RocketDNA Ltd. (RKT) Earnings Call Transcript & Summary

Good morning, everyone, and thank you for joining us today's RocketDNA Investor Webinar. My name is Mark Flynn, and I'm pleased to welcome both our existing shareholders and those following the company's journey for the first time. We're here today to provide an update on RocketDNA's progress over the March quarter and also to give you some insight into the exciting developments across our mining, infrastructure and public safety verticals. It's been a quarter of strong operational progress, highlighted by our ongoing pilot with Rio Tinto and successful deployments in South Australia, plus the completion of our new flagship remote operations center in Perth, where Chris is sitting today. We're very proud of achieving a simultaneous BARS Gold Certification in both Australia and Africa, certainly an industry first that sets a benchmark for drone safety and compliance globally. As always, presenting today is RocketDNA's Managing Director and CEO, Christopher Clark, who will walk us through the latest financial results, some operational milestones and strategic direction for the business going forward. Following the presentation, we'll open the floor to Q&A, if you can use the Q&A function within Zoom. I've also received a number of pre-submitted questions that we will look to answer and any additional questions that come through that live chat. So thanks, again for joining us. And with that, I'll hand over to Chris to take us through the quarter in review.

Thank you, Mark, and good morning, everyone. I'm really happy to be joining you from our very new remote operating center. You can see the sort of background from me. We've recently moved offices and really had the opportunity to kill out our new remote operating center, which I'll chat a little bit more about now, but really gives a great sort of indication or sort of visual representation of where the business is at and really kind of the level in which we're now beginning to operate. So again, thanks very much. And yes, thanks looking forward to chatting a little bit more about RocketDNA. A couple of interesting sort of bullet points really over the last 3 months and what we've managed to achieve. I understand that we didn't really come up with any kind of news of the new contracts, and really, this has really been about a quarter of really kind of building on to those foundations, which we built up last year. When you're dealing -- and maybe for context, a year ago, we had no Tier 1 miners on the books at all using our equipment. And now a year, we've got 2. And that is only sort of scaling. That pipeline is only growing. And really, the kind of sort of the nutshell reasoning for that is that dealing with these really massive organizations just takes time. You're really -- from an enterprise sales perspective, you're not only just setting presenting the next day dropping one of the units off, you're really having to go the full sort of cycle, not only from a safety and a contract or vendor management, but also looking at the cybersecurity and because you're plugging these particular units right directly into the infrastructure, and they're becoming part of the embedded part of the customers' workflows. So customers and especially Tier 1 clients as well take this really, really exceptionally seriously. I mean, they don't sort of take this sort of lighthearted. They're very really taking on the demos and the trials with the intent of how does this scale? How do we go from 1 to 5 to 10 to 100 units. And that's really the -- maybe the exciting thing, which we don't always get to sort of really kind of chat about as rocket -- until those sort of contracts become formalized and it's something that we can actually disclose. But what I can really say is that the momentum is really is building, and it's there. The customers love the product. Many of you may or may not have seen the recent video that came out involving us in the Rio Tinto trial. And that particular one started off over a year ago. It took us almost 6 months just to get on to the Gudai-Darri site. And what was meant to be a 3-month trial has now turned into a year-long relationship and engagement. And really, we're only seeing that only just growing, more units are in the pipeline, in the works for further applications. And I'll chat a little bit more now about some of the interesting things that we're doing across the spectrum of these Tier 1 customers, but all everything is indicating in the right direction of where the business is going and what the customers are using and where they feel like this will add value into their operations as well. So starting off with some of these bullet points before you can even get into -- on to site to one of these Tier 1 operators, there's sort of a minimum standardization or certification called the BARS certification, so the basic aviation risk sort of assessment and standard. And this is really administered by the Flight Safety Foundation, who all the major mining and oil and gas customers are all part of. And before you can even fly a drone onto any one of these sites, you need to get this BARS accreditation. And part of the process is once you've achieved the BARS accreditation at an exceptionally high standard after 3 years consistently, you're then awarded a gold standard. And we're the first to achieve this within the double [ conjointly ] between Australian and African operations. And there's really only a handful of people globally, who've got the certification. And this is a level of which Tier 1 operators are demanding that their drone companies are providing these kind of solutions or services onto their sites have these requirements. So this is purely a ticket to the game. This gets on to site. It's a really big nod to our quality and safety and regulatory teams. There's a lot of hard work that goes in the background, ensuring that you're managing the quality of their operations and their overall safety on an ongoing basis because you're having these external auditors, who've got years of experience of coming, who are there to find something wrong within operations. So to walk away from these particular safety audits to come up with no findings, it's a really incredible achievement and something we're very proud of our team. So a really big thank you to them. Really kind of building on to that has really been the amazing relationship that we've had with Rio over this past year. They've been really, really supportive and really understanding and very specific about how they want to apply the Rocket technology within their particular operations. We sort of started at the mining technical and surveying team as well, and now we're going into other departments within that. For those of you, who may not know that Rio is sort of divided into 5 big sort of departments, as you will, between railways and ports and actual mining operations. So there's quite a lot of opportunity not only within iron ore and open pit mining, but within each of these departments within Australia and globally as well. So we're really excited about this partnership and engagement and even the recent new Tier 1 deployment that we've done out in South Australia as well. That was commissioned within this last quarter as well, and we're really starting to see some of those positive results and uptake from that. And it's just amazing that once you get the first one out there, then all the other sites are really keen and interested and now engaging and want to know more about the technology because it kind of ends up being a little bit of a competition between the sites of who can utilize this to make their lives a lot easier. As mentioned, we are really sort of proud of our new remote operating center here in Perth. This really complements our existing operations out in Adelaide and in Johannesburg as well. And this allows us to provide that 24/7 global sort of accessibility across all operations. So when we're getting these inquiries, whether they come from Canada or in other parts of Africa as well, South America, this really allows us to not only focus on the surveying applications as well as security and nighttime applications on a 24/7 basis. So we're really sort of really excited to utilize this as well, as our demonstration space got a lot of great customers that have been lined up over the next couple of weeks. So not only in the mining industry, but as well as in the public safety space. They're all going to come see our new remote operating center, which presents this very intuitive system. So it allows our remote operators to get a very quick sort of appearance of what is happening in the sky, a situational awareness, if you will, of what is happening in the risks on the ground and in the air and allow them to be able to react and operate safely. Over the last quarter, we generated just under $1.7 million in revenue. This was sort of down from our previous quarter, which is one of our best quarters that we delivered. And really, this is sort of -- as we sort of mentioned, is really sort of due to the differentials in the Anglo contract, as well as some differences between the last quarter and some hardware delivery in units that we delivered in the last quarter as well. Speaking a little bit about that Anglo contract as well, it's -- as sort of per the last announcement, obviously, Anglo's have divested some of their operations, where we had a previous contract split between the head office and the NewCo operations, and our team is actively engaging with that NewCo and who are very keen in getting the trial, especially of our new technology solutions on to site. So by no means have we lost the customer for the long term. It's [ really ] by beginning the -- beginning of the process again of how we can reengage and really help them with their problems on site. Chatting a little bit about the financial highlights over the prior quarter as well. For the business, we're continuing to invest and always prioritize the contract value. So while we're -- I know everyone wants to see the sort of the big sort of 3-year contracts sort of come out, really, we're in that stage, where we've got a lot of those customers, who are going through these trials and pilot phases, which generally tends to be short-term arrangements, which then ultimately means it's not material from a revenue perspective. But it does not mean that there's not work happening in the background. And we're quite sensitive to the fact that customers want to trial and test and be convinced and once they sort of engaged in how they build that up. And really where we see this sort of happening is that once customers sort of take 1, they move on to the 5 and move on to 10s and 20s pretty quickly. So we do have a couple of nice big fish in the pipeline as well. And again, how that will contribute to the ARR and overall TCV will come in good time is how we believe. Overall, on the cash receipts side as well, this is obviously, again, is indicative of where the Anglo contract over the last couple of months has within the business. And overall, the -- our overall contracts percentage or breakup of overall revenue is sitting [ at about ] 55%. So where we -- what is our focus over the next couple of months? Where do we see the business going and what -- where we're going to kind of put a lot of our attention to within the activities and sort of taking into account of the size of the business and what we have going on. We continue to exploit our Tier 1 mining vertical, as slow as they may go and seem this is the potential opportunities for hundreds of units to be deployed within this Tier 1 vertical. In the meantime, while these Tier 1s are going through the process and the cybersecurity checks and all the safety and all the requirements and data validation tests as well, we are continuing to push into the new verticals such as our public safety and DFR program as well. We have had some initial success with sort of supplying of the initial units within our current WAPOL contract as well. And what we're now looking at is other government bodies as well, who are -- who have signed up for trials, who are now going to be testing the technology in an emergency response and their public safety and security aspect as well. So we -- I would kind of say that the mining sort of vertical is probably about sort of 12 to 18 months ahead of the public safety sector. But where we see that gain really going, especially here out in WA is there really is the commonality is just a shortage of people, especially out of remote areas and especially in dangerous locations or dangerous job titles, the sales part is not the hard part. It's not getting in front of the front door. The pricing at the right point. It's really about taking the customers to get it through all the motions because this is not something that you just use once and then you forget. Once you deploy, it becomes part of your new systems, your new workflows. So there's really that process management or change management that needs to occur with a lot of these companies and how they adapt to it as well. Saying that, though, we're really quite excited and seeing the progress of drone as a first responder or DFR within the U.S. that is growing at an exponential rate of how police departments are taking up DFR as a full multiplier within the organizations. And for those of you, who are not sure how DFR works, but it typically operates as a first responder, where you're deploying a drone first to really help prioritize the calls. So you're getting a triple 0 call in, the drone gets deployed straight out of the box, especially in these very far remote regional areas, which are difficult to access, and you typically only got 2 or 3 officers and one may be on leave and one has to stay in the police station. So one -- you only got one officer, who can deploy. But in some of these areas, you're getting 12, 15 calls. And not only are we seeing the uptake of the technology in the U.S. and how that's filtering into the Australian market, but really the ever-pending need, just the honest need of these technology solutions and how they will be taken upon just to help sort of leverage the sort of ability for police officers to really attend these particular calls as well. So we're very confident in the use case or the needs and the business case for these units. It's just that matter of time letting the customers take on the trials and see how they can integrate into their current systems. From the quarterly results as well, it's really as sort of mentioned, we just had the revenue sort of pullback within the Anglo space as well. And we've obviously sort of engaged them for a new trial as well within their survey and security teams. So we really hope to get a couple of good news out of the -- back out of the Africa team again. Overall, consistently, the revenue sort of split is -- has been really consistent. So while we have a lot of work going on within the one-off ad hoc and trial space as well, having those contracts remains a really core part of our business. And that's everything that we're sort of doing is always presenting to customers both those options of do you want a trial, here's the low-risk option and here's the better priced long-term contract options as well. From the net cash perspective, so obviously, it was a really big sort of investment month as well, the quarter really being affected by those low receipts from that Anglo contract as well. We obviously sort of got ahead of that and rightsized the business appropriately. Also being conscious of not making sure that we're not sort of putting the rug under our team's feet there that they can't deliver on any new work that is sort of coming and being very conscious of that. So we really sort of took a scale pull and made sure we sort of tackled what we needed to there to rightsize and lower the cost and thus, there might be some sort of cost in terms of those retrenchments as well.But we're really -- as a management team, we've got our arms around it. We're very conscious of any kind of cost spending within that and what's needed to keep those operations profitable, especially in Africa. We also took a strategic decision to invest into the units as well. So when you're manufacturing these units and even though we're not soldering the units straight from beginning, we're really about building all of these systems. They just sort of take a while to sort of assemble sometimes between sort of 30 and 40 days. And when you get an opportunity that comes, you want to be able to react and go fast. So having a couple of these units in stock has been important for us and keeping spares was sort of an investment that we need to make in line with the new business model within the business. Overall, we're conscious of the increase in lease in the annual recurring revenue numbers as well. And as we see these contracts convert from the 1s and 5s to long-term contracts, we hope to have some really good news on the conversion of our growing pipeline numbers as well. And that's the numbers for me. Thanks, Mark. You got a couple of questions.

Thanks, Chris. That was great. You've answered a lot of things, but a couple of questions that have come in from shareholders and also online now. Just in regards to the xBot deployments during the quarter, you mentioned that there has been a couple of deployments and to those Tier 1 mining clients. Can you extrapolate on that deployment to the Tier 1 mines?

Yes. So we've had a couple of units that have been deployed to Tier 1 mining customers. Again, it's really -- we're quite sensitive to the phasing of this and when customers are ready to make bigger commitments and thus make material announcements for the company. But overall, what I can say is that these customers have transitioned from a trial to a formal pilot, which now sort of encompasses sort of active workflows right, within the business. So we've gone beyond the scope of just 2 or 3 applications within the environment to about 20. The next phase beyond the pilot is what these companies call is sort of a demonstration period. And then the next phase beyond that is what they call scalability. Scalability is -- or the scalability phase is when they deploy to all sites, that's when it becomes the standard and everyone has to then encompass this technology. So that's why we say it's really -- it's something you sort of with the Tier 1s, it's like -- it's sort of all or nothing, right? You sort of -- you've got to really manage these really early stages really, really well. It's like this is where you put all your intent. It's kind of like -- that really special sort of project that only really comes around once in a while, and you've got to do this well in terms of allocating the resources and time to make sure you handle this process right. The interesting thing is that as we're looking to go between -- from a pilot to a demonstration phase, we can then start deploying the system at other sites within the Pilbara as well. So what that then does is that gives a greater context or broader scope for them to pick up any other issues or make any other kind of maintenance decisions or understand how they will be deploying these at scale. So we're, again, constantly -- every week, we're having meetings and every month with head office on what do they need to get this to the next phase and how do they eventually get to that scaling phase, where it becomes a standard across all the operations. So yes, we're pretty much on top of that.

The WAPOL engagement that we've -- which we have announced and just probably a bit of an update or status of those -- of that relationship with WAPOL at this point.

Yes. So Rocket was selected as a preferred supplier under a 3-year award to support the WA Police's Drone First Responder program or the DFR program. Again, I think it's important to iterate that no minimum order is guaranteed within this particular agreement. Though this partnership does help us to really get involved with WA Police and really kind of support them in their capabilities as well. We want to obviously give them the space to understand and learn and to test these systems as well, very similar as in like the mining context as well. But again, using a lot of our AI data capabilities and special knowledge in software and automation we want to make their lives as easy as possible. So yes, I think we've also delivered a unit there at the end of last year. I think that unit is going to be deployed quite shortly. So we'll be there to support them along the journey.

We've been active and the business development team has been very active at the trade shows. Is there any meaningful leisure opportunities resulting from these events, both here and in South Africa?

Yes. So we recently actually brought on Harry, who's joined us in our sales team. Actually, Harry comes out of the police in a very technical role. And so, he's actually joining us from a technical sales role to really help us develop that relationship not only in the police, but in other sectors of government and government security as well. So we've been really sort of testing out the space within the police technology conference as well. And this is really sort of gauge us to look at DFR within other states or within other departments as well even from an emergency response perspective. So again, the public safety sector is probably in terms of the maturity is a little bit behind, where the mining is, but there's definitely that overall need and overall growth in the pipeline for these departments. It's just that you've got to get it right within the budget alignment cycle, as we all know, and especially with elections up recently. It's obviously been something for them to navigate internally and how much money they ask for and how they deploy it. So yes, we -- what we do, again, similar to mining is that we support, we're there. It's through the sort of trial and pilot phase. But in the meantime, while that is happening, we're always continuously on the lookout for other opportunities and other clients as well and understanding what are their particular problems and use cases.

Just on the pipeline ahead, obviously, we've mentioned Rio in the video that we've put out there and the partnership we're generating there. Is there any other advancements with other Tier 1 companies? I know WSP was one that we announced last year as well.

Yes. So this is a really, really interesting project. And I think the client will allow us to put out a little bit of more news as the project travels sort of further along the track. We sort of deploy the units is really around tailings monitoring, which you all know it's become a really big thing, especially in mining. And so, a lot of especially Tier 1 miners are very sensitive around how these projects are going and sort of tracked, especially in the construction expansion of tailings projects as well. So working with WSP, it's really about providing that surety in that all these tailings are being built to spec and really giving them that assurance of how the technology can be used in a construction application as well in addition to the daily mining activities within the site.

Great. The new remote operating center that you're sitting in there now. Obviously, it's a new office and a new fancy screens and being able to remotely operate these drones from Perth. Also, do you still retain Adelaide, and do you still retain South African ability? And what does the new center provide to RocketDNA?

Yes. So this remote operating center or the ROC, as we call it, is really a great investment in WA, Perth and for the business and enables us to really provide that 24/7 beyond visual line of sight operational from a central location and really reduces the need overall for customers to use field-based pilots. It streamlines the deployment of autonomous drone fleets. It supports easier demonstrations to customers. The facility is really here to help us actually improve the overall margin per mission, as the scale increases because the kind of the intelligent sort of systems that we brought in here is really about having a single operator control and fly and monitor multiple drones at a time. So it's really just adding up to the scalability of the overall solution.

We've talked about the BARS, the dual BARS Gold Certification a bit. How does that open up new client discussions? Or is it -- is that sort of overcoming some hurdles?

It's a really fascinating -- it's really been a very fascinating term because, again, we've been doing this for sort of 3 years, doing it quite religiously. It's something that we're really passionate about. Safety is really within our culture and within our blood coming -- especially when you're sort of joining the mining, the public safety, aviation and technology sectors and you're trying to pull those all together because sometimes culturally, they all don't really mix so well. But at Rocket, we really found that ability to pull that all into one space, and that's really what makes us special. And to get that kind of accreditation or that acknowledgment of our systems, especially to have 0 findings, and to get that feedback because remember, these auditors are going to all the other operators, and really, that then filters back down to these Tier 1 miners, who are saying like, you've got great guys behind you, you've got no stress and worries about how they're going to perform operations because we're going to treat your sites better than what their own guys would want to do on site. And that's really our sort of minor mentality is we really take on that accountability and ownership of safety when it comes to operating these complex drones across the country, whether it be from mine sites to public safety to agriculture and farming sites as well. You get the same level of safety and service across the board.

And just finally, any other emerging sector interest. So any early-stage traction in other verticals, call it insurance or agri business, even further government infrastructure that could -- that's popping up?

Yes. Thanks, Mark. Yes, we're getting inquiries all the time from those different sectors. Our -- really, our focus right now is on that mining and public safety. And what we're finding beyond just deploying autonomous drones and doing remote, let's say, data capture or perimeter monitoring within these particular verticals is we're really kind of getting deeper from a software level, which is really kind of the intent, right, within these systems. The beauty of autonomous drones is the fast and frequent nature of these particular systems. So what that means is that once customers sort of get over these sort of initial trials and sort of replacing their current manual operations with autonomous drones, they're now saying, right, how -- we've got all these other autonomous systems on our mine sites, the autonomous drills, autonomous trucks, how can they now the autonomous drones now support those. And really, what we're working on now is what we call a machine-to-machine triggering of the drones. So currently, all drone flights are either scheduled and which then happen automatically, or they're manually sort of requested. We've got a really cool piece of software called Skylink, where the customers come and sort of fill in a form or send an e-mail, they get a ticket and then the drone is dispatched. It's kind of a nice little bit of an Uber sort of style request system. But now the customers are saying, right, well, if the drill goes down, don't wait for the human to make the drone request, let the machine trigger the drone request and we really go to see that. So that's the kind of the stage and the depth of conversations and integration that we're now having with the customers, which is really exciting and again, increases not only the stickiness, but the overall opportunity for billing more on the software end as well.

Thanks, Chris, and probably thank you to everyone for joining us today. We just ticked over 11:30 Sydney time, but we appreciate the continued support as always, and obviously, interest from our shareholder community at RocketDNA. And we're really looking to progress our strategy to scale this autonomous drone operations. If any questions we didn't get to during this session, please feel free to reach out directly via e-mail at [email protected], and we will get back to you. But thanks, again for your time, and thanks, Chris, and we look forward to keeping you updated, as the next quarter unfolds.

Thanks so much, Mark.

Thanks, guys.