Volatus Aerospace Inc. (FLT) Earnings Call Transcript & Summary

Welcome to our webinar today, Canada's Defense Industrial Strategy and what it means for Volatus. I am Danielle Gagne, Head of Global Training, Strategy and Business Development for Volatus Aerospace and also the moderator for this call. Before we get started, just a reminder that we welcome your questions, and we will be having a Q&A session at the end of the presentation. [Operator Instructions] If we are unable to answer your question today, we'll be happy to connect with you after the program. This presentation will be recorded and made available to everyone via e-mail within 24 hours. And I'd also like to take a moment to point out that certain information set forth in this presentation contains forward-looking information, including future-oriented financial information and financial outlook and actual results may differ materially. The risks uncertainties and other factors that could influence actual results are described in this presentation, in the press release and in our MD&A filed with Canadian regulators. This presentation also contains non-IFRS measures, which also outlined in the presentation. There is a full disclosure on Page 2 of this presentation, which we encourage you to read and can be found on Volatus' investors website at investor.volatusaerospace.com. The company considers the earning call part of -- sorry, the company -- sorry, this is part of our regular disclosure. And I am going to hand this over to Glen Lynch to get us started.

Thanks, Danielle. Good afternoon, everybody, and thank you for taking time to join us today. My name is Glen Lynch. I'm the Chief Executive Officer of Volatus Aerospace. I'm joined by Abhinav Singhvi, Abhi as our CFO. And Abhi will be the guy you're going to lob any hard questions at towards the end of this. So today, I'm going to walk through three things. First, what's happening in the defense and drone sector globally. Second, we'll talk about Canada's new Defence Industrial Strategy and how that's reshaping the market. And third, we'll talk about how Volatus is positioned within that environment. The short version is this, autonomous systems are becoming a core capability in modern defense and Canada has now made domestic drone capability, a strategic priority. Volatus operates directly in that space. So let me start with a quick overview of the company. Volatus is a Canadian aerospace company. We're focused on drones, autonomy and remote operations. We operate across four main areas: first, drone platforms themselves. You'll hear me use the words drones, RPAS, UAVs, UAS and autonomous or uncrewed systems all in -- throughout this, they really mean the same thing. So we operate drone platforms themselves. Second, autonomy software and mission systems. Third, remote operations center where aircraft can be managed at scale. And fourth, operational services such as training, inspection and mission support. We operate across Canada and internationally, including the United States, the United Kingdom, Europe and Latin America. Our strategy has been to build an integrated platform that combines aircraft, autonomy and operations infrastructure and services. That integrated approach positions us well as governments and industries move towards large-scale drone operations. That's true in Canada and in much of the world today. The global defense landscape has changed dramatically over the past several years. Modern conflicts have demonstrated the impact of autonomous systems, drones are now used extensively for intelligence, surveillance, logistics and tactical operations in theater. What makes them powerful is their ability to operate persistently and at a much lower cost and danger than traditional aircraft. As a result, governments around the world are accelerating investment in uncrewed systems. We're seeing increased spending across NATO countries and significant development programs globally. In simple terms, autonomous aviation, drones is becoming a core part of modern defense capability. Canada recently introduced new policy framework called the Defence Industrial Strategy. This strategy represents a structural shift in how Canada approaches defense procurement and industrial development. The government has committed to more than $80 billion in defense reinvestment, and a key goal of the strategy is to strengthen Canadian's domestic defense industry while simultaneously reinforcing our economic security. The policy targets 70% of defense procurement being directed to Canadian companies that's almost a complete reversal from what we've experienced in years gone by. It also establishes a new Defence Investment Agency, which is designed to accelerate procurement and connect industry with national defense priorities. The broader objective is clear. Canada wants to develop domestic capability in strategic defense technologies, including drones. One of the most important elements of the strategy is the designation of certain technologies as sovereign capabilities. Those include areas such as aerospace platforms, digital systems, sensors and autonomous systems. Uncrewed and autonomous aircraft are now part of that group. That means the government recognizes drones as a strategic capability that should be developed and produced domestically right here at Canada at home. For companies operating in this sector, this provides a clear policy signal. Canada intends to build and support a domestic drone industry. Volatus operates directly across several of these priority domains. We develop and operate uncrewed aircraft systems. We conduct operations in remote and Arctic environments. We deploy sensors and intelligent surveillance and reconnaissance capabilities also called ISR, and we provide training and operational services. We also maintain Canadian ownership and control of our intellectual property. Together, these capabilities align closely with the areas that Canada has identified as strategic. One of the key things that differentiates Volatus is that we operate an integrated platform at the top are the aircraft themselves. These include systems such as the Condor heavy-lift drone platform, our recently acquired V-Series, Medium Altitude Long Endurance drones, our Sentinel docking station and our piloted aircraft. Below that sits the autonomy layer. The autonomy systems manage navigation, mission execution and fleet operations. Below that is our remote operations center, which allows us to manage aircraft remotely at scale. Finally, we have operational services. These include training, inspection, mission support and other capabilities. Together, when we take them together, these layers create a complete ecosystem for autonomous aviation. This is one of my favorite slides. Effectively, this is our national infrastructure footprint and Volatus operates infrastructure across Canada that ultimately supports our platform. Our manufacturing and innovation hub is our newest facility located in Mirabel, Quebec. Our geomatics and data operations are located in Quebec City. Our operations control center is based in the Toronto region. Our aviation operations hub is in Edmonton. In addition, we have operational teams across Canada and internationally. This national infrastructure gives us the ability to deploy and support operations across multiple sectors. As a company, we generate revenue across several areas. One is drone platforms themselves. Another is remote operations and mission management. We also generate revenue through data collection and inspection services. Training and simulation is another important area. Danielle will tell you that. And finally, we participate in defense and government programs. These revenue streams allow us to operate across both commercial and defense markets. And that diversification provides resilience while also positioning our company for growth as autonomous aviation expands. When we look ahead, several major drivers are shaping growth in our sector. The first is sovereign drone procurement programs as governments develop domestic capability. And I say governments because again, while we're focused on the Canadian Defence Industrial Strategy, this is something that's happening around the world. The second is export markets, which serve as a multiplier. Many countries are expanding drone adoption across both defense and civil sectors. You'll oftentimes hear the term dual-use technology, meaning that the technology can be applied across both sectors that represents most of Volatus technologies. And third is increasing demand for intelligence, surveillance and reconnaissance and sensing capabilities. Fourth, Arctic and remote operations, where drones can provide capabilities that are difficult and dangerous to deliver with traditional aircraft. And finally, defense partnerships with larger contractors and allied governments. Together, these drivers represent significant growth potential for companies operating in our space. Another key element of our strategy is domestic manufacturing and intellectual property control. Canada's strategy places an emphasis on Canadian-owned technologies and production capability and capacity. The picture you're looking at here is our new manufacturing facility in Mirabel. This is central to this effort. Our goal is to expand domestic production capability while maintaining control over our core intellectual property. This approach supports both Canadian defense requirements and provides export opportunities. From a capital markets perspective, several factors are important. First, the new defense strategy creates long-term demand signal. Second, it reduces uncertainty around procurement priorities. And third, it increases the importance of domestic supplier. Lastly, it expands export opportunities through government-supported programs. Companies positioned within these strategic sectors can benefit from improved visibility and long-term growth opportunities. One of the things I'd like to point out is that when long-term demand signals are received, and funds are allocated, risk is assessed differently. As risk is reduced, the cost of capital is reduced and the opportunity to accelerate execution is improved. Let me close with a few key takeaways. First, defense industries globally are shifting towards autonomous systems. Second, Canada has introduced a major industrial strategy focused on domestic capability. Third, drones are now designated as sovereign capability. Fourth, export opportunities in our sector are expanding. And finally, Volatus operates across several of the domains that the government has identified as strategic priority. That positioning is central to our long-term strategy and what Volatus has been working extremely hard for. With that, we're happy to take any questions.

We already have some questions rolling in, Glen. So I'll get started right away. [Operator Instructions] So the first question is, how do you see the process of selecting and supporting champions unfolding? The 70% made in Canada stands out? Can you discuss how that works with the 50% export growth target?

Yes. So there -- they kind of one stacks on top of the other, right? So one serves, I think the export target serves as a multiplier for the domestic capacity. I think what we really have to look at here is what it means for the government. Now there's a challenge, right? I think a lot of people are going to be looking for Canadian procurement immediately. But the challenge is it's been an awful lot of years since the Canadian government procured much for defense and certainly from Canada. As the Prime Minister noted in a speech back in June, 3/4 of all of defense spending, every dollar that was spent from Canada on defense was spent outside of Canada. So the result of that is we need to make a lot of investment and put a lot of effort into our defense industry at large. But basically, what you're going to see happening is two things going on. Number one, the government is prioritizing in their Buy-Partner-Build framework. And what does that mean? It's -- excuse me, it's Build-Partner-Buy. So build means if they can -- if we build it in Canada or it could be reasonably built in Canada, buying from Canada is the immediate priority. The second priority is partner. That means partnering between Canadian businesses and allied -- friendly allied businesses to build in Canada under license with the intention of developing and transferring IP to Canada ultimately. And third, where none of those are possible, it's to buy, right? At the end of the day, our soldiers need equipment and we need to invest in Canada's military. So that's kind of how it works. I think what's going on initially, a lot of the capital deployment will be done through the R&D sector. And Abhi, you might want to provide some clarity on that.

So, Glen, I can cover that part. So first thing is on the 75% comment. The intent of the Canadian government is basically, to sum up very shortly, they want the companies to manufacture in Canada, have the IPs, supply chain and the skilled labor in Canada. The 50% export growth target basically reflects the goal of building the sovereign capability, basically make and build in Canada but sell everywhere across the globe. And that's also one of the reasons why our Prime Minister went to the Europe and became part of SAFE, which is Security Action For Europe, where Canada is one of the only non-European [ companies ]. So all this comes together with the government is saying, build in Canada and we'll ensure you are able and capable to supply everywhere else. On the second part, where Glen said, on the capabilities, so government has allocated between -- roughly between, I would say, $600 million to almost $1 billion in enabling companies to sell, I would say, all across or build the capabilities. So almost $250 million has been allocated to NRC IRAP which is basically a defense industrial assist stream. $70 million for BOREALIS, $4 billion being allocated to BDC and almost, I would say, $400 million to RSAs, regional development -- RDAs, which is Regional Development Investment Agencies for small, medium business integrations. Apart from that, the -- there have been almost $6 billion allocated to Defence Industrial Strategy that again comes back together. And the intent of the government is $80 billion investment in defense and $50 billion, a 10-year target where the government wants to promote small and medium businesses. They have identified broadly 600 small medium businesses within Canada that can supply or that have capability to supply to the government of Canada in terms of defense and they have allocated $50 billion in revenue over the period of 10 years. So that's a lot of money being allocated in defense, in R&D, in development and also basically derisking and showcasing that there's significant demand and the government has sent out those demand signals to the market to derisk investors and cost of capital.

Our next question is, can you remind us of what kind of work you're doing for NATO countries and how you might leverage this when pursuing Canadian defense contracts?

So supporting NATO is something that we've been doing since the conflict or invasion of Ukraine happened at the beginning, to the extent that, many of our managers myself included, are actually banned from entering Russia as part of Russian sanctions on Canada. For the most part, our primary business to date has been the sale of equipment into Ukraine and the training of warfighters for Ukraine. A lot of that's been happening. The training happens particularly out of the U.K. and sale of equipment has been across our network for the most part.

So another question that we have is, it sounds like the sounds of drones is quickly becoming threatening to many people. Since part of your business model includes package delivery, are you prepared to respond to pushback from the public and regulatory agencies? Are you prepared to take a hit to your bottom line?

So a couple of things there. At the moment, there is nothing in the drone delivery sector that's actually contributing profitability. It's building capability for us. But quite frankly, it's a small cost to develop a strong capability that will matter over time. The only one thing I would like to do is clarify. Volatus actually doesn't do any consumer delivery. It's not a space that we focus for many of the reasons that the question was written in the first place. There's a lot of things. It has to do with -- let's just say there's a lot of challenges to package delivery, including the unit economics themselves, and there are some people that are really focused on that space. That's not us. We focus on medical delivery that's what we do right now in Toronto and between hospitals in Toronto and between the Edmonton Airport and a First Nations clinic in Alberta. But for the most part, our preparation is more for remote resupply rather than for domestic delivery. I don't see us delivering Amazon packages anytime soon for sure.

So can you speak a little bit more? I think you did discuss this in your talk, but maybe a little bit more about your specialized manufacturing capability and how that's going to lie in?

So I have a background in manufacturing as do several of our senior executives. Specialized manufacturing capability is not so much around the manufacturing capability. Aerospace manufacturing, our factory is being established with aerospace practices, AS9100 quality management and so on and so on. But -- and in terms of the type of things that are important to us, it's having the correct level of autonomy where, for example, we may move into with any success, maybe larger turn production over time. No promises on that front, obviously, because it's really early in the game to say if and when those contracts will come. But the ideal solution for a factory to operate properly is having the correct level of automation introduced into the factory. And that's something that we're working hard with partners to establish that right number. What's more specific here though is the fact that we're making a significant commitment to meet the demand requirements, particularly for the Canadian military, but also for the dual-use platforms that can eventually serve our pipelines and power lines and border surveillance type applications.

And where do you see the most attractive opportunities amongst the segments you operate?

Well, oil and gas is always the one that's most predictable for us, right? Abhi calls it dull boring revenue. Abhi, why don't you jump in on that, being that I'm stealing your line.

Oh, no, Glen, go ahead, that's okay.

All right. So dull boring revenue, really, that's in the energy and really in the energy sector. Infrastructure. We have -- we're very, very cautious on how we forecast our defense right now, not because we don't believe there's going to be a lot of it. I think we've just seen a policy statement that's got a long-term demand signal from the government. So the opportunity is definitely there. The problem is everything is new, right? And headlines and news releases don't generate bottom line contracts do. And the procurement cycle is what it is. I was in Ottawa today participating in the MINERVA Initiative. That's an initiative to modernize the Canadian Army. So we're actively engaged with the Canadian Armed Forces. Our industry is actively engaged or better to say that the Armed Forces is actively engaged with the industry. So a lot's happening there, but we're very conservative about how we forecast what that could possibly be. The most exciting opportunity, the blue sky is definitely defense. It's just very difficult for us to -- I think, difficult and it would be irresponsible for us to try and forecast how quickly that could happen. So in most of the estimates, the analyst estimates that you'll actually see there is minimal impact from defense because we'd rather surprise big happy as opposed to big sad.

And can you talk about your bidding pipeline, defense versus commercial bidding pipeline and how you treat that as a company?

So we actually -- we talk actively and openly about our industrial commercial defense pipeline because that one, we have some visibility historically. Now when you're in a nascent industry like ours that's growing, the nature and size of the contract change, so does the procurement cycle. So conversion rates of yesterday don't necessarily translate on a linear basis. But it's more predictable, right? Long-term stable contracts in -- with oil and gas, power utilities and so on. I think that's probably the -- I don't know, Abby, do you want to add a little bit to that?

Sure, Glen. It's a tricky one. So we have openly said it in the market as well as to the community that our commercial pipeline hovers between $500 million to $600 million at a given point of time currently. Our defense pipeline is significantly larger than that. We generally stay away from committing or disclosing those numbers purely because it keeps changing rapidly. And with what we are seeing is with current geopolitical tensions, significant tailwinds, NATO commitments, demand from across the board, right, from Europe, from Canada, U.S., the pipeline is changing, expanding much more aggressively, something which we haven't seen in the past. The only reason we don't communicate those numbers firmly is we don't know the conversion ratio. We don't know how fast the government will move. There is policies, there are commitments. The only thing is how quickly they can move and convert those, I would say, policies into firm procurement orders. And that's -- those are the reasons we generally stay away from disclosing because we would rather underpromise and overdeliver rather than other way around.

Can you talk a little bit about how Volatus has supported Ukraine? You mentioned it early on in the presentation, we have somebody asking kind of what we've been doing there.

So selling -- predominantly selling equipment into Ukraine and drones specifically, also providing training. And in the earlier days, I think, Danielle, you spent an awful lot of time trying to help promote some of the NGOs that were supporting Ukraine through webinars and so on. That's been our primary activities. Now we're probably more focused on trying to directly support the defense agencies that are supporting Ukraine.

So another question is, how quickly do you see the Canadian government proceeding with the goals that they enacted in the Defence Industrial Strategy?

So good question. I'd love to snap my fingers and say it's going to happen tomorrow. There's a strong demand signal. But typically, what happens in defense procurement, especially with new technologies, they go through a period of time determining what they want. They're moving extremely quickly these days. As I said, I just came back from Ottawa. I drove in shortly before this call. But realistically, how quickly will it happen? Typically, the orders are small so that the government can test the technologies. They go through ISED challenge competitions and so on. But it's hard to say because there are some immediate requirements that the -- both the Army and the Canadian Armed Forces at large actually require. So it's just -- honestly, it's speculative. It's early days. The document has only been out for a matter of less than a week now. So we should see that visibility over the next little while. All I can say is spending an awful lot of time in Ottawa and getting feedback from our government relations firm, the demand signal is matching the government's will. We certainly have the demand signals coming out of the Canadian armed forces themselves. So it's simply a matter of how quickly the Defence Industrial Strategy can be set up and running.

So you mentioned BOREALIS, you passed the first stage of BOREALIS. What is the time line to finalize the competition and ID the 3 final companies?

So we're entering Stage 2 right now. Stage 3, to be honest with you, I'd be guessing at the window. Abby, do you know the dates for the second one?

Yes. So end of -- before end of March, Stage 2 needs to be submitted and completed. The decision will come out in probably within a few months after that. And then the -- and Stage 2 is basically submitting the entire prototype of the drone. Stage 3 is actually testing those prototypes. So developing 3 of those units, testing in front of the right regulatory authorities and Canadian Armed Forces. And the companies that come in that stage, right now, it's a longer -- they have opened up a longer window just for the development, considering the participants, whoever products and prototypes gets down selected, will need time to produce them. Not the case with Volatus, we can get those out fairly quickly given the resource capital and the facility we have in place now. So Stage 3, the government has been lenient and given almost, I would say, 12 months period, April 2026 to April 2027. But we expect that by end of this year, all those 3 stages could be completed, and they should be final, I would say, shortlist the 3 companies. The government or the intent of the project is, awarding the reward to companies or to the product that 10,000 of those units can be made. And if the intent is to push a button and have 10,000 units made a month, it's doable by those organizations as well. So it's not just a matter of the best tech, it's a matter of speed, capabilities, scale and also the available capital resources.

And another question is, will Unusual Machines supply any equipment for Mirabel to be used in the production of drones? Or will it just be parts?

So Unusual Machines is a trusted supplier partner. One of the challenges that we're working through right now, as a matter of fact, they're a strategic investor in Volatus. But one of the challenges that we're working through right now is the 70% domestic supply. And it's also some of the current trade uncertainties that can impact unknown tariffs going back and forth across the border can make that a little bit complex. Long term, though, they're a rock-solid partner that are doing some exciting things and inevitably, we'll be doing business with them.

And how do you foresee the acceleration of the company's share value in the market considering the company's position in relation to the government's new approach?

So I don't -- it's not appropriate for me to give any advice on what we think can happen there other than to say Canadian defense contractors in general, right? Let's look at defense, not even just drones. But defense companies in Canada have typically traded at a discounted valuation compared to the U.S. peers. One argument for that, that I tend to subscribe to, and there's certainly a lot of people smarter than me. So this is more the way I look at it. Without having a government that will buy from a domestic industry, it's very difficult for that domestic supplier to have credibility with foreign governments. So it takes a lot more work to sell to Germany if Canada doesn't buy, so to speak. The minute -- and I believe that's part of the problem. As a result, there's no stability, there's increased risk and so on. What we have now is a very clear demand signal from the Canadian government. An identification of what we do as being a sovereign capability, an allocation of funding, so we have a long-term demand signal. I believe that creates the environment for investors to reevaluate where companies should sit relative to some of their foreign peers. Now whether that will be better or worse is a completely different story. But at the end of the day, I think the environment has changed for people to actually value or look at how companies are valued and Canada has been trading as an industry at a discount to the United States.

We have a couple of questions in regard to our Mirabel facility, and we have a number of them that could easily keep us well past the hour. So I'm going to try to combine a couple of them together. So what is the time line for the facility at Mirabel? And what drones will be produced in that facility? And what kind of increase do we hope to expect to see once that facility is fully live?

I don't think we're ready to release the kind of forecast for the facility yet, but what I will do is talk about its current state and the priority as a company. So the facility, we have possession of the facility. We actually are -- we have an office in the innovation center, and we have a stand-alone facility for -- which is actually much better from a defense contracting standpoint for security, almost co-located on the same airport at Mirabel. The facility right now is in the process of going through a refit to suit what we're doing. And we're in the process of finalizing the tooling, the production tooling for the aircraft portfolio that we acquired from the U.K. Those will be produced by a Canadian composite manufacturer. And we expect to be in production of those aircraft, at least for the flight test prototypes to prove the tooling and revalidate some of the numbers and have demonstration capabilities available within the next few months. Few months being, I would say, sometime this summer, we should be having some exciting news coming out of there. The plan for the facility right now is to manufacture basically four large drones that we have in our portfolio. One remote docking system that's meant for -- basically, it's our Sentinel Dock that's meant for dropping out in the middle of nowhere to provide persistent surveillance where there's absolutely no infrastructure, and we can operate it from our OCC. And then there's the attritable drones that we're working towards for the Canadian military. Those are the -- ultimately, the drones that are carried by the soldiers themselves and ultimately used by the Canadian Army.

So I know we can't answer this question directly. But are we looking to acquisition -- to do any major acquisitions that will help us our presence in these markets, regions and countries in the near future?

So the only thing I can say to start with is we understand that domestic priority or sovereign capability is not just a Canadian priority. If we want to compete in other markets, we have to develop those capabilities in that -- in the markets that we're involved in, for the most part, not entirely, but for the most part. And then we can support from one to the other. That's probably -- the biggest focus is making sure that we've got domestic capability in each of those markets. I'm not sure I answered that question, Danielle?

Glen, you did. I think the short answer is yes. I would say the geographies could be Canada, Europe, U.S., like it's wide. And the intent is -- one key point is it's -- that any M&As we'll be doing has to be accretive for us.

So with the Beyond Visual Line of Sight as active policy, and this is -- this might be good for me to give a little bit. But the Level one complex regulatory licensing has become live in Canada. We're one of the first countries in the globe to actually have a Beyond Visual Line of Sight ruling that enables pilots and organizations to become certified to fly low-risk Beyond Visual Line of Sight. And do you expect this to change your conversion rates to contracts to increase or?

So I -- let's say that I would certainly hope that contributes to our capabilities. Volatus through our predecessor company, Drone Delivery Canada, had the first approval to fly Beyond Visual Line of Sight in Canada. It happened before any of these regulations existed. It happened with a waiver, and it was a flight between Moosonee and Moose Factory, Ontario back in the days of the Drone Delivery Canada active brand. So we've been flying missions across Canada for years now through Drone Delivery Canada specifically, which is now Volatus Aerospace. That was one of the companies that we've merged. I would say the key point there is to give you an idea how real this is every day that the weather in Edmonton is flyable, every business day, we fly as many as 16 flights a day in and out of the Edmonton Airport with a drone. The thing to keep in mind is the air vehicle is in Edmonton, the pilot operator is just north of Toronto. So that gives you an idea of what's actually happening today. So it ties together with the licensing with the regulatory capabilities. And by the way, Canada may have leapfrogged a lot of countries here, but these countries will catch up fast. So this is a capability that's going to continue to expand. And we've got credibility. We use the credibility of what we do here in Canada to help us in other markets.

Absolutely. There's been a lot of congratulatory notes in here about being named top 50 in the Venture. How does this translate for buyers? And does this impact your trajectory on uplisting?

So I mean, we had some good response from the market when it was announced last week. We're super proud. I think it validates the hard work of our team. But one of the things that I would say in terms of uplisting as an example, we have been working very hard as the company matures to create optionality, to basically institute what we've been calling institutional level hygiene within the company to basically put us in a position that we could make strategic moves when it was deemed to be the right time to do them. That's probably about as far as I can say at this point.

And a lot of conversations and including us has been about the Canadian border. Do you think that the Defence Industrial Strategy is going to make that more of a realistic conversation in the near future?

So what it does is it definitely provides some signaling. I think there's -- the strong signal that we see is the Canadian Arctic, right? Which is a huge area of interest for Volatus. As a matter of fact, of the three drone portfolio, the three large strong we acquired, two of them are specifically earmarked for Arctic, two of the designs. But fundamentally, the southern border is something that can be handled now. I think that it's a little bit of a wait and see because it's not -- I don't believe it was addressed to anywhere specific within the Defence Industrial Strategy. And bear in mind that the Defence Industrial Strategy deals with defense as opposed to not 100% sure that RCMP and Canada Border actually fall into that jurisdiction, although a lot of moving pieces these days.

What do you think are going to be some of the big challenges? And how is Volatus rising to meet that to get Canadian government contracts, especially with the Defence Industrial Strategy? And how do we compare against our competitors in your opinion?

So the important thing is you can't really see your competitors if they're behind you and you never look over your shoulders, so you keep running, right? We've been working hard on this since November of 2024. And we've had government relations firms engaged since December of 2024 right through the current day. The writing was on the wall. Canada needed to step up its defense spending. Regardless of global geopolitics, many of the things that have happened, like, for example, increased defense spending, it needed to happen. No matter what politics aside, that needed to happen, our soldiers needed better tools to do the jobs that we're charging them to do. And Canada needs more independence from an industrial standpoint. So I think -- I mean, it's speeding things up for sure, how fast is a different story.

And this is a very interesting question. What types of projects are coming with your strategic -- what types of projects are coming up with your strategic partnerships that we've announced over the couple of years as a refresher, can you name some of them?

So the partnerships that we're talking about would be partnerships like, for example, Ondas, Dufour would be a fairly recent one that we announced. Always, Kongsberg is an active partner in our world. We're engaged actively in integrating their technology and with other technologies like MatrixSpace and whatnot into our ecosystem, our collective ecosystem, I'll say, not just Volatus. But those are continuing to move forward. A little early to be able to tell you exactly what they're going to do other than to say, for example, Dufour is very much focused on long-range drone cargo deliveries, including potentially strategic resupply. That also fits with our Condor helicopter, which is a different type of platform as well. And when you look at partnerships like Kongsberg and MatrixSpace, that's all around aerospace. I think those will do well Ondas. I did see a question that came through about our partnership with Ondas. We have a very strong relationship with Ondas. I'm in relatively frequent contact with their CEO. It's a bit challenging to say where that's going to go, though, now because, of course, we have some challenges in where things are manufactured. There's a big push for things to be manufactured in Canada. Ondas has some very strong technologies. And we present those technologies as solutions for problems. I suspect in the event of a significant opportunity that would lead to a different conversation with Ondas. But we stay very close to them.

And this is a question about ARCO, how is our relationship with them? And is it currently training and services are we helping with their mining in Africa? Would you like me to respond to that one...

Why don't you take that one?

Yes. I'm heading that conversation with ARCO. And right now, we are currently exploring training capabilities and sticking to those -- to that service side of the business as well as supplying but nothing with mining with Africa just yet. But that is where we're at, at this moment. Of the current government opportunities you're pursuing are any of them in a formal RFP? Are you seeing RFP come out at this point?

There's been a flow of RFPs. RFPs, RFIs and early-stage consulting. So there's a lot of that going on period. It's starting to build some momentum.

So can you talk a little bit about the announcement of the new CTO, Krish? And what's his role going to be to help accelerate Volatus?

So I think that's been an important one. Krish is somebody that's been associated with us for some time, but bringing him on as a Chief Technology Officer. I think that was a big win for our company. As most of you know, or many of you likely know, Volatus is a very acquisitive company. We've acquired 20 companies over the history of our organization. And with that, many of those organizations have their own little pockets of engineering in there. For example, Synergy has engineering. That's our aviation brand out West. Drone Delivery Canada had engineering. We acquired engineers with our acquisition of the Caliburn, MALE RPAS platforms, Medium Altitude Long Endurance RPAS platforms late last year. So the goal with Gokul is to centralize. We've centralized all of our engineering capabilities. We have centralized all of our IP management and IP protection under one. Gokul now works very closely with -- we've hired somebody full time in our grant writing. We have a full-time corporate counsel that joined us earlier this year, 20 years' experience in capital markets inside -- she's been a General Counsel for the best part of 2 decades. And so that's really positioned us well for the protection and management and protection of our intellectual properties. But I would say between kind of bringing all of our engineering into one place, centralizing, not centralizing the IP, combined with, I think we've got to have, I'm going to guess and say, 6 or 8 job openings out there right now for highly qualified specialized engineering staff. It's a pretty exciting time. Gokul and a couple of our engineers are located in other parts of the world right now. And we'll ultimately move them to Canada in the immediate future. We're going through that process right now.

You mentioned that your company operates across multiple revenue streams. Are there any areas where you feel that you're looking to sell there are, the gaps, the capabilities that you're looking to strengthen internally? That might be better addressed through acquiring a company?

So the company has got to a size right now that we've kind of streamlined some of our things internally. Abhi is front line on our corporate development activities these days. So maybe I'll let him answer that one.

Thanks, Glen. Sure. So we are deliberately -- what we have done is built a diversified platform across equipment services and training division. So there's always -- we constantly assess where these trends of the platforms make sense. There are always two areas, I would say that we keep evaluating on a continuous basis, right? In the age of AI, specifically now, the first preference or I would say, immediate area becomes the depth in the high-value systems and softwares we have and we have been using autonomy. AI-enabled processing autonomous systems like where AI could replace the software, more traditionally expensive software solutions. The integrated C2 systems we have, these are the one -- I would say, the first layer that's been evolving, where we are trying to find opportunities for more improvement as we evolve. And then, of course, I would say, the industrial scale and manufacturing depth and opportunity. So I would say those are the two, I would say, immediate one where we keep evolving and keep making sure that the systems and the process we have are actually most recent, latest, generates most efficiency, and that also brings us towards more disciplined approach so that we have a best return on capital.

Are you seeing any traction? Or can you talk about some of the conversations you're having with government in terms of -- and about different sectors and how our Lobbyists are supporting those efforts, as we've discussed in the past?

The level of engagement right now is encouraging, I would say. The team that's representing us in Ottawa has done a very good job of getting us meetings on a regular basis. As a matter of fact, sometimes the hardest part is Danielle actually looks after this for me half the time, trying to fit holes in my schedule to meet with people. On top of that, we actually have high-ranking political officials now, several of them visiting our facilities over the next couple of weeks. I think we have one group in Montreal tomorrow. We have another group in Toronto later on this week. And so we are getting a lot of engagement and a lot of traction right now. So it's definitely been a good experience so far. And it's sending very positive signals. Again, I can't buy a loaf of a bread with a signal, but it is extremely encouraging.

This one might be for both Abhi and Glen, is the company on track for positive income this year?

I can probably take that, Glen. So we generally don't issue the formal guidance. We rely on the consensus estimate. We are working towards the positive operating income, specifically through scale in the revenues we are witnessing. We have significant tailwinds and also, I would say, call as fixed cost absorption. Now this being a public call, I would use more investors safe language. Whether this translates into full year profitability, of course, depends on two major items. One is the program timing, specifically on the defense side. And the second one is the capital deployment decisions and strategy we make, which is mostly, I would say, is the R&D investment by the company.

We're getting to the end of our questions. We are answering the rapid fire here. We have a -- sorry, I'm trying to pick where we're at next. Do you have any update on what we've done with tree planting in the past? I know this is a little bit off topic, but we did get that question. The tree planting trial that we did with Irving do you have any interest in moving that capability further...

Yes, reforestation is a huge thing. So the project last summer was successful. We very much hope to continue to do it again this year. But even more than that, we're facing wildfires as another substantial threat to Canada. And we burn millions of hectares of trees every year, and we plant hundreds of thousands. And the real difference between that is where we're cutting trees, we're planting trees, but where they're burning, historically, the governments around the world have allowed the forest to reforest themselves. The problem is the intensity, the environmental changes have resulted in fire intensities being substantially more than they have been in the past and seed base is being incinerated. So we believe that there's an opportunity to continue to scale with companies like our partner, we announced some time ago, a partner with Ki Reforestation out of Toronto that's doing some interesting seed technology work. But for large-scale aerial seeding using drones like the Condor, for example, I think that there's real potential in the future for those type of activities.

So as we near the top of the hour, I just want to kind of bring this all together because we've talked about a lot of different moving pieces. So what are the key takeaways of from the Defence Industrial Strategy that you want everyone to walk away from this webinar for?

So I would say first, the Defence Industrial Strategy represents a shift in how the Canadian government looks at defense procurement. They have pledged substantial funding, and they have said they're going to spend that money to the greatest degree possible within Canada. They have identified their sovereign sectors, sectors that are considered priority for Canada and Volatus lives in one of those sectors, and we're working -- actually, we live in a few of them, depending on how you look at them. And we're working very, very hard to leverage that opportunity. The other thing I do want to say is the opportunities that we're seeing in Canada are not limited to Canada, right? We're focused on Canada because Canada has a massive opportunity, and it's right in our backyard. And the reality is the scale and number of the competitors is very different here, which creates a real opportunity. But those same opportunities are being felt in other countries that are being impacted by the same influences that are affecting Canada.

Absolutely. All right. With that, unless Abhi, you have something you would like to say to wrap it up?

Sure. You always...

I always do that.

From the more financial perspective, right, Defence Industrial Strategy has laid on a 10-year, path not a 1-year path, which is the most critical one defense companies to grow domestically because the capital return on investors, the capital invested is always have a long-term investment of our long-term return gestation period, I would say. So allocating $50 billion over 10 years period, promoting 70% built in Canada, 50% export opportunities, priority sectors being autonomous systems, ISR, advanced manufacturing. Those are the priority capabilities areas. It fits right into Volatus, I would say, circle, it's what we've been trying to do for the past several years. I would say the timing could not be better for the company. And the model is all about building Canada partner with allies and expand the opportunity globally to drive long-term growth in the industry. It does derisk capital, sends the right demand signals to the community and something which I would say Canada, specifically in the defense segment hasn't seen it in the last couple of decades.

Danielle, just before we wind up, there were a few straggler questions that we are not going to have time to answer. I'd like to encourage anyone to -- anybody who has questions we weren't able to answer during this or that you've thought of and haven't been able to get into the chat to please direct those questions to our Investor Relations. You can find that, Danielle will give you the information on that. And we'd be happy to follow up with you.

Absolutely. You can reach us at [email protected], and we will get back -- we'll answer your questions right away. Thank you, everyone, for joining us. And just a reminder that the presentation will be sent within 24 hours via our website. And if you have any additional questions, again, please reach out to us. Have a great day, and thank you for joining.

Thanks, all.

Thank you.