional fees, wage costs, etcetera. So Kevin, if you could just flip to the next quarterly table there. We just went through the year over year. So now we'll just do a quarter over quarter change between this quarter and Q1 of this year.

Speaker 2

So again, revenue, dollars 1,700,000 that increased by $403,000 from $1,300,000 in Q1, an increase of 30% due to higher product sales. Gross margin as mentioned 26.6% compared to 21.1 percent from Q1. Again, if we back out those one time write downs, would have been 34.4 versus 32.2 for Q1, so a few points higher quarter over quarter on the gross margin as well. Total comprehensive loss, we mentioned $7,100,000 this time compared to $1,900,000 for the Q1. Please recall that non cash fair value of derivative liability of $2,600,000 the inventory write down and the gain on the notes receivable.

Speaker 2

So the comprehensive loss again would have been CAD4.4 million. If we adjust the same non cash items for Q1, that loss would have been CAD3 point 6. So Q2 had a bit higher loss than Q1. That's because of some higher professional fees done in Q2 versus in Q1. And then on the final page, Kim, you can see here our total assets did increase to $8,300,000 sorry, from $8,300,000 to $9,900,000 from the end of the year, which is largely due to an increase in cash.

Speaker 2

The working capital as at the end of June was a deficit of $3,700,000 versus a deficit of $717,000 However, we did have a big fair value of derivative liability of $9,400,000 on our balance sheet. And again, that's due to us meaning the company reporting in the Canadian currency versus U. S. And some other things. So that's why it's treated as a liability.

Speaker 2

Again, it's a non cash item. So if you back that out, working capital would have been a surplus of CAD 5,700,000 dollars 3,500,000 at the end of the year. Doing the same thing with shareholders' equity at the end of this quarter, that would have been a shareholders' equity of $6,800,000 versus the $2,600,000 that you see here and $4,600,000 at the end of December versus the $408,000,000 shown here. You can see we continue to have minimal debt. And as Ken mentioned at the outset, our cash balance is at $5,300,000 compared to $3,100,000 at the end of the year.

Speaker 2

And with that, I'll pass it back to you, Ken.

Speaker 1

Great. Thanks, Paul. So I'm just going to jump into the questions that came in and were submitted to me if that's okay with everybody. So the first question I've gotten here is that the market is telling us there's something of concern going on. Are we at risk of bankruptcy?

Speaker 1

Well, this is an opinion. And as CEO, you can imagine it's a biased opinion. I do not believe that we're at risk of bankruptcy. I think probably if you're a pure black and white numbers auditor person, you could argue the risk involved here or not. This is a venture company and it is risky.

Speaker 1

I do not believe that we are at risk of bankruptcy. I think we've got an incredibly experienced board. We've got an incredibly experienced management team. We've been in this type of position before. I think we have a very clear understanding, a good strategy and a very clear understanding of what it takes to drive this company through $100,000,000 plus of sales in the very near future.

Speaker 1

And that's what we've scaled the company to do. And we've scaled the company to be able to do that based on the demand indications that we've got at hand and which is a rigorously evaluated pipeline. So candidly, you're not able to attract the type of people we have on Board if we didn't have a real company, real product, real opportunity and real demand. So we continue to be financeable. I think we continue to make a bunch of the right moves in order to be a long term sustainable company.

Speaker 1

We have generally raised much, much less money than the competitors that are in the same position as us. And so I think in many respects, not taking away from the challenges in particular that we've recently faced or the intricacies of the drone industry, But I think we're in a very, very strategically well positioned place to see the exponential growth that this industry is has not yet, but is going to experience. So our competitors seem to be winning both in revenue and stock price. What are they getting right that we don't seem to be? Well, I think not all of our competitors are doing well, but there are a couple that from in terms of their valuation of stock price, they are doing well.

Speaker 1

And I think they're really good companies. I think probably the one in particular that's being referred to here, I'll not directly reference, but speak to, which would be they have pretty much a single product that they've done a very good job on and very good job of positioning in the military. And I do believe that that particular company is going to win either all or a significant portion of the program of record that they're generally competing with. They also have a single product, so that's allowed them to focus and keep their product strategy and able to scale that product without maybe the size of infrastructure that somebody like we've had to or the complexity of the types of sales that we're working through, which is a very, very good strategy. The reason that we stayed away from that particular strategy was because that particular product line, which is a smaller Category 1 drone is a very competitive space and will be the most competitive space out there.

Speaker 1

We've seen over the last 25 years, every single North American company who's tried to compete solely in that space has gone out of business. Now, I don't think this company is going to go that we're speaking about is going to go out of business. I think that the market is very different today because of the military environment, drones, regulations, all of that type of stuff. But it still would be the most competitive space out there. And so we've continued to want to differentiate from that particular space.

Speaker 1

And that particular space will see foreign competitors come in low cost providers, maybe not necessarily Chinese, though my opinion difference a little bit. I think that Chinese is still going to be a very strong legislation is going to take legislation is going to take care of a bunch of that. But there are a number of non North American providers that can do these types drones and I think that's going to be some price sensitivity in there. Not taking anything away from that particular company that we're talking about here. I think that they've done a fantastic job.

Speaker 1

You will see us in that particular space, but it's because of the product that we have that comes into that space will be integrated with the full product line of heavy, heavy, heavy, hybrid, 3 XL and FPV drones. So the customers that we're working with are really looking for integrated solutions that can do things like carry FPV drones and integrate with them and do laser targeting and logistics systems that just don't do one type of logistics, but can actually do multiple types of logistics or whether it's medical delivery or ship to shore or whatever the case is. So I think they're just a little further ahead of the curve in terms of us and they've done a good job of it. And the better they do, the better it is for the entire industry and can only wish them all the best. So I think they're doing fantastic.

Speaker 1

But that's why I think the 1 or 2 companies that we're thinking about there out there probably a little bit further in front of us. So when do we see us getting some real meaningful contracts? I see it this year. Yes. I mean, we've seen the advanced contracts of those.

Speaker 1

We've been working on them for a couple of years. We've got some initial orders that we've been receiving, gone through the testing process. We know who is not left at the table and who is and we're there and stuff. So that again, I'm not giving a forward looking statement, but if you own my opinion, we'll see some very meaningful contracts this year. Have we considered strategic alternatives such as mergers?

Speaker 1

The drone space is seeing a lot of that happening right now. And for sure, we've looked at different companies. We've been approached by some different companies. Those are always type of alternatives out there. It's not something that we're looking at considering right now.

Speaker 1

We think basically organic growth, 2 or 3 large contract announcements and it's just an entirely different valuation game. It's exponential. And I've seen this before in other industries and companies I've been lucky enough to be involved with. So I think patience and fortitude is in general our best tact right now. But we're going to do what's smart for shareholders.

Speaker 1

And so if that comes up one way or the other, we're obligated to take a look at those types of things. So do we expect to be at full production capacity by the end of 2024? For the most part, we're yes, we'll be ready to be at full production capacity. And all it takes is one of the contracts to drop through or start scaling in order for us to be there. So in all likelihood, the answer is yes.

Speaker 1

Are we involved in the replicator program? I think every drone company in one form or the other is involved in the replicator program. Of the 3 or 4 kind of, I'll call it majors even though we're all very small companies at this point and soon not to be in my opinion. But so the answer from that regard is yes. Are there any worries or supply chain issues now or you think in the future, especially Asian made components?

Speaker 1

The answer is yes. It's a really dynamic field. So we do see some supply chain that would typically be out of China moving into parts of Malaysia and other parts of Southeast Asia, which is going to provide some coverage for the NDA compliance requirements and allow the North American market to scale. In those smaller type of Category 1 drones, that's also going to provide some price pressure, not for some time, but it also can provide some capabilities in terms of the types of payloads and additional components that you can put on them. So it is a constraining factor and will be for a number of years.

Speaker 1

But the second is not a constraining factor. We're going to start seeing price pressure. So overall, I'm not worried about it. It will sort itself out or we'll figure out how to deal with it. But at this point, it's kind of not really an issue.

Speaker 1

What do we think the potential out of Australia is? The Australian potential is massive, not just because it's a significant market and important Five Eyes partner, but it's in Southeast Asia. And it is the stepping off point for all the concerns that are happening, say, for example, with Taiwan or China. And so it's a strategically very important for to have made this move into Australia. We have the luxury of being pulled into the situation because of the work that we have been doing in Ukraine and then obviously historically with U.

Speaker 1

S. Contractors and now the U. S. And the Canadian military. So to be able to have those militaries present at a number of our trainings and the work that we're doing with the different parts of the DoD has been a great advantage.

Speaker 1

So we've got pulled into it. So we're super lucky there. But we've also been informed it's an imperative. You need to be there strategically. And so I think we've got to jump on the space down there, in particular with the categories of or product types that we have, not necessarily just the one small ISR that everybody seems to sell, but having things like the 3XL, the advanced FPVs, the heavy lift, the heavy, heavy lifts, the hybrid drones as integrated product lines, that's we're kind of singled out there.

Speaker 1

So there aren't there isn't really anybody else that's doing it in the same manner that we are. So the fact that we're early movers there, we're pretty excited about the opportunity. And it's tens and tens and tens of 1,000,000,000 of dollars in our opinion. So and where are we going to be sending drones to Ukraine? The war looks far from over.

Speaker 1

That war unfortunately is far from over. And even when it's over, the drone demand will be actually just as big because everything from the surveillance to the de mining to the reconnaissance to security, it will all be done by drones. It won't be done by people, that's for sure. But it's far from over and we are selling drones there. So and we're going to continue and we will I think you'll be pretty pleased with a number of the initiatives that we had that will hopefully be announced here shortly around it.

Speaker 1

So that's the end of the questions that I've got. And but please feel free to email Rolly and with any further questions, email me, I'll do my best to get back to you. It's pretty hard to keep up with the demand on that. But between Rolly and I, we'll do our best to make sure that we communicate as transparently as we're allowed to on everything that's moving forward. I do want to recognize the fact that we have had a really challenging market.

Speaker 1

It is due to the fact that we continue to burn money. That said, last year, we had 6 months in the 1st 6 months of the year, our operational burn was cash burn was $11,600,000 just I think it's $6,400,000 And again and the important part is a lot of that operational burn was due last year to building out capacity. And this year, it's all about product and sales and operations and implementing and integrating. So we do feel we're on track. Our Board seems be very comfortable with where we're at.

Speaker 1

Notwithstanding, we feel the pain that the shareholders feel when we've seen these drops most recently. We think they're highly misunderstood. We think we also what we think, we do. We have a concentration of a few shareholders that hold large positions that can move those markets pretty dramatically. And but as we continue to mature as a company, we do believe that we'll see exponential growth and that'll be reflected in the stock price hopefully as well.

Speaker 1

So we appreciate your patience. We empathize with the challenges. And but we're going to continue to focus on great product, focus on great customers, focus on great people and now get ready to sell. So thank you for all your time today. Appreciate it.

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Earnings Conference Call
Draganfly Q2 2024
00:00 / 00:00