Draganfly Inc. (DPRO) Earnings Call Transcript & Summary

Cameron, great to see you as always. Thanks for being with us.

Thank you for having me. Always a pleasure.

Absolutely, Cameron. For more than 20 years, Draganfly, a trusted name in hardware, software, sensors and services for unmanned aerial vehicles or UAVs. For viewers new to the story, Cameron, what is Draganfly?

Draganfly is a drone solution provider. We are the longest-standing commercial manufacturer of drones in the world. We commercialized the quadcopter. We put the first thermal cameras on quadcopters. First drone that was ever credited with saving a human life, which sits on permanent display in the Smithsonian, is a Draganfly drone. We have a long-standing history working for public safety, military contractors, long-form infrastructure, things like pipelines and power lines. And we're really the trusted name, in my opinion anyway, in the drone industry, and very, very well positioned for what is now unfolding into this multibillion-dollar industry.

Cam, earlier this month, Draganfly announced record revenue for the 9 months ending September 30, 2022. Give us the highlights.

Yes. So we've been a small company for the last 20-plus years, which is why we're the longest-running company out there. There's been lots of very well-funded, high-profile drone companies that have started in North America and Europe. And for the most part, they've all gone out of business. And the reason is that they were prematurely scaling into a market that -- a market that, frankly, we just didn't see developing up until about 2 years ago, where the FAA regulations started to become very, very clear on how drones would be used within our infrastructure, in particular, flying beyond visual line of sight. That, and now combined with the unfortunate conflict in Ukraine, has dramatically highlighted and expanded the entire drone market globally. And what this means for Draganfly is simply keeping up. Our record revenues are really a reflection just of us trying to do what we can for our customers while we are building out our capacity to keep up with these bigger orders that are continuing to come in.

A highlight of Draganfly's third quarter was its unveiling of its next-generation UAV platforms at the Commercial UAV Expo in Las Vegas. These include the Commander 3 XL drone and the Draganfly Heavy Lift Drone. Tell us more about these, Cam, as well as Draganfly's long-range LiDAR system also unveiled at the expo. Are users stepping up to buy?

It's really a fun time to be in this space and actually a fun time for us, in particular, at this point in the business. So the first couple of years, ergo, when we started to really scale the business, the #1 issue was what are the customers going to want. And the big advantage that we have as an organization is that we've got 24 years. We've got hundreds of customers. And so we are able to know or understand from customer demand what was going to be needed in these coming years rather than trying to guess or hope or coming up with something that's cool and going out and getting a signature customer and -- where a lot of our competitors are positioned today. And where we're at is we've got that feedback. We spent a year and a bit putting these new product lines together and then unveiled them in Q3 of last year. And there's no way we're going to be able to keep up with capacity over the next couple of years. The waiting lists are long. The deposits are in. And we've answered the call. We have developed a number of products, in particular, the Commander 3 XL, which is, in my opinion, the most efficient drone in the market today. That's a 24-pound drone that can also carry 26 pounds of payload for about 50 minutes. You can put everything from LiDAR systems, to thermal systems, to mine detection systems, to -- you name it. It's being referred to as the Swiss Army Knife of the drone industry. And so our back orders on that thing are already just outstanding. We've got the Heavy Lift Drone that's 9 feet across. It carries 70 pounds of payload. Great for logistics work, great for light military, great for delivery services. And we've got a LiDAR system. And why is LiDAR so important? Well, LiDAR is a huge, huge part of the mapping and the survey business. And just like a couple of years ago where there was a concern around foreign-manufactured drones and the data that they collect, because nothing collects data better than a drone, we now see that sentiment in a big push within the regulators and the markets to move to North American made sensors. And the biggest of which we have demand around is the LiDAR system. And so our LiDAR system, typically, this is a LiDAR system that previously had to be carried on a helicopter. So a massive platform, thousands of dollars of -- an hour to operate, can now be operated even on our 3 XL drone or certainly our Heavy Lift Drone per -- in the order of magnitude of hundreds of dollars per hour. So all of these products, again, are borne out of customer demand, and we have got the luxury now of just keeping up.

Cam, recently news came out that Draganfly had fulfilled an order of 30 reconnaissance drones for the Ukraine. Can you tell us more about that?

Yes. So we have a long-standing history of working with public safety, light military work. We're doing contract work for military contractors. And so these 30 reconnaissance drones were borne out of work that we'd already been doing in Ukraine around humanitarian services, like delivery of medical supplies and pharmaceuticals as well as using our technology in mine detection. So these 30 reconnaissance drones are being deployed into theater and, we believe, are the front end of potentially or hopefully many more orders to come with the various groups that we're working with there. Ukraine really is an incredible advent for the drone industry. It's unfortunate that it's happening, but it is completely redefined what air dominance means in military theater. So previously, only very large organizations, countries, could attain air dominance. And really, air dominance is the key factor to whether a particular situation was going to be successful or not. Now from 10,000 feet down, pretty much anybody that can manage these lower-cost UAV systems, these smaller UAV systems, can accomplish air dominance. And so for organizations like us at Draganfly, who have a decade or a quarter of a century of experience working with these types of organizations, it really -- the technology that we're developing, it comes out of our experience, but also experience in the field operating these has been paramount. And we're going to see the drone industry completely excel over the next couple of years. In fact, I would suggest that if you're a drone organization that's looking to operate internationally or with DoDs or public safety organizations, if you haven't been able to demonstrate an effective presence in Ukraine, you're probably not going to be a real player going forward. Now because there are so few of us there that are able to do that, it really is also helping define the market for those particular drone companies like us over the coming years.

I think it is commendable how you have gone in and made the most out of a very unfortunate situation. You're showing the way forward. It's extremely exciting. And finally, Cam, what is the essential value proposition? Why should investors take an interest in Draganfly right now?

I think there's 3 particular things. First of all, there's -- and not in a particular order, they're all equally important, but there's our technology. We have been developing technology for 25-plus years. The drone industry is very complex. It's not just about putting an airframe up with some blades on it and being able to put something up in the air. You've got spoofing. You've got jamming. You've got regulation. You've got training. You've got payload management. You've got data management. You're handling the most information that a company or a customer or a government has when you're operating those drones. So the long-standing technology development track record that we have, our patent portfolio, et cetera, I think, is extremely important. The second thing is traction. We demonstrated quarter-over-quarter growth, record growth year after year. We're at the very, very beginning of this industry, and there's a very few players that are able, from a technical and operational standpoint, to actually follow through on all the promise of this industry. So the traction that we're getting, I think, is really important. And then finally, it's our team. We have an experienced management team that collectively has grown multiple companies from micro-cap companies to $1 billion exits for our shareholders. And if you look at our Board, we've got people like John Mitnick, the former GC of all of Homeland Security, and a GC at Raytheon. We've got Andy Card, who is the former Chief of Staff of the White House. We've got people and access that are representative of the opportunity that's in front of us and, I think, hopefully, representative of the great shareholders that we're able to attract.

It's an exciting story, Cameron, and you always do it justice. Thanks for being with us today.

Thank you.