RocketDNA Ltd. (RKT) Earnings Call Transcript & Summary

Good morning, everyone. Welcome to RocketDNA's Investor Presentation for the Quarterly Ended March 2024. Just to confirm, everyone can hear me? And maybe just to test out the system a little bit, if I could ask someone just to confirm, audio is okay, just a little chatbox. Perfect. Thank you. Can you hear everyone there? Great. Give a couple of seconds for everyone else to join. In the meantime, maybe a little bit of housekeeping. Today is specifically focused around our March quarterly sort of update and presentation news. We've recently done a presentation as a sort of -- as a business -- general business update about a couple of weeks ago which can be found in our most recent announcements. So today, we'll be really sort of telling about the last 3 months within the business and a bit of an update on the progress of a couple of our strategies as well. What we see sort of the value as well as to use these sessions as a mechanism to engage with each one of our shareholders as well. So please feel free to put any questions that you may have inside the chat box to the right. And then as we have time today, I'll opt in to answer a couple of those questions as well. Right. Kick sliding off today. And a very warm welcome to everyone. And again, thank you very much for joining me, my name is Chris Clark, CEO and Managing Director of RocketDNA Limited, a drone services and integration technology company listed here in Australia on the ASX. And overall, I always like to sort of begin with the overall mission. For those of you who may not know much about RocketDNA and what we do. I originally started the business over about 12 years ago and have really been through the sort of the journey in terms of wind drones. The game is not what sort of -- people sort of view as a -- sort of as a hobby, as sort of a toy and to what has now become a fully commercialized product really sort of grown across multiple industries and changing the arena of how mining industry and even to the news of how wars are even performed. Our particular business is focused on the commercial end of drone technology and how that is deployed within enterprise and large suite of customers. And really, sort of our core mission and what we do and how we are sort of our guiding compass in north into how we decide what strategies and products to pursue is really around generating very frequent data that speaks to the heart of decision-makers in a very fast-changing world. So we're always looking to develop solutions and solve problems that are not only complex, but require a large batch of geospatial data that can be used to help our customers make these much faster decisions. And what's really interesting is the sort of the unique intersection of what drones and now AI provide is the ability to take these large batches of geospatial data and provide these insights in a very short period of time. And this is sort of -- has been sort of guiding principle and how we've automated not only the data capture side, but also the data processing for each of our customers and our projects. From a company valuation side, it's really -- RocketDNA is very much in a unique position with revenues sort of close to the $6 million mark. Obviously, a lot of the questions as a lot of people always look at it and say look at the market cap and always interested to understand the pricing evaluation. And this is -- this investor call in this quarter is really part of our objectives in ensuring that we can actually communicate the value of the business and where we see it going. Really, our intent is to continuously keep focusing on getting the business to the profitability factor and a lot of you would have seen in the recent activities report and our recent sort of quarterly that we are really sort of kicking goals towards that. As a management team, we've always been very focused on running the business lean and focused on sort of the projects at hand that deliver the most value. And we really do believe that the business is in that unique position to capture a very large segment of the market. We find not only the demand for drones growing need of them is only growing within the sector. So where RocketDNA is very uniquely positioned as a business to capture a large portion of that. Having one of the key metrics that we like to communicate as well is really around the ARR figure. You typically see this a lot within your technology companies and this is really taking the annualized revenues of our long-term contracts. You'll see a little bit later that I've really really sort of focused on the -- when you're looking at sort of the technology companies, it's really about how the metrics and so the multiples that you apply within these annualized revenues. And how we -- and others can sort of be extrapolated to determine a valuation as well. The interesting one here, when you're going now to our customer base is the -- it's just really the kind of the companies and the customers that we engage with and our presence across the world. So as mentioned, RocketDNA is really focused on working with these large Tier 1 and Tier 2, originally sort of legacy business has been within the mining industry. The mining industry has been a really unique place in which we've sort of cut our teeth in that mining companies want solutions that work that are at the right price point and are able to scale and be supported within a very harsh environment. So any sort of products or solutions that you develop in a mining environment can really be used within other potential kind of industries within oil and gas and agriculture, it's pretty easy to sort of scale from that particular sector. What we've always been about as well is understanding the overall needs of our customers who have got a very high safety and sort of technology integration requirements. So these customers are very risk averse and require their suppliers to understand and operate at the levels in which they expect. So we really kind of pride ourselves within our safety credentials, our BAR certification and everything that's needed to really operate at the sort of expected service levels required. A couple of highlights from our financial year-end. So we operate on a January to December financial year as well and a couple of key sort of movements that have happened in the last quarter. As a business, not only do we have a sort of strong focus on the financial side, even though we sort of almost operate -- is sort of a bit of a start-up with a very long -- of a start-up mindset with a very long history, proven background, proven customers' long-term contracts. We're always prepared to make the necessary adjustments to really refine the business as we go along. What we see or look within the last of 3 months within the business bringing David on board is what is putting David in the position of Chairman has really helped us as a business and even help myself as well be able to focus on the key opportunities which are starting to develop within a pipeline of sales. So really -- it's been a very interesting journey even -- not only over the last 3 months, but even over the last year, especially a lot of our new product strategies have realized working through these initial phases of these large companies to launch these new products. And again, as sort of mentioned drone technology, it's not going anywhere. Customers are only using more and more of it. And really, it's -- the focus is around the data element, getting that geospatial data is sort of quicker, cheaper and safer than they've been previously doing it. A key metric that's always interesting to watch within the businesses is a sort of focus on that topline revenue growth, sort of our key metrics or sort of our base of core revenues have sort of originated out of Africa with a lot of our focus now growing the Australian share of the revenue sector as well. So in a couple of slides, I'll show you is really the breakdown of the revenues, which is -- which is sort of comprised of at least about 40% of our contracts being long-term contracts signed with these Tier 1, Tier 2 miners. And I'll show you a little bit later on sort of our progress and how we balance our pipeline and our projects and our delivery of these revenue numbers. For those of you that -- who are new and may not know exactly the industries or the products, the endpoints that we deliver because we're sort of talking probably sort of really too broad sort of terms of how we deliver the solutions and what we focus on. So again, coming to our guiding compass and where we look really about getting and consulting with the end customer, understanding their problems and looking for these particular applications or workflows, which they'd like to automate. So where they really find sort of scenarios where there may be a workflow that's dull, dangerous dirty and maybe just playing all sort of boring. We look to automate those workflows using drone technology and our suites of software and application tools, which really integrate and build for the customer in a really robust bulletproof solution that can work and maintain on a continuous basis. Some of the sectors that we've been exposed to and what we provide solutions and really expand really from the entire mine to mill within a mine site and as well as a particular part of our business coming from the security surveillance and agriculture sectors as well. So a vast majority, when we say coming out of mining, we're looking at things all the way from exploration, survey planning, the geotechnical and the drill and blast side. And these are all sectors that are continuously looking for optimization of tools and technologies to improve the businesses in which they operate. Agriculture is always a very interesting sector for us because a lot of the hardware and a lot of the approvals that we get, again, can be extrapolated from mining into an agriculture into urban and semi-urban environments. So we get a lot of benefit, cost efficiencies of sharing those hardware stacks. And what we really see in the ag space is using high-resolution sensors and cameras to capture and quantify a lot of problems that they're detecting on the farms. So as a practical example, we've done things from counting cows, counting sheep, even counting an individual sort of crops and providing these population reports to the customers who are then able to fly and are able to understand where they may be tracking. This, again, enables customers to be able to perform these flights on a more frequent basis. And again, to be able to pick up the really small changes or the deviations in their livestock counts. And this allows them to really sort of tackle it before they might be losing any kind of assets or stock as well, whether it be sick sheep or cows that sort of need attending to. What we're also seeing is a really growing demand within the public safety and emergency response space as well. A lot of government and policing bodies have started to really come to the market in terms of how they look to deploy and make efficient use of their response teams on the ground as well as removing them from dangerous scenarios and drones got a very large space to play within that sector as well. We really have invested a lot of time team, especially the team in Africa have got a couple of customers where we've already -- have used our traditional drone services and how we've sort of, let's say, had a one-to-one relationship with a pilot flying a drone within these areas, but also deployed our autonomous export solution in which where it can operate and capture and stream live video feed data with a thermal view within -- remotely as well. What makes RocketDNA very unique is a set of the regulatory approvals that we've -- and our capacity -- operational capacity that we manage to build up over the last decade. And these are the things that just take time in terms of building that trust with the regulator, proving yourself. They really generally use the crawl, run for loss philosophy in terms of capabilities, and I think we're at a very pretty healthy jog in terms of cadence as a business, continually adding to our approvals and always looking for these efficiencies because the more approvals that we can add on to this is the more complex operations become, the more value that we're able to offer to the customer and more efficiencies that we see within our operating model as well. The key really elements is really around the safety and the BAR certifications. This being an external third party. And the big focus, which is very unique within Australia and Africa and where we operate is up beyond visual line of sight and remote operations approvals allowing us to then perform drone-in-a-box solutions for our customers across the country and the world. Coming to the financial highlights of the business for the last quarter as well, really the focus has been about continue doing what we do best in terms of growing the contract revenue, building on a lot of the sort of updates you would have noticed in the last quarter was we brought on Calidus, who took on a 3-year deal for our autonomous xBot solution as well. That was just under the $400,000 mark for a single unit. So that's kind of also helped bump up our ARR number as well. And that -- that's really a great sort of win and a confirmation and a validation of the xBot solution. We're going to see a lot of these -- sort of these Tier 2 miners really start sort of getting the confidence in deploying these kind of technologies to help them in these particular difficult sites or very remote regions to really sort of meet the needs of where they're struggling to deploy people to the sites as well. So xBot really speaks very well and it's a very reliable solution, it's with a growing pipeline beyond that as well. Again, really a great sort of effort by the team in terms of the revenue from the prior quarter as well, a very strong quarter that we've been seeing and as well as sort of complemented by the cash receipts. The team, I could say, is very well run by Paul, our CFO, for the size of the business that we're at and the amount of sort of reporting and the details and the segmentation that we can get on our numbers, really helps us understand and again adjust accordingly to suit the operations of the business to where we're at as well as meeting our growth ambitions because I think what every shareholder obviously would like is not only a profitable business, but a business that is growing. And I think that's -- it's always a very interesting dynamic to try and balance, and I believe one that -- we as the management team feel that we've got the perfect mix for. A really strong cash flow quarterly. So a couple of highlights. So looking at the cash flow of the business, I'm sure our intentions are very well known that it's our aspirations to really get this business to a cash flow or EBITDA breakeven as soon as possible. We're really, again, sort of managing the cost side and the revenue sides of the business as well, demonstrating really good cost management, but as well as increasing the revenues, the spread of the contracts, the continuous uptick of not only ad hoc, but customers conducting trials with the solutions. And this all indicates into our stronger growing pipeline as well. A couple of the elements, if you sort of have a look at the quarterly as well, is at -- sort of at a net burn of $104,000 for the quarter compared to the prior quarter, really, again, just sort of shows that we can be quite sensitive to the needs of the business. We know what to dial in and go back and essentially we're really sort of at that inflection point of taking this business into the sort of the positive territory. So, yes, a very exciting time for the business, and we really look forward to continuing these -- kind of these conversations and seeing what the next quarter it delivers. As mentioned, it was really great to bring David on Board. He's been part of the team for over a year now. So really been grateful to sort of hand over the reins and get his help from the Chairman's perspective. And for me to sort of roll up my sleeves and spend a lot more time with the team, within the operations sector because it's such a crucial time, especially with some of these very large customers we are working with, the sort of the systems that you're setting up at this early stage really sort of set the benchmark for the future, and we -- it's just personate that we get that right. And I'm very, very comfortable from my side on the sales side. So the more I'm in front of the customer with the team as well, the better -- the sort of the bigger the contracts, the potentials that we seek to close. Right. I have the next one. So sort of -- it's a visual representation of the previous slide, just sort of showing the positive trajectory of the revenue and the cash receipts within the business and the year-to-date as well. Again, this being done audited figures and just realizing how our financial years are from January to December each year. This is one of my favorite sort of slides to always chat to because when we're always talking about ARR or TCV numbers, we're always really referring to that yellow sort of bottom section of this Hamburger graph. And it really kind of shows the potential of the business and what we're doing and how we're developing it as well. So a lot -- the business is always really interesting in terms of the phasing of it. We're not hard -- like a pure like hardware business, which has a lot of peaks and valleys, nearly 40% of this business is these long-term contracted revenues where customers have the confidence to sign up these long-term deals. In the middle and the sort of the green sort of the patties also are a very unique part of the business, which you can see there at the end of the quarter was about 30% which represents customers who have been with us for a longer period of time, but have maybe not committed to a contract more than 30 days. So these would typically be customers that are giving us either a 3-month or a 6-month purchase order, but have been with us for longer than a year. And that's you can kind of see the really strong section of that took a really big growth within this last quarter as well which is starting to show that customers again are building that confidence and it's an early indicator of customers that once they've sort of been with us for over a year, they may lead into a long-term contract as well. And also always being importantly is our ad hoc pipeline as well. So this being customers who may be totally new to the business, or be projects once-off that we sort of bring into the early part of the sales funnel and how we deliver that revenue. So overall, I think pretty well balanced in terms of healthy model of the company and making sure that we've always got the core part of the business, the customers that are there as well as the new projects coming into the pipeline. Speaking about to the net cash used in operations. So what you're really going to kind of see in this graph, especially over the last year was, I think in those terms of this business, we could take this profitable very, very quickly if we need to, if we need to push on those sort of pull those levers and really sort of transform the business, but really understanding that again, as within our positions that we understand that we've got to be growing this because it's no use just having a company that's just sitting there breakeven, but something that's going to have a strong trajectory for the future. And being within this business and this industry for over 10 years, it's really been very fascinating to watch the overall growth and the size of this market develop and mature over the last decade and us deciding within the last sort of 18 months and where you've kind of seen that sort of the net burn over the last 3 or 4 quarters is us investing within the business to develop a new autonomous export solution. So traditionally, we've always been involved sort of in the manual sort of part, again, a remote pilot that goes out to a site, conducts all the safety checks on site and then flies the drone. A lot of our new solutions have been focused on developing the autonomous and remotely operated drone systems, which we believe will account for probably about 25% of the current drone market going forward. So it's really about taking a large share of that potential sector and doing that responsibly using the in-house skills that what we need to do to develop, grow and market the new products as well. Again, having a look at the ARR number. So a lot of this is obviously based on the legacy contract business, but with the addition of Calidus, which is a new long-term contract that's been added to that. You're getting that nice little bump up in the ARR there as well. So a little sort of update of where we're at in the business, probably trying not to repeat too much of sort of the prior sort of 2 weeks when you had the business update. But again, to sort of clarify as a business we've obviously got the 2 sort of strategies, the one which is our typical legacy operations around placing people on mine sites and conducting projects on agriculture and doing security surveillance with people on site. It still continues to be our largest part of our business with our second strategy, really focusing around our autonomous products. So we're not necessarily reinventing the wheel. The customers are always continually looking for the data output. That's the problem that they're looking to solve, how that is achieved and how that data is captured is what we do very uniquely. Operating within the drone space is very highly regulated. As sort of mentioned, not only within mining, but aviation are very risk averse. If not in zero risk environments and trying to navigate between those 2 sectors while trying to introduce a new technology is a special recipe upon itself and then trying to deploy that across globally across all multiple sites and different sort of customers is really that knowledge that we built and the skills and the capacity to really meet the customer demand. We're again traditionally up to this point. We've been integrators of the technology. So we've never have built our own hardware or software. And with this new strategy, we've become essentially sort of manufacturers or assemblers of these new systems. So again, when you're looking at this remotely autonomous systems, it's not possible just to take a unit off the shelf and operate it. I guess, you can, if you wanted to do 1 unit, but trying to actually scale that to 2 or 3, there's a lot more to it. So we've -- when we're taking these products, whether it be a DJI system or another brand and integrate into our export system, it's really about designing an overall solution that can be deployed to these mining environments that are very harsh, require very specific electrical standards and need to be remotely reliable and accessible as well. So we've sort of -- we really had built up our capacity and our abilities in understanding inventory, stock management, sort of just-in-time manufacturing really in terms of how we -- when you order all the parts because if you look at sort of our export solution, there's probably between 30 and 60 separate small components that go all into assembling an export solution and trying to manage all of that is sort of a unique process in itself. We've also realized that in the solution when you deliver an autonomous solution, and you actually remove a human out of the loop on site, we needed to introduce a piece of software, which is proprietary to our own, which we call [ SiteTube ]. And this really kind of similar to what the name says, it's an enterprise-grade YouTube software that when our drones land and upload the videos and the content, these become immediately available to the end user as well. So they get their notifications of the SiteTube that the video is uploaded. And this has been a really great success for the customers. They love this because you're sort of getting your data very fresh. Customers who are able to get a 360-degree view of their mine sites every single day, even before they get out of bed really helps with scenarios like shift change and safety and again getting that information as sort of as fresh as possible for them to make the right decisions. So we've really been sort of ticking the box not only in meeting the customer demand but also building up our own IP and how we deploy and build these solutions as well. And again, it's all about speaking to these particular enterprise scenarios that customers have this demand for real-time data. This then will lead into what we're also very comfortable around, which has always been and understanding that we deliver a data element with -- that's not just pretty pictures but actually has some reporting value and insights within that. And with the advent of AI and generative sort of reporting, we're able to really provide the customer a range of kind of tools, whether it be from automated volumetric reporting, which is what Calidus went for. So every day, they're getting automated stockpile reporting that is delivered to them all the way to helping customers optimize their drop-in-a-box scenarios using our [indiscernible] software tools as well in forecasting the fragmentation of model and these help in decisions and understanding what kind of equipment you need to send or deploy after a blast as well. So you're saving on fuel costs and saving on explosives. There's a lot of sort of downstream benefits in having that knowledge upfront as well. Sort of a quick sort of side view. As you can see in that sort of the phone are a lot of our strategy is all about the drone-in-a-box technology segment. Drone-in-a-box is not necessarily a new thing. It's been a concept that's been around probably for about 5 years now. But really only at this time, do we believe that a very viable and scalable solution now exists at the price point which customers are prepared to pay and not just to have 1 unit, but multiple units on-site. So developing all these separate elements where you see the export solution, you see in the main photo there, which is then controlled by an operator in one of our remote operating centers in the top right and then the video feed coming back full loop into SiteTube or other tools for data processing and reporting what you can see in the little cell phone image. And as a quick sort of a brief example, probably we'll leave some time for Q&A, but some of the deliverables and outputs that we're doing for customers really focuses within specific industries such as oil and gas, in addition to photos and videos and panoramics but being able to attach particular sensors to allow and to mapping as well of methane leaks, a lot of automated inspections. So using thermal sensor to look at power poles, detect cracks, faulty insulators. We've got an automated water pipeline leak detection, looking for dam spots and along water pipes, especially in mining environments, out of the desert it's a very crucial element as well. And as sort of mentioned with Calidus using sort of enough of tools to be able to deliver very specific solutions that meet a particular customer's pain point in the volumetrics and open pit monitoring. So this really contributes to not only understanding what's the production output happening on each of the individual sites and then combining this into a single power BI dashboard, but also providing open pit capabilities to really make the geotechnicals and safety managers lives a lot easier as well. And that's pretty much where I'll sort of leave it as well. If anyone who would like to post a couple of questions up on the chat, very happy to answer a couple of questions as well. Otherwise, happy to sort of leave there as well.

I see we don't have any additional questions there. But -- so I'll probably then wrap that up from us and here at the team of you go. Right. So I've got a question here, thanks to Robert. The question is drone technology has matured, what is our business around the docking station? So thank you, Robert. Yes, our business model, again, sort of as discussed, has really been around -- if I sort of go back a couple of slides, it's really been around integrating these docking stations into our xBot solution to get a CASA approval for a docking station, you need to add all these supporting devices around it being it the camera, the redundant communication things and all the safety equipment required to operate these remotely. Because essentially, what you're doing with a drone-in-a-box or a drone docking station is you have to simulate the pilot on site from a remote location. So you can kind of see in the top photo over there. We're monitoring the weather. We're monitoring the air risks. We're communicating with air traffic via VHF radio as well and continuously monitoring the drone in real time as we are sort of performing the flights. Now a lot of these flights can happen autonomously, so the drone can be scheduled and fly the same path on its own. And essentially, the drone operator doesn't need to be fully engaged with the drone, but just sort of monitoring it the same way you would like a Tesla in sort of autonomous mode as well. So our strategy is really upon -- our business model has been around offering these units, either selling them or leasing them to customers and then operating them for them underneath our CASA approvals. So we're really about -- so as I guess, a lot of the questions are also coming through a lot of sort of the technical questions as well. And we're seeing questions around, like I guess, the latency [indiscernible] and yes, how we select the technologies. Looking at the StarLink systems in combination with cellular systems as well, is something that's really sort of taking into account and how we deploy these. So I think that's what's probably the very unique thing about sort of the drone-in-a-box is not only having these new systems have come to market, but the supporting sort of connectivity options like StarLink and the processing capabilities and a very fast turnaround of AI tools has allowed us to really in a single combination be able to do a lot larger technological leap and we're not reinventing the wheel, but taking a lot of the headaches and the pain points and lot of the manual processes away in delivering these solutions. So all these things together are so critical in being able to deliver a viable solution. In terms of the amount of units that we've sort of delivered, we've sort of really communicated the market, especially in our last quarter as well. It's -- we've sort of deployed the first sort of batch of 6 units across sort of sites in Australia and Africa, and we currently are receiving the sort of second batch now with sort of deployments happening now starting from this month. So this really also is dependent on the sort of the approvals as sort of mentioned in sort of our business update while you receive approvals nationally. You've got to add on the specific sites in terms of as the customers are starting to be onboarded. And this may have a sort of a slight delay depending on the, I guess, the sort of the queue that's happening at the regulator. They may -- they only got a couple of people assigned to this and they -- it's generally a very sort of standard process as we've really proven it to them. And just adding on the specific areas is generally a tick box exercise, and we sort of work with them in how we -- and sort of this is very sort of -- it is a unique scenario within that environment, how we may adjust certain operational parameters to meet those requirements. So yes, we look forward to obviously making a couple more announcements and we'll communicate to the market as more of these are sort of rolled out and customers are signing up. I don't see any more questions coming through there. But I think from my side, again, always very happy to engage and sort of communicate with the market. We're going to be doing this every single quarter as well, really making sure that we're engaging with every single one of our shareholders, not only through events, but again, through these webinars. So yes, we really appreciate the support of every single one of our shareholders. We definitely feel frustrated as I'm sure many of -- everyone else does and understanding the disconnect between where the -- where they feel sort of the valuation of the business should be. And that's why we're very cautious and aware of making sure we're not only running and growing the business as best we can, but as well as the -- also communicating the value and the potential of the company more broadly as well. With that, I'd like to thank everyone for their time. Thank you again for attending this quarterly review and look forward to catching up with you soon. Thanks, everyone. Go well.