Draganfly, Inc. (NASDAQ:DPRO) Q4 2021 Earnings Conference Call March 31, 2022 6:00 PM ET
Company Participants
Rolly Bustos – Head, IR
Cameron Chell – CEO
Scott Larson – President
Rolly Bustos
Hello all. Greetings, and welcome to the Draganfly 2021 Year-end and Fourth Quarter Shareholder Update Call. My name is Rolly Bustos, I head the internal Investor Relations here at Draganfly. I’ve had the pleasure to speak to many of you on the call throughout our journey, and I personally welcome you to this update.
Today’s call will follow a similar but slightly different format as previous ones with our CEO, Cameron Chell discussing our full year and fourth quarter operational highlights. Then our President, Scott Larson will facilitate the Q&A portion. This will include both questions submitted during the call and ones that have been sent, pre-sent to us during the past week.
While we’ll try to get to them all, I apologize in advance if time doesn’t allow us to do so.
Remember, you’re always welcome to reach out to me at investor.relations@draganfly.com to follow up if we didn’t get to you specifically.
So without further ado, Cam, please go ahead.
Cameron Chell
Thanks, Rolly, and thanks, everybody, for taking your precious time and being on this call with us. We are really, really excited about what’s going on at Draganfly, incredibly humbled and gracious or thankful for the year that we’ve had and look forward to talking a bit about that year and maybe some subsequent events of what’s happening here in Q1.
The first thing that we need to start off with is that our numbers are going to be filed tomorrow. So this is our first full year year-end on NASDAQ, and our auditors are behind schedule, which is a very common problem with companies across all public companies right now.
There is no material problems. There’s no issues. We know what the numbers are. We’re dying to talk about them. We’re very happy where they came in, but the auditors persnickety little things that they’re checking off and doing and third readings and such. And so they’ll be filed tomorrow, and that’s all I can say about that.
So first of all, I apologize. But that said, I think it’s, we still want to provide a company update, which we’ll give color to our last year. We’ll also be able to talk about some of the incredible subsequent events that are ongoing right now in Q1. And certainly, we want to be able to take your Q&A. So thank you for your patience, and thanks for your trust in being a shareholder at Draganfly.
So basically, Draganfly is, as I’ve said many times, the — often referred to and likely is the oldest commercial drone manufacturer in the world. And one of the biggest questions that I get is if you guys are the oldest in the world, why are you still such a small company? And both — they’ll say, both you and Cam, you and Scott, Cam, have built companies that have been billion-dollar market caps with hundreds of millions in revenue before and you’ve got this — really, this tiny little revenue company. Why has it taken so long to get there.
And the reality is that today, the drone industry is a $20 billion industry. But what most people don’t realize is that 97-ish percent of that industry is military, right? And a couple of percent of that industry is consumer. And then 1% or 2% or 3% maybe is commercial. And so it’s really — this is a very unpopular thing to say in the industry, but it’s really a very small industry up until now.
And so while we’ve seen the likes of Air Lilly and Airwear and 3DR and GoPro multi-hundred dollars million investments with people like John Chambers as the Chairman. And the biggest names with the biggest VCs in the world having backed them, all of those companies have been in the commercial space in the last 15 to 20 years. All of those companies, at least once have tried to buy Draganfly, if not multiple times. And for any number of reasons, we ended up not selling out, which is more luck than anything. And we’re here today and they’re not.
The reason that we’re here today they’re not is because they came in with huge investment into the space and expectations to service a commercial market that just wasn’t there yet. And so they had expectations to hit scaling numbers and revenue and they put that money to work.
And so they routinely started making cheaper and cheaper drones to try to compete against the Chinese equivalents, the DGIs, which are light commercial drones and great consumer drones. And every single one of them can’t compete, could not compete market. You’ve got a Chinese-made product with incredibly low labor cost subsidized company, 10,000 engineers, well done, well-made products like a fantastic company in so many regards, and that’s why they just — and so they all dwindled the way and they just couldn’t survive.
Now Draganfly on the other hand, we’re a private company. We had to become monthly not. We had to make payroll, we had to do those things. So we generally survive on either selling into public safety or doing — selling into different entities that would approach us that where having a North American-made drone or having a drone that had greater capabilities was important, right, greater reliability, et cetera, et cetera, or we would do contracting for military contractors, and so we’ve built systems out there that drone companies today out there that are commercial but built and it would be dream a building.
So we built systems counter drone systems where drones that fly at hundreds of miles an hour, 100% autonomous shooting out Kevlar nets using airbag explosives, capturing drones and pulling them out of theater, whether that was a combat scenario or whether that was over a correctional facility or something like that or scenarios where we’ve run a theater and pilots where there’s blood being delivered onto the battlefield. So this amount of AI and autonomous work and highly specialized work is what’s made our engineering bench so strong and allowed us to attract the top talent in the industry and keep that talent.
In fact, in the 24 years, we’ve only had 2 people leave and one was kind of by retirement, if you — not kind, it was by retirement a few weeks ago and one, Google got one of our engineers about 5 years ago. So, and every time we’ve tried to be acquired by one of these other drone companies, it’s because they really wanted our engineering bench and the IP that we have.
And so — but here’s the difference. And here’s what’s happened is that basically 2 years ago, the FAA came out with very clear rulings about what was going to be happening in the industry. And so we had guidance, real clear guidance for the first time about beyond visual line of sight, which is the key regulation that scales the commercial industry, right, had operation of drones over populations, both day and night time. And with those 2 pieces of regulation put out there with clear guidance on what we can do today and where they’re going to take it, literally, my time went from spending my days, either helping design solutions and selling like every single day on the selling, selling, selling everything was outbound for us to within 2 weeks, everything was inbound. And everything now is absolutely inbound.
And since that time, our revenues have doubled every single year. And the reason they have it more than doubled is we’ve just been building capacity, whether that was resource capacity, whether it was manufacturing capacity, distribution capacity. And we’re very fortunate to do some financings last year to get public on Nasdaq and to have a balance sheet and a capital base that have allowed us to build that capacity to start to meet demand.
So last year, we doubled in revenue. If you look at our last 3 quarterly filings, you’ll see that we were on track for that same kind of trend for this year. And I feel really confident that saying that next year we’ll more likely than not, in my opinion, all things being equal, be able to double revenue over what this revenue is going to be. And I cite our November announcement where we had 1 contract from $9 million, and that’s $9 million of reoccurring revenue for 3 years where we’re producing 50,000 drones just for 1 customer. And our pipeline is absolutely jammed.
We are in an incredibly grateful and gracious position to get to pick and choose our customers today. And believe me, after a decade plus of having to fight for every single customer, this is an incredible space for us to be in. And we don’t, we’re not taking it for granted. And so we continue to move forward.
But that’s really why, we have been a small company, but the advantage here is that we’ve been a small company. We have an incredible portfolio of IP. We have an incredible engineering bench. We have as much experience in building incredible drones and mapping systems and auto pilots and hardware and software and AI as any large company out there could imagine. It’s because we ran a very pragmatic business for years and years, and we had to, listen, we had to put food on the table every single day.
And so we still have that mentality in our management infrastructure and in our ethos. And so while we are doubling, we’re going to continue to double — and listen, us and management, if you look at the pedigree of our Board, we’re out to build a $1 billion company plus. And we’re out to build a company that is going to be the #1 or the #2 player. And I feel confident saying that at this point, we’re on track.
Now there are some great competitors out there and some great comps, and I think that’s really important because it helps validate the entire industry. I can also say that we don’t have 1 piece of work in our pipeline or 1 with going on that was a competitive situation. And I would hazard to say that the other drone companies are probably in the same situation. None of us have run into each other or seen each other. So that won’t last forever for sure.
But certainly for the next at least 18 months, if not 24, I would suspect that, that will continue to be the case.
So that the industry is going to a $43 billion industry. By 2028, there’s all kinds of different analysts report that site is. Now to be clear, I’ve never believed these reports because I’ve read them before about how big the industry was and everything was going on, and I was like everybody is going bankrupt, and we’re struggling every single month to make sure we hit our numbers and do all these things, and we’re not doing billions or hundreds of millions of revenue. So I don’t know where all this industry stock does. But I can say unequivocally for the first time, I do believe these numbers because there’s — every day, there’s inbound that we just can’t take on and/or we get to select which ones we do get to take on.
And of course, the stuff that we’re taking on is solution based is higher-margin business, things that help us build a strategic moat for our future verticals that were current and future verticals that we’re going to be serving.
We’re not doing one-off manufacturing for things. We’re not doing low-margin, low-end consumer drones, things. It’s got to be special for us to take us on. And, and I think we’ve got a runway of a few years for sure to be able to continue to do that.
So a bit, just a quick bit of review. In the ’90s, grew building hardware. In the 2000s, we were building hardware, and we were doing software mapping systems, autopilot systems. We’re building applications for customers, and we’re doing sensor work. And then as we moved into the late teens, it really became more about autonomous work and AI.
And ultimately, the future of the drone industry, whether it’s delivery or whether it’s entertainment or education or any part of it, it’s really all going to be data-driven. And so our ultimate focus is really all about data.
I would hazard to say for a number of different reasons that in 3 to 5 years from now, Draganfly will always be known as a drone company. We’re always going to make great drones. We’re always going to service our customers in that way. But nothing collects data better than a drone, nothing. Like we can put a drone up and within 5 minutes, we can give anything from down to centimeter mapping to traffic patterns to sound analysis to carbon emission analysis to visual recognition of things to vital signs of people to like in 5 minutes, like data on the drone is just so unbelievable in game-changing what it’s going to do.
And so in 3 to 5 years from now, I think we will be a data company. We’ll always be known as a drone company because that’s the primary collection point. But we will own that entire data chain so that we’re not just collecting the data and building specific sensors and AI to collect that data for our customers, but we’ll be housing and helping analyze that data as well.
And that’s where we really see the future of the drone industry. And again, whether that’s in delivery or whether it’s in industrial inspection or whatever at the end of the day, it’s really all about that data and how your AI can utilize it.
And this is what I do think is different about Draganfly compared to a lot of out there right now, where they might be building a specific piece of hardware to work in a great industry, but they’re looking for their signature customer or they’re looking to get their signature product out to market or mature it or whatever the case is. And the reality is — I’m just going to skip ahead 1 slide here is we have a mature product line.
And our product lines are not just hardware. Our product lines are full solutions. They come with whether it’s the piloting systems or integrated with other software that they have to be integrated with or whether it’s the AI or whether it’s the data collection or — it’s really a platform. It’s not a piece of hardware that we sell. We do not have customers that come to us and saying, “We want a drone that flies 5 minutes longer and 13 meters higher.
That’s just never a question that comes up. Maybe in the early 2000s in the late ’90s, it was. But today, a customer comes up and says, we’ve got 23 ports for a port authority, and we need to do this type of security, this type of vital intelligence monitoring. We need to do this type of environmental monitoring. We need to house the data in this format and we need to — where do we start?
They’re not looking for a drone and a pilot. They’re trying to do a whole solution.
And a great example of this was a couple of years ago, we had a client come to us and they were looking to be able to do recognition of social distancing and face mask wearing because this was the epicenter of where the COVID outbreak had sprung from in New York. And so that particular sheriff’s office asked if we could design this into our systems. And we did.
And so they were able to change policy. They were able to readdress resourcing. They’ve got incredible data about what signage worked, and they were able to give good stats to their counsel and it worked great. And one of the officers at the end of that deployment, she said, “what would be really cool is if you folks could detect COVID-19.” And we all kind of chuckled. But later that night, at the hotel, we were working on the problem.
And less than 9 months later, we came out with a product that was commercialized that would allow our drones, right, or any camera to be able to read the vital signs, so it can read your heart rate, your respiratory rate, your blood pressure, your blood oxygen level, your heart rate variability. And we’ve deployed these systems now into manufacturing facilities into correctional facilities, into doctors’ offices, just a plethora of different applications. And where it really counts is in the humanitarian side of things.
So one of the things that’s happened to us in the last few short weeks here is cold chain delivery services, which is a channel of ours, where we’re building delivery, medical delivery and first responder systems for Texas EMS. It’s call about a $750,000 contract that we announced last year. Phase 1, it’s a 5-phase contract that eventually leads into multiple year support and services of the supply and provisioning and operations of what will be hundreds and hundreds of drones from 911 stations.
And they were contacted by a humanitarian organization in the Ukraine. And the reason that they were contacted was because they had seen the work that we had done with our medical relief drone and the work that we’re doing with Texas EMS. And we’ve got hundreds and hundreds of flights on this drone, tons of data that we’re providing to the FAA. And so we have a proprietary 35 payload box that in this case, sits on top of the drone and can deliver temperature-sensitive supplies into a situation. So whether it’s vaccines or whether it’s insulin or whether it’s Epipen, whether it’s blood, whether it’s pharmaceuticals or pain killers or whatever it is, we can do that work, and we’ve got experience doing that work.
And given the fact that the first drone to ever say that human life was a Draganfly drone. And that drone today sits on permanent display in the Smithsonian. And so our public safety work is just part of our ethos and it’s just incredibly, incredibly important to us.
And so revised soldiers Ukraine approached cold chain and cold chain was like Draganfly is going to be all over this. So they put an initial order of 10 units, and these are $30,000 units. They put an initial order of 10 units in with us. We donated another 3 units, which is the least that we could do.
And because they were actually buying it. They have bought multiple dozens, if I’m not mistaken, of ambulances and put them in theater to get supplies in, but those ambulances are literally getting taken out and shot and stopped and confiscated and such. So they’re looking to a drawing solution, and we think we’ve provided it.
This drone can fly from over 5 kilometers away. It can fly by wire and goggle. It moves incredibly fast. It drops in puts the drone right where it’s needed. It’s about a 3-second release to pull out the thermal pack and so that the — either the survivors or the people on the ground can get that and get out of the way as quick as possible.
And then not done get lost as quickly as possible.
And the question I get is what did the drone gets shot down and it’s like who cares, send
another one. What if it gets shot down. And it’s like send 10 more. Like it just doesn’t. Like this $30,000 to save a life, who cares about what it costs when the ordinance alone or the missiles or just the plain ordinance or shells that are used to hit that building or take those people out or crushed in neighborhood or — one of them cost 10x this.
So — or multiple times even more than that. So who cares is swarm the place with 50 drones, like you’re going to get equipment in there, and you’ve got people 5 kilometers away doing it. And you’re doing it with drones that are made with the security the Draganfly provides.
We have footage of Chinese-made drones where a pilot will have the drone, land the drone and literally seconds later, it’s hit by a missile. It’s unbelievably disturbing footage. And so organizations over there were literally going to Amazon and buying drones just try to get thermal cameras so they could see survivors and buildings. And of course, they’ve had to abandon all of them now because both the controller whoever has the control and the drone can be targeted. And that’s absolutely not the case with Draganfly, which is also why North American-made drones and the security and the amount of time that we’ve made drones, the amount of military clients that we have is so incredibly important to the humanitarian effort.
I just got to throw it out there that what I’m — it’s hard to even talk about without getting choked up. But we’ve had shareholders that have stepped up — multiples of shareholders now that have stepped up and are on top of the order that we already got are buying drones, which we’re selling at cost and doing the logistics for free, and they’re donating them. And they’re just like, “hey, this is, I was going to donate to some cause.” But if I can do this and send a drone over there that has direct impact with people that are on the ground doing it, and to me, it’s just an incredible sign of the type of shareholders that you are, the type of company that you’re backing. And another reason we’re just going to keep working so hard to earn your trust. It’s incredible.
So a program is kind of a grassroots program is pulling up here. So those folks that are buying those drones, they get to name them like write something on there. And we’ll provide them the mission stats, and we’ll provide them to the extent we can as long as it’s nothing inappropriate, we’ll provide them the footage from the drone as well. And so — and the great part of it is, we’ve now had another company that stepped up and said they’ll provide insulin to put inside the drones, which is actually one of the biggest requests that are coming through to Irena at SK excuse me — is people just can’t get insulin than they’re trapped in places and so. So we’re super excited about what’s going on here.
Now the other great part about this is this advanced our product release this particular product release, and we’re releasing 5 products this year, including everything from secure brand-new North America made LiDAR systems right through to heavy lift systems and a couple of other things that we’ll announce coming up. But this particular product is down and run in the market. is great. And quite frankly, the inbound from multiple parts of the world for the humanitarian drone now is off the chart. And so I mean, it’s just — it’s been — we want to give everything we can, and it’s already giving back to us in terms of inbound sales leads to stock, which was never the intent, but it’s an unintended and unexpected consequence that’s coming out of it, and we’re really excited about what’s happening there.
Just talking a little bit about Q4. We were excited in Q4. We closed a contract to do a bunch of spring of our proprietary disinfectant with their drones at CES, which was a big success in particular, at the government conference that’s at the tail end of CES, which was really successful for us. And still not even able to — well, we followed up with all the leads there, but we’re — it’s just overwhelming trying to get to everybody.
We’ve had a really successful relationship with DRL. And DRL is — a lot of people don’t realize it, but the drone racing the — they’re drone racingly, but really, they’re a tech company. I mean, these folks are just absolutely brilliant in what they build and how they build it, the communication links that they have to do, the complexity of being able to do a fair drone race is just off the chart.
And what’s really interesting is DRL gets a lot of inbound requests to, “hey, how do you do this? Or how do you build that? Or can you build this for us?”, and our relationship and the lab that we’re building with them while the intent is to take the innovation and then commercialize it, which we were doing, and we’ll talk a little bit about here in a second, the unexpected and unintended consequence, which has been incredibly beneficial to us is the biz dev opportunities that are coming to us because of our association with DRL and companies coming to them because of their expertise and technology and then really just saying, “Hey, you should talk to our partner, drone — Draganfly.”
So we just — I want to throw it out again to DRL for being such an incredible partner and letting us be a part of something that they do. And they do so well. Like I mean, I learned a ton from their management team because they are really, they just — they all just seem so congruent and aligned.
We continue our partnership with Alabama State University, so along with our kiosks that are in there. And again, they’ve had the lowest COVID rates, so they sailed through the latest surge and everything else, Dr. Ross there is just such an incredible leader.
We did spring for their season. And again, they’ve just seen so many financial benefits all the way from things like lower insurance rates and higher enrollment rates and everything because of the stance that they took with COVID and then actually deploying it and using our solutions with them on our drones and Vital Intelligence, artificial intelligence software, it’s been great.
But we have also launched a training program with them, and we’ve gone through our first cohort now and trained 13 pilots, a couple of which are going to end up becoming Draganfly people, we hope and we think. And they are the rock stars of those cohorts. And with the employment crunch, this has been fantastic, but it’s also a moneymaker for us. And so we’re looking to roll this out through all the HPCs if possible, and we’ll run a couple of more cohorts. There’s 100,000 jobs that are going to be required between engineers and pilots over the next 5 years.
And so we’re really excited to work with ASU and their partner universities in order to roll out the proprietary 107 certificate program as well as the other advanced programs that we’re now beginning to offer, which is how to fly drones in humanitarian situations, how to be a first-responder drone operator, the list goes on. So thanks to them for their partnership and their ongoing being a customer of bars.
Cold chain delivery services, the EMS project out of Texas. We’ve just about completed Phase 1. We expect that to move into, well, we know it’s going to move into the Phase 2, at least and hopefully right through to Phase 5, which would be massive contracts for us over the years. Unexpected benefit is the incredible work that they brought to the table to allowing us to work in the Ukraine, of course, cold — their parent company is one of the largest logistics providers into the DoD and NATO. In fact, they provided, cold chain provided all of the vaccines storage and delivery in the state of Texas for COVID and for the city of Chicago and a number of other places.
So a great partnership there, and thanks, thanks to them.
The Mint 400. The reason I bring this up is because we had a direct commercialization of some of our work that went into the Mint 400, and the Mint 400 is a Baja race.
And so the reason I’m highlighting this is because about a year ago, we started designing in our lab, and we’re actually working on some of this with DRL as well. A thermal system that will actually see through dust in the Baja race, and actually map that with LiDAR that we do before a race. So in the Baja race, it’s over just hundreds of miles. And so we’ll actually LiDAR, map that in, combine it with thermal systems, so that they’re running through these incredibly dusty provisions, they can actually see through the dust and actually down to the centimeter inch where they’re at on the track.
Now the truck that we put this in, it was a beautiful installation. We opened it up to the whole industry to see. Of course, it’s an incredibly influential industry. Most of these that are running these trucks or billionaires and this is for fun for them. So it’s great exposure in that regard for us.
And Kyle Washington, in particular, with his truck and Washington family have been just incredible supporters, and amazing shareholders for us.
And so when we did that install, it made a difference. The truck led most of the rate. And if you talk to Ryan, the driver. He will tell you that he’s never had that type of intelligence and dust before. It’s just, it was incredible.
Now the truck blue an engine as it was in the lead for most of the race, but he credited that positioning mostly — I mean, he’s got to take credit, he’s incredible driver. But the new tech on there was incredible.
And so this is a great example of how we’re going to be able to use this as technology, obviously, not just in Baja racing because it’s not a really big market or anything like that. But imagine, if you will, when you’re putting drones in emergency situations or in desert situations, where you’ve got to be able to see through things, where you don’t have clear line of sight or in cloud situations or in candescent situations. This is where we apply this type of work into the technology that we do. And that’s really the differentiator for Draganfly is that we’re not, we know a drone can fly and a lot of people can make a drone. But can you make a drone that reads vital science?
Can you make a drone that can see through a dust storm? Can you make a drone can that can get through clouds, right, and support either your personnel on the ground or whatever the case is or give you eyes in the sky when you’re a small unit or when you’re an emergency situation, almost regardless of the weather conditions.
Now of course, extreme winds and stuff are still going to be an issue, but we’re working on a lot of stuff that actually dampens and increases the capability for these drones in those situations. But that’s just how we think and we have customers that want these types of requirements, and that’s the differentiator.
The reason that RSU came to us or came to cold chain was because we had the application that they needed. There’s nothing else out there like it. These drones are coming in delivering these medical supplies and providing bioassigned readings back to the people to buy to who needs to triage. How bad are the people that are in those surviving situations? Are they in shock?
Are they dehydrated? Are they like — so — and over time, has the stuff that will make the difference. It’s that data. It’s the information. It’s not just — and that makes their delivery, but actually utilizes every aspect of a delivery or a flight or a mission to be able to collect all the information you need in order to be more successful rather than just getting a package somewhere.
Fobi, a fantastic partner to work with. They did a number of events this year with their event check-in system and utilizing our vital intelligence software. We’re really excited about some very big things that are happening in that space with world-class size events that are mandated now to manage the health services and the health monitoring of all of the volunteers and all of the athletes and all of the people that participate when you big crowds together. So we’re really excited about what’s coming up out of that and the health security and services that we’ll be providing for some of those global type of events.
And we — a couple of new sheriff’s offices have come on board with us with new drones and utilizing the Vital Intelligence kiosk systems for check-ins at their jails or intake and things like that. And there’s more than I could list here, but just wanted to give a sample of it.
So listen, on that front, the bottom line is we’re going through rapid growth. We’re providing advanced drone services and solutions. We’re in a heightened regulatory environment, which is a benefit to us because of the amount of time we’ve been in at this, you’ve got the drones that we’ve had certified compared to other companies, the relationship that we have working with the readers and because we’re very, very comfortable working with government agencies and 911 and sheriff’s departments and stuff. So the more regulation, even though it’s very friendly right now, the more regulation, better in terms of a moat or a barrier to entry from competitors for us.
And we have a seasoned executive team. Scott and I have had the good pleasure of building a couple of great companies before. Not everything has been successful, but on par. I mean, we’ve had a couple of knocking out of the parks. And this, in my opinion, is another one.
And quite frankly, this is probably the most meaningful one, especially considering the events of the last month in the type of work that we’re getting to do. So — but if you also again, look at our Board, if you look at gentlemen like Andy Card, the former White House Chief of Staff and Secretary of Transportation, John Mitten, the former GC of all of Homeland Security, Julie Myers who ran ICE. The list goes on. For a counter size to have that type of PGRE and governance is what’s really helping us win some just incredible customers and making sure management is on top of their game.
So on that front, first and foremost, I really appreciate everybody, allowing us to have the time to give this presentation. Certainly, as we release our numbers over the next 24 hours, if you want individual follow-up, check with Rolly, we’re happy to do one-on-one calls with the analysts and institutions or shareholders to run through the numbers. Again, there’s nothing material in terms of any problems at this point. It’s just a late filing on the auditor side of things. Just trying to be as kind as I can and not as frustrated as I probably really in that regard.
And we’re just — we’re thrilled with the results that we hit in the last year and this quarter that we’re in right now, is looking great.
So on that note, what I’ll do is I’ll turn it over to our president, Scott, to facilitate questions and Rolly, I think you’ve been busy on the Q&A as well. So thank you very much and very thank you just for allowing us to do what we do and being a part of it. We appreciate your trust, and we’ll work hard to keep it. Scott?
Question-and-Answer Session
A – Scott Larson
Yes. Thanks, Cam. And thanks, everyone who has sent in questions. We’ve had a number of questions who came in prior to the call. So we’ve got a list of questions there.
We have a list of questions that are coming in kind of during the call. And so I’m just kind of going to take these as they come in. And some I’ll ask myself, some I’ll defer back to Cam and keeping the course an eye on time and all the investment we work through as many of these as Cam as we can has lots of doubles up and all the rest of it. So just kind of jumping in right here.
First one, please comment on international expansion plans for Draganfly?
So I’ll go ahead and take this. We, over the last 5, 6 months, we’ve had a number of international initiatives that have, our way, opportunities that have, our way, things — we’ve looked at things that were passed on. We were in — we were invited down to Bahamas a couple of weeks ago to look at putting together an interia kind of delivery network. There was a bunch of media that came out from Bahamas local TV and radio and so forth. And so that’s just an example of it.
There’s been other islands that we’ve looked at as well as other things international.
One of the advantages, of course, of international opportunities is a slightly less regulated environment in terms of what you can do, where you can fly drones, fly in further distances over people and things like that.
So there are opportunities that come at us for sure. There’s opportunities that we’re looking at. I think we should be able to come up with announcements that are a little more material and update on shareholders and kind of the plans as we work our way through there.
So I don’t want to get too far into that, just to say that certainly, international markets outside of the North American regulatory environment, something that Draganfly has been looking at for a long time. And over the last 4 or 5 months, actually have made some significant traction with regards to customers, opportunities, different levels of service that we can provide in generally island-type countries, but also other countries that aren’t added . So on that one, it’s a great question for all kinds of reasons and — but just bear with us on that one.
Cameron Chell
And Scott, you need not to give too much color, but that was a — one, it was a very big initiative. There were dozens of agencies, dozens of dignitaries, dozens of government officials that were there. It was invite only. We were the only company there. We were completely always like — by wasn’t there, you got to go, but you got to get I don’t want to overstate it, but at the same time, we’re not chasing every opportunity out there.
There’s thousands of them. But when you — when there’s that type of an opportunity with an international organization that sets us up and government invite you, those are the things that we’re putting effort into because they have the right size and scale that can meet the expectations that we want to build in terms of the company. But anyway, I just wanted to — it was an incredible job and a big deal that what you would and Paul pulled off down there.
Scott Larson
Yes, it’s a good point. These initiatives are typically government-sponsored government insight invited, managed with ministries of forestry, transportation, environmental, coast guard monitoring as an example. So yes, it’s a very — it’s a good point there, Cam.
Another question that’s come in from a couple of different people here. With global supply constrained — global supply chain constraints, how does that affect what you guys are doing with regards to chips and things like that, Cam, why don’t you go ahead and take an answer to that, and maybe I’ll comment afterwards.
Cameron Chell
Yes. So certainly, over the last 1.5 years, we’ve been building up our capacity and our manufacturing capacity in order to meet the demand and such. And so we’ve seen our delivery times. We haven’t been talking massive, massive volumes. So the supply chain — and we had decent inventory.
So our supply chain really hasn’t been as big an issue for us. And we are feeling that now just because the size of our orders are growing and the supply chain in some aspects, is not getting a lot better, like it’s still lagging.
So that said, we’re still kind of within that we’re not in an ideal time frame for delivery. We’re kind of in that 6 to 8 weeks delivery time for product, which isn’t great. We would like to be in that — we’re not to come in buy it off-the-shelf type of company. But for the most — so — but within a couple of weeks, we would like to be able to deliver any product any time. And that’s just not entirely possible right now with the supply chain.
I guess the leveling factor is it isn’t for anybody right now. Now I think we’ve been probably less affected by it because we’ve been in the scale up rather than already at scale scenario.
And the other aspect of visit that a lot of the stuff that we do has a longer lead time up-front because we’re doing a lot of design, engineering, integration, workflow management, business process how do the drones fit into the airspace, what data are you pulling down to fit into your ERP. So as all of that work is kind of happening, we’re already ordering parts and building prototypes and things like that. By the time we get to scale, we’ve had longer lead times.
So it’s also why we kind of see a lag in scale, even though we’re growing like crazy, it’s because we have this up-front kind of consultative phase a lot of times. We’re not — we’re just, you don’t walk in divesting our drones. You buy entire platforms from us. So overall, we actually haven’t been that affected by it, but it’s something we’re keeping a very close eye on sure.
Scott Larson
Yes. It’s — the camps point, it’s affected everybody, of course. Drones and all other industries. And so it is tricky. We think we’ve done a really good job of managing it and buying and bulky in ahead of supply chains and things like that.
Buy some of the long lead items in advance, but it’s an issue. For sure, it’s an issue, affected anyone. We think we’ve managed to work our way through it and done a pretty good job on it. And to that point, hasn’t affected numbers and so forth, but we spent a lot of time working out for sure.
Cameron Chell
Yes. Definitely, it takes more resource time for sure, but that’s a great point. Yes. That’s a fair [indiscernible].
Scott Larson
Another question here. Any military contracts or clients in the pipeline?
We haven’t, actually. We haven’t announced any. We do some humanitarian work, of course, which is the right thing to do. So the installation other is, of course, with the contracts that we’ve announced. And so I would say we had some government contracts. But with regards to specific military, no. That’s not who Draganfly is we’re an engineering customers in the past, but certainly nothing too pointy, but certainly humanitarian as we’ve talked about, and we think we’ll continue to do that in the future.
Cameron Chell
Yes. If I can just add into that. I think I want to be a little bit careful on how big you call military. So what we call military is we don’t build the bombs, right? We don’t build ordinance.
We don’t build things that kill people.
We have done some work in the nonlethal space. So kind of 40-millimeter launchers that sit underneath the drone that true to beanbag or a nonlethal nonexplosive doorbuster for a SWAT team or something like that. But as soon as we get into the military work that we were asked to build a guidance system or whatever, that’s just not — it’s not what we’re going to do.
That said, our military contractors and the agencies in the government that are military important customers of ours and do we work with them? Absolutely. So whether it’s kind of reconnaissance or humanitarian or border patrol or border surveillance, all of those types of things, for sure. That’s the lots and lots in the works. But as Scott said, we’re not doing anything that goes out and kill somebody.
Scott Larson
A quick question here is come in, say with regards to what’s the payable capacity of the Jones? Specifically, I think the references to the stuff that we’re doing in Ukraine. Can a rescue dog, for example, fit in one? Is it size of a large pizza box?
And yes, is the answer. I think depending on kind of how far the drone needs to go. Obviously, the less mass that goes into the box into the delivery unit, it means it can go further. But generally, think about something in the 10- to 30-pound range. If it’s less, go further, if it’s a little higher, obviously, you can go a little shorter distances.
But yes, something the size of a pizza box is a little bigger even higher 18 inches high, maybe a little deeper than that. So insulin, medical search and rescue dog, as you asked about, certainly, 25 to 30 pounds would generally be the max weight, the max mass for this type of drone that we’re talking about. But it’s interesting question.
Cameron Chell
On that, like if there’s the math, like the one thing that’s, we try to anticipate where the market is going to go and prepare to build product for it. We don’t build product for it before we have seen customer demand though. So we try to live in between that space, whereas Steve Jobs would say, you have to build the car before anybody knew they needed a car — or the end of the world, which does only build what a customer asked for. We try to manage right in between that on, because we know you got to go to get — you had to speed to where the puck is going to be. But from a financial perspective, it’s pretty easy to blow your brains out on things that you might happen.
And so the reason I bring that up is because this medical relief drone is 35 pounds. Some of the heavier lift drones that we’re working with were some of the island customers — and excuse me, that we’re working that can do much more than that. But it’s really all in any, it’s all about engineering, right? And then, of course, regulation.
And so no, we’re not in a move human space. That’s an entirely different set of regulations in a world that we’re not like — we think that space is going to be owned by the Bells and the Airbuses and — or the other really big companies that are financing into that, and that’s not where we’re going. But you have to move it to a or to move out something like that because — and we think there’s a market that would be needed for that. We can, knock on wood with a slight grain of salt, we can build anything, right? It’s just engineering.
Scott Larson
Okay. It’s 10 minutes before the end of the hour. Let’s see if we can work away through a few more of these questions and then and pretty much right on time. Cam, I’ll send this one back to you. Any update on DDL?
Cameron Chell
What’s that?
Scott Larson
DDL.
Cameron Chell
Yes, well, so we’re in the process of tooling right now. We expect to start production in December. So if things go kind of according to the plan or a little bit better than planned, we’ll be into shipping first units in Q4. It’s going to be questionable whether we can recognize the revenue quite in Q4 or not. But other than that, that’s on track.
It’s not other than that. That is the plan. It’s on track. We’ve done a bunch of work, design work. All the designs have been approved.
Testing has been done. Modeling has been done. Thing is in process right now. There’s some specialized machines that we had to build and create for it.
So yes, we’re really excited about it. We think not only because it’s a great $9 million a year recurring contract and 50,000 drones a year that we’re putting out. But also really demonstrates to our other customers how we can make something entirely, entirely strategically differentiated for them. Like they will have a product in the market that nobody else will be able to compete with, and they’re not going to able to go get it somewhere else.
Unless people are willing to do that engineering and do the special tooling and build the machines and all that type of stuff for it.
So I’m as excited about it to demonstrate to our customers our capabilities and commitment that we make in strategic differentiator we can provide to them as I am about the revenue and the margin and the deal and they’re a fantastic company to work with, too.
Scott Larson
How about an update on Woz ED?
Cameron Chell
Yes. So we announced, I thought it was maybe in Q1 here or maybe it was Q4. We announced that we finalized our deal with Woz ED. Actually, DDL became part of the deal and Robotify also became part of the deal, where we’re providing educational software development equipment and drones into the next generation of what Woz ED will be providing into the school system. And I can tell you that the work that we’ve done with DDL in that space has really given us, has really informed us and taught us a lot in terms of how we’re actually creating this additional, or not just us, but along with robotified DRL and Woz ED, how we’re creating this incredibly differentiated product that will go primarily into middle schools.
And actually, it’s going to be a product that will then support DRL and what they’re doing in the middle schools and their whole league development. So we can’t talk about specific numbers or anything like that. But again, we’re thrilled that Steve Wozniak’s organization chose us to work with and do that design work and such with them.
So I can say it’s not a contract that’s the size of DDL by any stretch, but it is one of these contracts that once you’ve built it with them that it is lifelong.
So who knows? Like over the course of the next 15 years of this product’s life cycle and how it integrates with schools and all the middle schools that over 500 middle schools already that Woz ED services and the Draganfly name in there, the unintended benefits, I think, will be quite large. But it could be as big as DDL because it just has that type of long tail to it. But on the surface, it’s not — just to put it in context, it’s not a 50,000 drawn a year, $9 million a year contract.
But it’s sizable and to the extent that we can talk about specifics, whatever the lower, let me say, in the accountants, we will and so more information coming, but it’s successful, and we’re thrilled that we have chosen to be able to do it.
Scott Larson
Yes, we’ve had a few dozen questions that come in. So unfortunately, not going to be able to answer all of them, but we’ll take a couple more.
Do you see opportunity for more delivery drones outside of Ukraine?
And the answer is yes, of course, we’re talking about some of those. Some of — and initiatives that we’re doing here in the U.S. with cold chain. I mentioned a little bit earlier on the call, of course, there’s been some international customers and potential opportunities that will engaged and responded to. And those are moving along at 1 pace with regards to putting together delivery networks for using drones outside of both North America as well as Ukraine.
So yes is the answer to that. We do see opportunity — we do see significant opportunity for using drones for delivery purposes outside of Ukraine, certainly. And this will be our side of humanitarian purpose as well. This would be just goods and services and products and things like that, that we’re the drones are typically used for things that are more valuable, single kind of deliveries. But yes, significant opportunities and look forward to dragging some of those over the line over the next little bit and been able to come out with some announcements and initiatives.
Cameron Chell
There’s some great questions here. I’m just dying to answer them online, but I know I can do 3 things at once, even though I tell everybody I can. So I just really want to encourage everybody because once this thing ends, I don’t know if I can save these, but I really send these questions into Rolly, and we will get back on every single one of them. There’s some really great ones that in here. So yes — please if we don’t get to you get an older ruling, and we’ll answer to them. So…
Scott Larson
Yes. Yes, so 100%, right? So send them into our Investor Relations line. e-mail them in, we’ll get back. We’ll be on top of them for sure.
They don’t need to all come in at one day in our shareholder call here.
So why don’t we take 1 more? Came, I’ll send this back to you. and any new vinyl intelligence. What’s the update on those kiosks, customers, things that are kind of working their way through without getting too far ahead of ourselves. Any thoughts on that?
Cameron Chell
Yes. So we’re finding a great market in the correctional facilities market, in the sheriff’s department market and in manufacturing, where they have people that are all coming together and they need to make sure that they need to — their ROI on making sure that their population is healthy. and stays healthy is regardless of now that we’re moving to an endemic from a pandemic or we’re preparing for the next pandemic or whatever. They just realized that their corporate risk — now the pandemic risk is something that auditors even look at for these larger companies and governments look at and unions look at. So we’re finding a really strong market in those particular areas for the kiosks.
We’re Continuing to integrate the technology into other forms. We got a really cool company that we’re working with overseas that works in the autonomous automobile and [indiscernible] space. And so yes, they’re just incredible company in the autonomy space.
And so they’re looking to incorporate into their platform, which supplies many of the largest manufacturers today the ability for the vehicle itself to read the vital signs. So if you think about heavy machinery or a car or something like that and being able to read the vital signs of the driver all the time or the operator for safety reasons or those types of things.
And that’s actually a direct result of the work that we’ve done with DRL, where at the drone racing lead, we actually have the drone racers. Our cameras are looking at them and providing live feeds and their vital intelligence or on their vital. So as they’re whipping through certain parts of the core or if they’re behind or if they’re ahead. We can see what their heart rate is what the respiratory rate is, like the data is really quite incredible.
We’ve even had inquiries from gaming companies that say, “Hey, we want that kind of data. for people that are playing our video games because we want to show and demonstrate the physical capabilities that are required in order to play our games.” So the whole esport thing is even chiming into it.
There’s a number of things happening in the telemedicine space and such as well. But again, unless they are really big and significant opportunities, we’re not chasing everyone down. We’re making sure that they’re driven by customers and customers that have budget. And then back that budget then helps drive our R&D costs. The most imminent sales numbers that will drive the Vital Intelligence product line will be events, large events.
So I’m not going your average meeting at a convention or something. But if you think about a very large sporting event or a very large convention where the risk and the liability of an outbreak happening here or people not being sick or the ability to demonstrate people coming to that event, whether it’s government sending athletes or volunteers into an area, and they’re doing a best practices around health security, which might include things like spraying and vital intelligence and stuff like that, that’s been an unexpected market for us that’s really mature quickly, and we expect to make some great progress and announcements in that regard shortly.
Scott Larson
Yes. Okay. Okay. So it’s 4:00 here Pacific Time. I want to thank everybody who joined the call.
Thanks for the questions. Thanks for the interest. Of course, as Cam mentioned in what we’re doing, some great questions, great suggestions as well in terms of ideas and opportunities and thanks for us to kind of get our head wrapped around.
So I think we will end it there. As Cam mentioned, keep e-mailing the questions in. We’ll respond to them as we can over the next little bit. Stay connected at the same stocks, of course, we’re trying to continually improve our shareholder communications and just being part of the community and engaging as best we can, not giving guidance, of course, but just keeping people aware of the things that we’re doing because, in fact, we’re doing a lot of other things. And the opportunities continue to go up, and some of those will have announced and some of those are still to come.
So I think with that, I’ll go ahead and thank everybody and Cam can sign us off here.
Cameron Chell
Yes. Thank you, Scott. As always, it’s such a pleasure to serve with you and with Rolly and the entire team that you’ve put together, of course, including our Board. Most importantly, quite frankly, is our customers. So for those customers who may be honor our shareholders are that our customers as well.
We just thank you for the trust. We’re going to work hard to continue to make you strategically differentiated from your competitors and hopefully help build out your business for you. So we’ll humbly work in that direction.
Our shareholders, which are the lifeblood of the company, especially when we’re growing, and we need the trust and the belief of you, that doesn’t escape us. And so Jerry Chat, Sam, Chris, Gregory Eugene, Kent, Katul, Nick, I’m sorry, we didn’t get to your questions today, we will answer them. And just thanks for your patience and time and then to our employees. I mean, you’re amazing. Like what you were pulling off and what you’re doing for people right now is truly, truly incredible.
And as part of management and founder, I’m honored to get to work with you.
So anyway, thank you so much. Look forward to the numbers coming out tomorrow, and don’t be afraid to reach out to us. Thank you.
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