Ageagle Aerial Systems Inc (UAVS) 2022 Q3 法說會逐字稿

Good day, everyone, and thank you for participating in today's conference call. Joining us today from AgEagle is Chief Executive Officer and Chairman of the Board, Barrett Mooney; and Nicole Fernandez-McGovern, AgEagle's Chief Financial Officer and Executive Vice President of Operations.

Following Barrett and Nicole's prepared remarks, both company officers will respond to questions that were previously submitted via e-mail by analysts and investors.

Before I turn it over to Barrett, I would like to remind you that during today's call, including the question-and-answer session, statements that are not historical facts, including any projections, statements regarding future events or future financial performance, or statements of intent or belief are forward-looking statements, and these are covered by the Safe Harbor disclaimers contained in the company's public filings with the SEC.

Actual outcome and results may differ materially from what is expressed in or implied by these forward-looking statements. With that said, I'll turn the call over to AgEagle's CEO. Barrett, please go ahead.

Thank you very much, [Dagmar], and good afternoon, everyone. I'd like to start this call by inviting Nicole to review AgEagle's key financial highlights relating to our performance during the third quarter. After which, I'll provide commentary on what we accomplished in Q3, and then provide you with details on our strategy for Q4 and 2023. Nicole, over to you.

Thanks, Barrett, and thank you all for joining us today. Yesterday, we filed our 10-Q with the SEC, which is accessible on the SEC.gov website and on the Investor Relations section of the AgEagle website.

Additionally, we announced some key highlights from our 10-Q via press release this morning, which I would like to recap here. For the three months ended September 30, 2022, total revenues were $5.5 million compared to $2.0 million in the prior-year period, an increase of $3.5 million or 172%.

This increase was primarily attributable to revenue generated from our sales of our eBee line of drones as part of the senseFly acquisition that we completed in the fourth quarter of 2021, which contributed to $2.1 million this quarter.

Additionally, our quarterly revenue growth was fueled by a 71% increase in the sale of the Altum-PT and RedEdge-P sensors, which pushed total sensor sales to $3.3 million compared to $1.9 million in the prior period. Our software subscription sales increased 36% to $153,000 compared to $112,000 in the prior year's third quarter, which was primarily due to an increase in subscriptions for Measured Ground Control.

The company's loss from operations totaled $5.1 million compared to $3.8 million in the same year ago. This increase is primarily attributable to increased general and administrative sales costs and increased new product development costs related to our senseFly acquisition in 2021. The increase was also attributable to a decrease in gross profit margins due to supply chain constraints.

During the three months ended September 30, AgEagle satisfied in full all payment for its 2021 acquisitions of MicaSense, senseFly SA and Inc., and a 50% discount of the original holdback amounts associated with the acquisition.

As a result of this accomplishment, the company realized a gain on extinguishment of debt of $6.5 million, which helped drive a significant increase in net income rising to $1.7 million compared to a net loss of $3.8 million reported for the same three months in 2021.

After factoring of foreign currency, cumulative translation adjustment, and accrued dividends on our Series F preferred stock, offset by amortization of unrecognized periodic pension costs in the three months reporting period, September 30, 2022, AgEagle's total comprehensive net income attributable to common shareholders was $1.3 million or $0.01 per share compared to a loss of $3.8 million or $0.05 loss per share.

Now looking up at the results for the first nine months of 2022, total revenues climbed $14.6 million, up 158% to $5.7 million when compared to the prior-year period. As part of the senseFly acquisition, which occurred in the fourth quarter of 2021, the company recorded incremental revenue for our eBee drones of $7.9 million, which were not included in the prior-year financials.

Again, due to strong global demand for the Altum-PT and RedEdge-P, total sensor sales increased 19% to $6.3 million compared to $5.3 million in the prior-year period. Revenues from software subscriptions increased 33% to $480,000 compared to $360,000 in the prior-year period.

The improvement in SaaS subscriptions was largely attributable to a 207% increase in SaaS software subscriptions for Measured Ground Control, which saw sales rise to $389,000 from $127,000. Offsetting the increase was a decline in SaaS subscription sales of HempOverview, which totaled $91,000, down 26% from $122,000.

Due to higher general and administrative, R&D, and sales and marketing expenses associated with our acquisition of senseFly in 2021, loss from operations increased to $18 million from $11.6 million. Our net loss for the first nine months of 2022 was $11.5 million compared to a net loss of $11.4 million for the first nine months of 2021.

After accounting for the foreign currency cumulative translation adjustments and accrued dividends on our Series F preferred, offset by the amortization of unrecognized periodic pension costs, total comprehensive loss available to common stockholders totaled $11.8 million for a $0.14 loss per share.

Our cash position as of September 30, 2022, was $5.3 million compared to $14.6 million at the end of 2021. In addition, stockholders' equity increased 15.3% to $88.3 million as of September 30, 2022, compared to $76.6 million at the end of 2021.

During the first nine months of 2022, the company raised total net proceeds of approximately $14.6 million in its financing activities, including $4.6 million through its at-the-market offering with co-agents Stifel and Raymond James at $9.9 million through a registered direct offering with an existing institutional investor.

Now I'll pass it back to Barrett to go over the operational highlights and a review of our strategy moving forward. Go ahead, Barrett.

Thanks, Nicole, and hello, everyone. We had an exciting quarter here at AgEagle, highlighted by the strong demand we received from both our eBee drones and our Altum-PT and RedEdge-P sensors. Through the congregation of our core channels, we generated another strong quarter of net revenue growth.

By attending and presenting at several trade shows, including the Commercial UAV Expo in Las Vegas and the INTERGEO EXPO in Essen, Germany, we drew attention from operators within industries like construction energy, and utilities, just to name a few, expanding our overall sphere of influence across a broad audience.

We've also achieved a significant milestone on the regulatory front with our eBee drones becoming the first and only unmanned aerial systems approved by the FAA for operations over people and over moving vehicles in the United States without the need for a waiver. I'm very proud of what our team has been able to accomplish over the quarter. We are beginning to see all their hard work culminating together to tangible results.

Let's dive into our specific segment updates, starting with our fixed-wing drones. Our eBee line is a strong contributor for us this quarter, in part fueled by the demand we've received since being added to the Department of Defense's the Blue UAS Cleared List. Since we've added -- since we were added to the list in May earlier this year, we have sold over 50 eBee TACs to the US government with strong continuous demand in our pipeline.

We've also very recently began a partnership with government contractor Darley to further reach into the US first responder and tactical defense markets. Darley is a leading supplier of training and material support to the US Department of Defense. And we believe this partnership will significantly bolster our penetration into government application by leveraging Darley's expertise in the space.

Citing our new FAA approval is critical to tactical search and rescue and firefighting missions, Darley looks to supply our eBee TACs to safety and defense professional worldwide as we open up additional revenue opportunities through our increasing competitive advantage. This is an exciting market opportunity for us. We're pushing tirelessly to unlock the full value of this revenue stream.

As I alluded to earlier, we recently announced that our eBee X series drones became the first and only unmanned autonomous system to be approved by the FAA for advanced drone operations over people and moving vehicles. These approvals allow eBee drones to operate without an FAA waiver over people and moving vehicles, which is often a difficult and costly process for our customers.

This brings additional commercial use cases for our drones and demonstrates our ability to bring industry-changing technology to practical operations. We've built a competitive moat for ourselves with our regulatory wins in Europe, Canada, and Brazil as well. And our latest win with the FAA has put even more distance between us and our competitors.

We expect these waivers will be strong catalyst towards additional commercial orders from safety-minded industries.

Our fixed-wing segment is on solid growth trajectory, and our results this quarter give a glimpse of the potential we believe our drones have. With the strong demand we have in our pipeline and the recent FAA approval, we are focused on delivering best-in-class drones, capitalizing on the momentum we've gained.

Moving onto our sensors segment, our sensors spearheaded by the Altum-PT and the RedEdge-P have continued to generate consistent demand, resulting in strong sales this quarter and providing meaningful growth to our top line.

In the first half of the year, marred by supply chain constraints and headwinds in the broader environment, we began accruing a strong backlog for our sensors. This quarter, we made material progress in addressing that backlog, and we expect to fully service our orders by the end of the year.

Our sensors have repeatedly proven their capabilities in a multitude of use cases and have been venerated by industry professionals. Our sensors unlock details that when paired with the correct data analytics tools offer tremendous insights within forestry, conservation, agriculture, and utility sectors.

We'll continue to improve and increase our line of unique and charismatic products for our customers who require high-quality data and insight.

Moving to our software division, Measured Ground Control and HempOverview. Our software division has contributed much to AgEagle than what our sales figures show. Since we embarked on this journey, we have leveraged our software technology within our fixed-wing and sensor division, allowing us to give our customers a full-stack package using in-house developed technology.

We continue to maximize the assets we have and evolve our user experience in our other core products. We believe that Ground Control has potential to play an integral part in the overall drone space, particularly with commercial drone operators, and we'll continue to develop that strategy.

Now I'd like to touch on a few corporate initiatives we've been working on as part of our one-company approach. During the quarter. We also welcome the launch of our new website, which brought together our various product channels. As mentioned in previous call, our newly designed website is a better reflection of our core offerings and shows our path towards being a full-stack autonomous drone solution.

As we begin to introduce next-generation products into the marketplace, our website will serve as the main hub for our product communication. If you haven't checked it out already, I highly recommend visiting our site to learn more about our market offerings and how we are supporting customers across a broad portfolio.

As part of brand unification, we have identified several opportunities to optimize communication and cost efficiencies throughout our global team. To further foster a stronger corporate culture and create valuable bonds within the team, we have chosen to consolidate our US operations and transition to a centralized location near Raleigh, North Carolina.

Based on production capabilities and stock inventory levels, we are targeting a year-end move and are offering our team members relocation and work-from-home options as applicable to their current roles. We will not be reducing or slowing down our US manufacturing capabilities in any way. This move will only help us reduce our costs. It will also create a stronger foundation throughout AgEagle and make us a more connected company.

With the speed at which AgEagle is growing, I believe this move will be integral to our ability to stay disciplined, structurally organized, and rooted in our core beliefs. As we wind down our office -- if we wind down our office spaces, we should see some reductions in our operating costs flow through the beginning of next year.

Our move to North Carolina is an important step towards reestablishing our core identity and company culture and bringing our team closer together. Our bottom line will begin improving as a direct result, and we will allocate the freed-up capital towards projects that we believe will be immediately value accretive to our platform.

Overall, we delivered another solid quarter and continue to position AgEagle for success. We're seeing consistent strong demand for our hardware products, while our software assets are evolving to create commercial opportunities in fast-growing industries. With new FAA approvals in place, we are excited to capitalize on our regulatory first.

Over the long term, I'd like to reiterate our focus on profitability. We've already taken steps to reduce our spend, and we're going to evaluate more programs in the coming months to improve our operating margin. Our platform has been rigorously tested. We have proven that our products have a strong value proposition to our customers across various industries.

Our mission has always been to unlock the value of AgEagle for our shareholders and position ourselves for long-term profitable success, and we firmly believe we remain on track to accomplish that mission.

Now I'll turn it over to Nicole for some Q&A.

Great, Barrett. Let's address the questions we received from our investors today. With the success of the eBee TAC and now new FAA approvals, where do you see the eBee line going next?

That's a very great question. I mean, our eBee line and fixed wing -- our eBee line is growing. We have opportunities ahead of us. The fixed-wing drone market continues to have tremendous potential: lightweight, high-endurance autonomous aircraft, can travel [in such amount], and continues to give high-quality data backed with operators with efficiency and sustainability.

And that remains a valuable tool to industry professionals. We have quite a few new tricks up our sleeve with the next generation of UAVs that we've been looking into. Not much more we can say about that at this time, but we have been spending our R&D time wisely this year. So stay tuned.

Great. So next question, as you have success with reseller and distribution network, do you still see your overall sales model shifting to a B2B focus with a direct-sales approach?

One thing to understand is that our value-added reseller model has very specific advantages for us. While we may not be able to announce all the deals that come through this network as readily, we are able to deliver our customers an overall better experience.

They can work with someone locally, and in many cases, within their own country that has handled our product and knows how to operate it. Many of our [VARs] offer training and additional services and products that work with ours to enhance the customer value output. So no, I wouldn't call it a shift. We value of VARs and their offerings to customers.

We do see several areas where a partnership or direct-fleet sales approach may be better suited to being directly from us and a large enterprise, and we continue to evaluate all those opportunities to improve the delivery of our products to our core customers while simultaneously expanding our market reach.

Great. Next question, as the drone industry remains fragmented and valuations are coming down in the marketplace, how do you -- how are you thinking about M&A strategy in the near to midterm?

At the current moment, we're watching the market very closely. M&A has been a growth strategy for us in the past. The better part of this year has been about coordinating and unifying the acquisitions that we've already made.

So that has given us the opportunity to take stock, evaluate the assets we have, and really chart a course for the future with the tools currently our disposal. So we're very interested to watch how the market shapes up in the coming year and see what partnerships, collaborations might show up that would increase our value offerings to our customers.

And then, at that time, we'll start to look at what the merger and acquisitions landscape looks like.

Great. Are there any partnerships in the pipeline with any other joint manufacturers to help expand your footprint in the industry as a whole?

So partnerships, in my view, are key to success in a fast-growing, highly technical industry. We are constantly reviewing the market, potential collaborators, and gaps within our own org to find value-added relationships that will improve our customers' user experience.

So at AgEagle, we believe that effective collaboration will continue to grow the industry so that we're not just constantly fighting our competitors for a larger slice of the pie. We're actually growing the pie through collaboration and seeing meaningful revenue gains through that portion of our expansion.

So there's no news to report at this time but do stay tuned for more to follow in the coming months because we see partnerships as a key opportunity for an industry like the UAV industry going forward.

And the last question for this afternoon is with organization seeing success across a multiple of issues, do you expect to eventually move away from the Ag portion of your company name?

We are a company with its roots in agriculture. We still serve the agriculture community with a variety of high-performance products that are ideally suited to meet that industry's needs. While like many companies, we are growing to find that the skills, product, and techniques used in ag are transferable to additional industries, we're still focused on delivering value at the field and plant-based research level.

As the question discusses some corporate rebranding, we're going to continue to provide value to our customers, and the corporate rebranding is a big undertaking. One day, that might be part of the discussion for a call like this, but not yet.

Great. This does conclude our last question for our Q&A section. I'd like to thank you all for joining our webcast today. And I'd like to thank all our shareholders for their continued support. We appreciate you staying with us throughout this journey. Barrett and I look forward to sharing our continued progress in our next corporate update webcast. Operator, back to you.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation.