RocketDNA Ltd. (RKT.AX) Earnings Call Transcript & Summary

Okay, a few more people just dialing in now. But otherwise, good morning, everybody, and thank you for joining us today. My name is Mark Flynn and I'm the Investor Relations person for RocketDNA. We appreciate you taking the time to get an update and especially on our June quarter. Today's session is opportunity for us all to walk through the company's operational and financial performance for the quarter. We're going to highlight our significant progress in some Tier 1 mining clients, some exciting new government sector opportunities -- opportunities and provide some insight into our growth strategy for the months ahead this year. There will be a chance for questions. I have received a number of questions, which I'll endeavor to answer, but there is a Q&A function on Zoom. So please use that through, and I'll endeavor to do our best to answer those. If not, I'll respond to you directly. Chris Clark, our Managing Director and CEO; and also our Chairman, David Morton, is online to answer those questions as well. Chris will lead the presentation, and we'll open the floor later on. So thank you again for your interest, and I'm going to support of RocketDNA. I'll now hand over to Chris to take you through the update.

Thank you, Mark, and good morning, everyone, and good morning, David. Really excited to give you feedback on the last 3 months here at RocketDNA. I think what's always really interesting that companies in our particular field is -- and especially in -- when we're sort of breaking new boundaries and borders within the technology space, where there's not always much that you see on the surface, but a lot that's happening underneath is particularly in the Tier 1 space. For those of you who don't know RocketDNA, just a bit of a recap of who we are and what we do and what makes us unique. RocketDNA has been operating in the drone and aerial surveying and mining space for nearly about 15 years now. And in the last couple of years, we really sort of saw the trend, which was starting to go particularly in the mining space towards more automation and autonomous mining techniques. And so RocketDNA really sort of transformed to really take advantage of this growing trend and ongoing wave of this new technology adoption within this vertical. Combined within the automation, we also looked at how we could then implement the new AI technologies, particularly within computer vision to really deliver on essentially -- or not only automating the data capture, but also automating the data reporting and invaluable insights that we deliver to these enterprise customers. What makes us unique is a couple of things that we've had to build up over the years to operate within the space and at a particular level that Tier 1 mining customers expect. Number 1 being our [indiscernible] certification this stands for the basic aviation risk assessment. Essentially, it's a ticket to the game that gets you onto the mine site without a bar certification, miners don't want to know you. It's really about having that impeccable safety record and operational and quality systems in place to be able to operate at scale. In addition to this, we've also worked pretty long and hard in getting very complex approvals and getting a license to operate from the [indiscernible] Aviation Safety Authority, otherwise known as CASA. CASA has only really given out a handful of what they call beyond vision line of sight approvals. And in addition to this BD loss approvals with remoting -- operating from a remote operating center. It is one of the hardest approvals that you can get. And in addition to this, we've also successfully have got approvals to operate within complex or within city and urban areas within some regional towns. And so we've really spent the time in building that trust and that relationship and the credibility with the regulator to get these approvals to allow us to -- to be able to grow our verticals and relevancy beyond just even the mining sectors. Remote operations is also what makes us really unique and special, understanding that drawings have been around for a very long time. It's really about only the advent of when you're bringing in low earth orbiting satellites, the AI now combined with remote operations that you can pull these all together to really offer a scalable solution. In other words, we can deploy systems hardware systems anywhere around the country or anywhere around the world. and then operate them from any one of our remote operating centers based in Adelaide, Perth or Johannesburg, and offer a 24/7 coverage wherever our clients may be. And this really gives a lot of unique advantages in that. This is what we do. This is what we focus on because while it may seem easy just to buy drone off a shelf and fly it and just try to go get CASA approvals. There's a lot of sort of inherent knowledge in IP in what takes to effectively operate a large fleet of drones at scale from a finite number of locations as well. And as mentioned, everything that we do is it's great to not only automate that data capture, but how do you actually then process that and provide the insights required to solve a particular question or a problem for the customers that had customers are [indiscernible] looking to quantify their risk or understand their production output. And this is where a lot of our automated processing and AI techniques come in. There isn't a day that goes by that we get unique scenarios from counting [indiscernible] to crops, to looking for foreign objects, people drug parifhenalia, you name it. We have all these kind of inquiries and sort of problems that customers sort of bring to us and saying, how can we use drones to detect these objects. And so the special thing that makes also RocketDNA unique is not just all of these approvals in this time that we've taken to build up all this IP, but it's really about our consultative approach to when a customer comes. We are all about efficiency and scalability. And so we're not a boutique engineering house by any means, but by really walking the journey with the customer and delivering very practical solutions that can be deployed today is what makes RocketDNA unique in this particular field. We're not about selling dreams. We're here about delivering practical solutions for today. Thanks, Mark. And so -- and so our reputation over the last few years has really built up a lot of credibility within the Tier 1 and Tier 2 space, particularly in the mining environment, which a lot of you will know is a really tough not to crack getting onto a Tier 1. Not only do you have to have all the right product and the right credentials, but you also then have to go through the customers' hoops, which involves very high safety bars, cyber security requirements, on-site inductions, health and safety, you name it. It's really -- it takes a really long time to get on to a site. But typically, what we're finding is once you're on, you never leave. And customers would rather work with you and develop and grow with you. And once you're on one particular site, then expanding on to other the sites is a lot easier because you then -- you understand those systems, you understand those requirements, you've really kind of tick those hundreds of boxes that needed to have been ticked over the years to really start getting to be able to entrench yourself within your existing customer base. And I think that's really going to be a lot of the theme of what we're going to hear today is once you're within that particular customer, the unique opportunities that are being given to us and new sites in which we're deploying it is really what's making this business quite exciting in terms of the total addressable market. Thank you, Mark. A quick look at the company's snapshot as well. I know many of you would have seen, but just sort of trading just around about the $11 million mark as well. We've released our half year numbers. We have a December year-end, just over $3 million for the half year as well. And really, our business model as a company is always to focus on the high-margin recurring revenue base projects and ideally tackling Tier 1 customers. We're all about enterprise and building solutions for enterprise and how we sold those really big complex problems at scale for them. Just talk about a little bit about the last quarter that was. I'd probably like to summarize into 3 main points. Number one, when we started out our export and autonomous train solution over about 18 months now. We really were all about understanding that the land and expand opportunity that before us. For those of you who may not know, drone data is something that is really crucial to open pit mining operations in particular and customers just -- and they're increasing reliability on that information. We're seeing more and more software packages, more and more tool sets that are coming out that are helping customers extract a lot more value, cut costs and really improve the overall efficiency of the operations. And a lot of these tools and subtract packages rely on up-to-date frequent drone data collection. As we're seeing more of the mines even convert to autonomous trucks or autonomous drill rigs, again, all these systems all play very well together and very complementary and how modern mines are run and improving the overall safety and removing people from the operating areas such as the pits environments. And so when we sort of started off with these 18 months ago, it was really about deploying, putting out trials were reinventing the wheel in terms of testing out any kind of non drone sort of applications. This is something that the customers are very used to getting, and they understood the outputs what was requiring. But what became very [indiscernible] apparent was the on-demand nature of the service that we were delivering. Before, it used to be a really big planning exercise. A lot of logistics time wasted in deploying drones to these operating areas, which can really be far remote and difficult to reach. And so would ultimately give the customer only an opportunity to get their data once a week if that because of just the logistics involved. And what we found is that when we started deploying autonomous sort of drone box systems out there, not only were we're ticking all the boxes and delivering on what they were currently receiving, but all of a sudden, we just found this massive unmet demand from all the other departments within the mines. So a lot of what we do is particularly survey, but all of a sudden, everyone else started coming out of the wood work, the geotechnicals, the geologists, the environmentals, the mine managers, all of a sudden, every single person now wanted their drone data. And what we've seen and to try not to kind of guess to speak to the cache is not just a land and expand in terms of the units, but just the data consumption and the reliance on the actual drone data has just been something that we've just been sort of blown away by in how customers have really brought this into the operations and now are heavily reliant on that. And so what we've seen in a practical sense, and it's a really quite interesting time for the business and to say, hey, how do we handle this, manage it and monetize a lot of it. But really, just in the last quarter, we've really kind of doubled the amount of flights that we have done as a company. A lot of you may have seen that we -- that [indiscernible] actually did a video sort of case study. You'll see it on our LinkedIn page for those who are interested. And at that time, when Rio sort of released the video, they were doing just over 200 flights a month really at across all their sites. And what we've seen -- and that's across all their sites, right, they were sort of performing. And what we're seeing now with our units is a, for example, a particular [indiscernible] where we're operating that single unit is doing 200 flights on its own from 1 particular site. So the massive demand for drone data has always been there. It just never has been met. And that's where we're finding the real unique potential is now -- is the really -- how do we then monetize that and really integrate that even further into the data and the tools so that the customers can make their operations more effective as well and really entrench the RocketDNA product suite as well. And so speaking on to that, the growing verticals beyond the typical surveying in particular, mining and what we're seeing as well is not only just expanding within the mining suites as well, but we're also expanding within Australia. Just earlier this quarter, we opened up on our first site up on the East Coast within the Bond Basin which is really exciting for us trying out a new commodity instead of the hard rock space as well. And that has also exceeded our expectations in a number of flights and just the acceptance. The customers are seeing immediate ROI within the first couple of weeks. What makes the RocketDNA solution overall so attractive. It's just simple. It's easy. It's quick. We've got the formula down. We deployed very quickly and the customers see those immediate benefits. And really within the first month of customers trialing out any one of our products, they're really asking for the proposal to say, right, we're not going back. This just really fits within it. And for those of you who've ever worked within the Queensland coal industry as well, it's really additional set of complex procedures and processes and labor regulations that you've got to navigate and that's really what makes Rocket DNA unique is that we take that all on board and we understand that we really know this enterprise space and this Tier 1 mining space really well. And for us, we're saying to customers, it's not a problem. We'll manage it and handle it and train up remote operators for these additional requirements where we need to. I think this Tier 1 miners really appreciate it because it just makes the process so simple and so easy for them to adopt. And this one particular customer, just from one particular unit, we're now doing a proposal for over 10 units for them now. So that just shows how quickly the expansion adoption rate is really a form where they see the value very quickly within our overall offering. Thank you, Mark. Probably on the tail end of that, not only are we growing in every individual customer and growing in with Australia, but also international expansion as well. We [indiscernible] has been a great customer of ours have taken on additional units were constantly engaging with this customer and how they can continue to use more autonomous drones not only within their survey, but also within the sort of security and perimeter patrols as well. So every single customer is quite unique in how they use that and how they then deploy those systems. And then we continuously on top of those that autonomous data capital autonomous petroleum then layer up more software, more software offerings. In terms of the financial highlights, I think what's really sort of important to note [indiscernible] is that our contract revenue continues to really to grow, really representing about 46% of the overall revenue as well, really reinforcing that recurring revenue is our primary goal and how we position with customers. Understanding that a lot of customers want to start off trialing or do short-term contracts in the beginning. And as they get confident we're now starting to see and really look forward to making announcements on some long-term deals as well, 1 is really beyond the 12-month mark, which is what contributes to our ARR figure. Thanks, Mark. So turning about the revenue sort of type and how we break down, again, the business model it's reinforcing in that getting on to the very first site, it takes a very long time, very long sales cycle. Anywhere between sort of a 3- to 6-month sort of space. But once we've deployed it's a very fast expansion within that. So we have these great customers, and it's been a very successful part of our overall marketing strategy and how we deploy and manage with these customers. And so we really look forward to bring you some more news as these finalize as well. Another really interesting space, again, not only within the mining is really within the public safety and our drone is a first responder vertical. RocketDNA has really invested quite heavily in a new remote operating center particularly in addressing not only just our growing mining activities, but as well as within the public safety. We're noting that there's a lot of increasing regulation and requirements, particularly on critical infrastructure sites such as within the overall sort of country determining on the the security of Critical Infrastructure Act as well that there's a lot of sort of more requirements put on these operators of critical assets to really look at how they start securing all their critical infrastructure and not only just from a cybersecurity but also from a physical security standpoint. And we're getting a lot of those inquiries of how can we assist in really kind of replacing the manual petroleum facility and using drones from an aerial perspective, using thermal sensors to provide that overall situational awareness and then coordinate with the security teams on the ground to address this. Thanks, Mark. From an operating -- from our quarterly sort of results and where the business is sort of going and I guess sort of looking at the revenue type as well. Again, the cash receipts from the customers, and I'll probably ask Mark to skip to the next one as well. I think the main one a lot of people obviously want to talk about is really around the cash sort of burn as well. And I think this particular quarter was quite interesting from the net outflow and really kind of marking a lot around the activities that we've been busy with. And I think to really try and summarize it into 2 key aspects of this. The most significant ones really being around a lot of work proposals and deployments that we had done just in the final month of the quarter as well and really the timing effect of those revenues, which we expect to get into the new quarter as well. So as those debtors get settled. And then overall, really around the working capital and the capital components of establishing the new remote operating center in this last quarter as well as the building up new units to then which were then deployed as well. As you'll see, the image sort of behind me with the new remote operating center, this really becomes one of the key cornerstones of being able to visually display to customers what is happening out on sites as well as mix our operations a lot more efficient and easier to manage as we're growing and expanding across multiple sites, how does the team then manage those particular sites as well. So -- it's really been a differentiator in the business. And it's really been great when you're bringing customers for them to be able to actually see how everything works and how it all pulls together and what makes RocketDNA very unique in that regard.

Thanks, Chris. A couple of questions that came through before the webinar if I can put to you and to David as well. [indiscernible] these between the 2, but mostly to you, Chris. The first 1 is on that Tier 1 engagement we talk a lot about. How is the demand for the hardware and also the services evolved over the last 3 to 6 months?

Yes. It's an interesting one, Mark. And I guess I'll sort of speak to it in 2 streams. Number one, on new customers. I think everyone knows that there's a lot of headwinds within the mining industry. Everyone is looking at the cost base again, how they can automate and how can they streamline their cost within that. So we're getting a lot of leads and inquiries from customers saying, "All right, how do we we not only cut costs but also improve our safety on site and become a lot more efficient. And then looking at the existing customers that we already have and how they really very quickly move from a trial to a proof of concept to really then solidifying the solution within the overall workflows as well. So we're sort of operating on a multitude of verticals not only within the customer themselves and not only within the mining industry, but then within the country and overall addressable market.

Just following on from that, that government and security vertical, very hard for us to answer. But 1 of the questions is, what's the potential size of that market in that sort of from government and/or local governments, federal and others.

Yes. So thanks, Mark. So this is -- this is a very emerging but very exciting opportunity for RocketDNA. We're now operating at over 2 secured government sites as well and have additional discussions underway. The scale of infrastructure monitoring is in the public and defense sort of space is significant. What we're seeing is they've really never had access to this kind of technology before. And so -- as we see the adoption as it progresses, we really think that this particular vertical could develop into our customer base that can be very comparable to the size of our mining customers over the medium term.

A lot of questions -- a couple of questions on scaling. -- use the words land and expand, but what sort of pattern are you seeing from the customers? And is it similar to what the Kamoa Copper model?

Yes. So again -- I guess, to reinforce that customers always start off small. It takes a long time to get the first one on, but as we're sort of seeing -- once the trial sort of start off typically with 1 unit, they expand quite rapidly as they see the productivity and the safety benefits feed through. So several sort of Tier 1 and Tier 2 miners are constantly actively assessing multiunit rollouts at the moment with -- across multiple remote operating areas such as pits and [indiscernible] pads as well. And I'd like to say, no, it's a cliche, but that's exactly what's happening within our particular business. It's you kind of start off small and then they go from 1 to 5 to 10 very rapidly. That's -- those are the discussions that we're having and the proposals that we have in the pipeline.

I think it's a really good question, and one is what cost savings does Rocket deliver for customers?

Yes. Our solutions essentially cut the need for manned interventional manned surveys, which reduced the overall site risks, they speed up the data turnaround. And effectively, they actually open up more applications and utility for the customers from a data frequency point of view. So effectively, what we're seeing is between a 30% to 50% cost reduction on the recurring costs within the survey and drone data collection field plus all the savings that they -- from an operational sense, such as the logistics getting team members out there, effectively allowing our customers to spend less time out in the field and more time behind their desks with the data. And what we're seeing is, again, it's not just in the saving the money from a survey perspective. But all of a sudden, the additional applications such as the tailings monitoring and conveyor inspections within other multiple customers that we've deployed our solutions are also saving them time and actually avoiding accidents and other areas of concern where such as unplanned shutdowns, effectively saying the millions?

I think one of the practical examples of that, Chris, which you've explained to me is after an explosives blast because we can send the drone out to see the result much quicker than you can put the human being back on site. They are ready to go several hours faster on the next blast and that saving is in the order of $10,000 plus, I think, per hour or something like that. So you think about that in terms of productivity and cost saving over the course of even a month the machines pay for themselves very, very quickly.

That's right, David. So we're seeing a lot of gold customers implement all dilution and grade control software packages within their workflows now, which rely very quite heavily on drones, sort of surveying the post-blast Mupale. And effectively, this helps them the diggers know where they need to dig within the Mupale, effectively reducing processing and chemical costs. And and all the like as well. So there's a heavy reliance the longer that it takes to collect the data, process it and send it to the [indiscernible], the more money that's wasted on that standby time. That's right.

And then just back to the working capital. Actually, I know a lot of people have been asking questions about the spend this month, and you had -- I think you explained about the rock being a one-off, but I think a really, really beneficial one-off. And it's also because we're now starting to field multiple orders -- we've always done a as we get the purchase ordering because we know this takes time to get the pad prepared and so on and then we go off and build the next [indiscernible] bot. Now we've actually invested in a little bit of inventory so we can speed up the order cycle -- and that's one of the rationales that's in there behind the increase in operating cash cost in this quarter. We don't expect that to continue.

Thank you. Chris, how important is site to winning new work? And what's the reception of [indiscernible].

Yes. So we haven't previously spoken a lot about [indiscernible], but it's sites for those who are not sure as a proprietary software platform of ours, which effectively is a drone data visualization. It probably sounds exactly how it looks. It's very -- it's effectively an enterprise version of YouTube, but not only allows customers to view videos and get [indiscernible] the photos, but they're panoramics as well. So effectively, it's a single source of where all the information is displayed for the customer. We then from this particular platform can then integrate and send to others, effectively then automating not only the data processing, but then the data integration with other packages as well. And it becomes a really key selling point of the RocketDNA overall solution. So you have the export hardware on one side. You have the remote operations in the middle and then you have site cube at the final stage, which is our software delivery key point. And the real big benefit is that it gives customers this immediate visual access to their data and the automated reporting and effectively cutting out all the manual processing and time that they spend in effectively the data handling and it's a major differentiator that supports our longer-term customers because the value that they get from the overall combined solution is highly valuable.

Just a question on the revenue. So back to -- just jumping back. So with legacy African contracts ending, how is Rocket replacing and then looking to grow revenue?

Yes. So as mentioned earlier, we've been around for 15 years. And typically, our legacy business model has always been to put drone pilots out on mine sites and do all the processing on site and do the data capture there. And really, a lot of our strategy has really been about replacing a lot of these existing contracts with export style units that effectively means that we're saving the customers money, but we're then -- we're seeing them down for a longer period as well. And really being -- Africa being our sort of our original sort of growth base within that, -- what we're also starting to see is a more massive growth in acceptance within Australia, understandably considering not only the labor cost, but just the expansiveness and the size of the continent and the distance between all the operational sites as well, the growth potential and opportunities in Australia and especially also in new international areas, which is very difficult to find the skills such as Papua New Guinea and Gabon are really very attractive for customers and we find quicker sales cycles within this. So yes, we're expecting overall half to '25 to show a much greater improvement as all these new deployments come to fruition.

Great. Thank you. David, it might give you first run at this one. So what would success look like for Rocket over the next 12 months to you? And then I'll ask Chris to follow up.

Our success looks like a significant uplift in revenue from our installed [indiscernible] device. And conversion of our ever-expanding pipeline, which has been growing exponentially over the past 12 months, they are the 2 key factors for us. It's about converting opportunity into revenue.

Perfect. And Chris?

Yes, I think it's just a revenue following on from all the activities as we -- as all these units have now been deployed, customers have completed their trials and now signing either on to paid proof of concepts or signing up on long-term contracts. Really, what we're seeing over the next 12 months is the secure of large contracts and at least 1 large government customer as well. And overall, the big focus being on the growth of the recurring revenue AR because understandingly, it's really great to have these sort of big peaks of values or big revenues and contracts. The focus of our businesses is really that ARR component because the way that we built the business model that we don't just make revenue just of 1 big hit, but actually it's really sort of cut up over a lot of different options from the customer. So effectively, the more the customers fly, the more money that we make. And if you kind of think about it, if customers are only currently flying 4 to 5 times a month, -- but the customers who've now had exports for over a year are now flying over 200 times a month. we're very quite excited to see is that now that new revenue comes through because all the costs have already been expended. The units are really out there. Now the margins are really starting to come through. I think that's the difference that we're going to see not just over the next 12 months, but really over the second half of the year. David, last comment and then Chris as well. Yes, the other thing we did in the quarter was appointed Advisory Board. That was very considered around timing and has already given us a lot greater connectivity with a greater range of opportunities. Those people are leaning in and they're already improving their work. One of them is already a significant shareholder as well. So they're putting the money where the mouth is. And we're very happy with the input we're receiving already. We think that will be a very significant move for us.

Thank you. David and Chris.

And I think from my side, thanks, Mark, is that I think a look for context is just to describe how far we've come just over a year ago, we didn't have any Tier 1 mining customers using export product. And now we've got the top 2 and growing significantly in -- and we haven't even really begun to even try scratch the surface of some of the sort of those Tier 2s or some others or on the East Coast. And so I think we're running with those current opportunities where we see that massive potential for hundreds of units within -- within the single largest Tier 1 mining companies. And I think as those sort of come to fruition, we definitely look we're very excited to be able to expand on those opportunities within -- not only within the current existing customers within Australia and [indiscernible] globally as well.

Awesome. Thank you, Chris. I think with that, we can thank Chris and David for their time today and everyone who joined the call. We've had a good number of people dial in. So we appreciate everyone's continued interest in RocketDNA. As I said before, any follow-up questions, please come through to Chris or myself or David, where our details are on the releases are on the screen there now. So please don't hesitate to reach out. We look forward to keeping you updated into the next quarter and the remaining time of the year. So stay interested in RocketDNA. And if any questions, please let us know, but thank you for joining us.

Thank you, Mark.

Thanks, Mark.