Draganfly Inc. (NASDAQ:DPRO) Q4 2023 Earnings Call Transcript March 27, 2024
Draganfly Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Rolly Bustos: All right. I think just to be considerate of everybody’s time here today, I think we’ll get started. So greetings, and welcome again to all shareholders and stakeholders to today’s Draganfly 2023 Q4 and Full-Year Earnings Call. My name is Rolly Bustos and I remind all joining us today that I am the Internal Investor Relations representative here at Draganfly. We appreciate you joining us for this review and update. We will start with our CEO and President, Cameron Chell, discussing the fourth quarter and full-year operational highlights. From there, our CFO, Paul Sun, will review the financials. And we will conclude, as usual, by going through the pre-submitted questions that we’ve received. As always, you’re welcome to reach out to me individually at investor.relations@draganfly.com.
Again, I remind everyone that this presentation may include forward-looking information and statements. These statements are not guarantees of future performance or financial results and undue reliance should not be placed on them. Any future events or results may differ from what might be discussed here. The full forward-looking disclaimer can be found on Page 2 and in your screen right now. So Cam, please go ahead.
Cameron Chell: Thanks, Rolly. I appreciate everybody taking the time today to [indiscernible] on the earnings call. We really appreciate your trust and consideration. So 2023 was a pivotal year for Draganfly, highlighted in particular by the fact that we have now shifted our production to organic capability to produce well over $100 million internally of product with two production lines on our two main products, which we’ll talk about here shortly. We still maintain our full custom and contract engineering capabilities as well as our work benches, which enable us to produce smaller batches as well. So in 2023, we had a little bit, by design, especially in the last two quarters or three quarters, but two in particular with building out our new plants, understanding that we weren’t going to grow the revenues because, in fact, we couldn’t grow the revenue because of capacity issues.
So our revenue for the year was $6.5 million with product sales being $5.2 million and provision of services being $1.26 million. We did have a gross profit margin of $2 million on that, so fairly healthy and which is about 31.5%. And as of the end of December, we had a cash balance of just over $3 million. So some operational highlights from Q4, in particular, was us receiving special flight operation certificates for transport – from Transport Canada. We have received other certificates as well from other jurisdictions. And these ones, in particular, were for the wildfire services that we are providing up to the Canadian government. This is an area that’s going to grow significantly for us this coming year, and we – as highlighted by the capabilities of the particular drones that we have manufactured.
We’ve also been working very, very closely with the United Nations on several initiatives that do relate to wildfires and in particular, climate change, and have had spoken a number of times and consulted several times as well with the World Meteorological Association in conjunction with the International Center of Digital Innovation, all part of The United Nations Convention to Combat Desertification. Further to that, and by far, the enormously fast-growing area of the entire drone market is the defense space. And a couple of the highlights from Q4, in particular, were not just our display, but our demonstrations at Modern Warfare Week, not just of the Commander 3XL, but also of several payload partners that participated in Modern Warfare Week with us.
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Q&A Session
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Leading up to that and out of that, we have done, through Q4 and into this year, we have done multiple live test scenarios and exclusive demonstrations with multiple branches of the DoD and those continue to push forward in support of the orders that we have coming forward in that regard. So a couple of other things, again to highlight was our new plant is now fully operational. It went – it opened in Q3. In Q4, it went operational. We have received several best practices certificates and participated in a number of audits from different defenses or militaries in order to certify the plant ready for production, of which we’re just now completing all of those certifications. So a pretty exciting time for the entire team and the organization.
I think also of note in Q4, we did unveil the Commander 3XL hybrid. Now this is a hybrid that’s really in demand in particular, not just from our commercial customers, but from military customers. So this takes all of the capabilities of the Commander 3XL, which is really the Swiss Army knife of drones, and puts a hybrid engine on it, whereby we can run it by gas or electric. It takes the operational timeframe from about 50 minutes up to about 2.5 hours. So you can imagine the increased flight time to increased range. And the entire engine on that only weighs about 9 pounds, so we’re still – we’ll have capability of well over 10 – between 10 and 15 pounds commercially and even greater than that for military operations or defense operations to be carrying payloads, whatever those payloads may be.
Interestingly enough, a lot of those payloads, as we’re now looking at, are actually other drones that drop, in particular FPV drones, and with swarming capabilities. Again, this is – when we designed that Commander 3XL, we designed it with the ultimate and flexibility. Now we didn’t anticipate being able to – or we didn’t anticipate necessarily putting on a hybrid engine or being able to drop other drone systems or create swarming with it. But that’s just an indication of the versatility of this drone. We also hosted our first Draganflyer Xperience, which was a first responder user conference at our Joint A.I.R Flight facility in Texas. We had at least a dozen different services there in attendance, training, testing, flying machines, trying payloads, working through use case scenarios, working through CONOPS and a number of different things.
And so that whole facility, for us, has just turned out to be an incredible opportunity for us to demonstrate, not just our capabilities, but actually provide flight training and testing for CONOPS or potential use cases that maybe aren’t necessarily available for some of our customers to do at their own facilities or if they have facilities at all. And so this facility itself has everything from sensor calibration to de-mining, to tactical grounds, to all sorts of different training scenarios as well as conference centers and such. And so we look forward to hosting more of our user conferences there as well as keeping it extremely busy as it has been with our customers. The thing that’s kind of interesting, especially in this Q and coming out of Q4 is that we’ve got a record pipeline and a number of customer demonstrations that are happening.
And in fact, we’ve really had to temper that simply because of the amount of orders that we’re now preparing to fulfill and the resources that we have at hand in order to do both that work and the work that we’ve got in terms of all the training and testing that’s happening. So interesting and positive challenge to have. But nonetheless, we can’t, for technical reasons, call it backlog as of the moment, but we can call it qualified pipeline and customer demonstration, so we’re at record numbers there As everyone knows, I think the drone industry is growing, but the military impact has really been absolutely incredible since the – I think, really, all nations or all defense departments, but in particular, NATO departments are really focusing on the small UAV market.
The Ukraine theater has demonstrated that small UAV is the tactical advantage now from anything from 5,000 feet down. So if you want air dominance, you really need to deploy these types of drones. So whether that’s a heavy-lift drone, whether it’s reconnaissance drones, whether it’s being FPV, being first-person fire drones, whether it be logistics drones, whether it be munitions, whatever the case is, it is now all about drones. And we think we’re really well positioned with the product lineup that we have designed to be incredibly versatile. Going into this, last couple of years, I think it’s worth noting again that our experience and background, while we were the oldest commercial manufacturer in the world, one of the reasons that we’re the oldest commercial manufacturers in the world is that we’ve done contract engineering for the military primes for basically about the last 18 or 19 years.
And that’s, in fact, what has been able to sustain the company while all the other North American companies didn’t survive the last 20 years. So this slide here just shows an example of the types of products that we have out there. The type of products we’ve worked on, the types of products that we have worked on for other organizations. And that top right corner represents, basically, military and artificial intelligence, where the bottom left corner, would be a very consumer type of toy. So we’ll continue to focus in this area. And as fortune would have it, it’s unfortunately geopolitically, but as fortune would have it is the fastest-growing area, and I think we’re well-positioned to become a major player in that. Just a quick product review and update.
