Q3 2020 Ageagle Aerial Systems Inc Earnings Call

Lets start off of drone solutions and contract manufacturing.

As I'm sure. Many of you have seen by now we reported record financial performance for the three and nine months ending September Thirtyth of 2020 Red.

Revenues for three months reporting totaled approximately 750000 and revenues for the first nine months of this year of totaled approximately 1.2 million.

We also more than doubled our gross margin profit year over year from the low 20% to mid 40% range for both the three and nine month periods ending September Thirtyth 2020.

Our record revenue and improved gross margins are a direct reflection of our company's expansion and the contractor all manufacturing in sub own the assembly for our ecommerce client doesn't gauge in advancing the drone package delivery systems and operations.

This key customer relationship, which began in late 2019 has demonstrated the need for AG Eagles experience and expertise in the commercial drone space, particularly for new applications and the exciting and fast growing drone package delivery market.

We're looking forward to perpetuating an expanding this relationship over the next year.

Last month, we announced that we received the two year contract manufacturing the without creek to produce their innovative drone delivery stations the.

Bill the Valkyries patented design specs, we will manufacture and assembly. These ground support stations in Wichita, Kansas.

It is our belief of the offerings patent station is the only solution that of solve the last answer logistics problem associated withdrawn deliveries.

Moreover, it allows for an entirely automated and safe drone package delivery.

We're very excited about our new relation with operating and anticipated long and mutually beneficial relationship between our companies.

We also require an equity stake in dockery, demonstrating our confidence in the growth strategy and the role we expected the play in helping make drone package delivery of reality across the nation and perhaps across the world.

The increase proving to be a highly collaborative new customer and business partner and we look forward to sharing update from this relationship as we move forward.

Furthermore, I'm proud to report the we have successfully completed the move of our manufacturing operations from the other share to our facility in Wichita, Kansas In fact, new workstations and office furniture, we're just deliver and saw last week and the signage on the building will be going up very soon.

As we began to ramp up operations, we are continually to expand our team at the facility. In addition, the hiring 30, plus aerospace industry expert Matt Martin as our VP of operations in September we recently welcomed the new director of quality of manufacturing along with a new office manager to the Wichita facility.

In addition, we are actively looking to hire of director of business development for our contract manufacturing business to.

The this and we recently engaged the professional executive search firm bit of specialized expertise in the unmanned aerial systems industry to assist us in identifying the most qualified candidates.

We hope to have this new hire onboard in Q1 of 2021.

Are we just held team has already hit the ground running with an end up manufacturing quality initiative the.

This includes our plan to become ISO 9000, and ask 9100 certified as well as being certified to meet unique customer qual t. process requirements. This.

This will differentiate our drone manufacturing operations in Wichita by meeting or exceeding the highest possible quality standard in the industry.

As customer expectation continues to rise having certified high quality manufacturer of capabilities as essentially become a requirement.

Assuring quality manufacturing and sales three principal function qual.

Quality design engineering quality control and quality management.

All of which are being integrated into the core fiber of AG Eagles of grow manufacturing Assembly operations.

We anticipate that this initiative will require approximately one year successfully complete and.

And with our teams collective depth of experience in setting of quality manufacturing operations, we expect it to go smoothly.

On other initiative one of the channel. The we are incredibly proud of as being selected as the industry partner in the next phase of Epay A's UAE EPS integrated pilot program or IP.

This new program called beyond was launched on October 26, 2020, and includes eight state local and tribal governments at the lead participants, including the Kansas Department of transportation or K Dod.

It was cade off of selected Agiga, along with several of the companies to help solve the civic key challenges confronting drone integration into the national airspace system.

These challenges include developing for true strategies for beyond visual line of sight operations, the repeatable scalable and economically viable.

So the incident emphasis of the program will be on infrastructure inspection, the public operations and small package delivery.

With the on program of task of leveraging industry operations to better analyze and quantify the societal and economic benefits of the U.S. operations as well as focusing on engagement hackers to collect analyze and address the community concerns.

Our team has already met with key officials from K dot to the five civic program initiatives that he will be responsible for leading and supporting we.

We are very excited about this government sponsored program and recognize that the collective efforts of the beyond program will serve to advance F.A.A.'s regulatory framework from mass adoption and deployment of commercial drones in a wide range of industrial applications, including public safety Federal state and local infrastructure inspection and drone package delivery.

Similar to the pilot projects. The we look forward to leading with the beyond program. We've also begun actively exploring other commercial drone research and development projects.

We look forward to providing you with important updates on our R&D initiatives on future calls and or informal press announcements in the months ahead.

Moving on to Act solutions.

We've made significant progress in nurturing potential new hemp overview of customer relationships with several states.

In fact, we are in the contracting stayed with one western state and advanced discussions on the scope of service with two other states.

At the minimum we expect to close at least one new state contract for hemp overview prior to the end of this year with additional states to follow prior to the start of 2021 and planting season.

Through our discussions with the state officials, we have learned quite a bit over the past six months on critical areas of need for important state crops beyond hemp.

As a result.

We are in the process of enhancing hemp overviews robust feature set by combining key elements of farmlands with artificial intelligence and machine learning capabilities.

The goal is to provide the agriculture, the industry's most advanced crop monitoring and data analytic solutions designed for both state and commercial farming operations.

We look forward to providing additional insights into the important development issues as it progresses.

Lastly, I want to provide an update on a few other corporate initiatives.

As I'm sure. Many of you have noticed by now we have completed a brand refresh and launched a new website at AG Eagle Dotcom that is now more closely aligned with our future growth opportunities and strategies.

We believe of the look and feel of our new website paired with updated content on our unique capabilities and strength will help provide potential new customers business partners and investors with a clear understanding of AG Eagles Doesnt focus on long term growth strategies.

We encourage you to check out the new site.

We think it turned out great and better reflects the AG Eagle story.

And other corporate initiatives that we have been heavily focused on over the past couple of months is actively seeking M&A opportunities given our strong balance sheet of nearly $25 million.

We are focused on opportunities that will provide aggie with certain key benefits, including established revenue channels patented and or proprietary technologies that can be leveraged in our drone solutions in AG solutions business channels.

As well as advanced manufacturing assembly capabilities and assets.

While many companies in our space are largely the startup early development stage, we had meaningful discussions with the few highly attractive and from medical targets, if or when we elect to move forward. The acquisition. We look forward to providing you with the relevant details the sooner the permissible to do so.

Overall I'm incredibly pleased with the progress we've made since I started as CEO the summer.

As we move forward through the early stages of the drone age we have entered entered into a meaningful partnership expanded our capacity capabilities and offerings in bolstered our management team of incredibly talented individuals.

There's all these pieces come together, we are highly confident our value proposition and the strength of our position in the industry moving forward.

Our entire team has been hard at work and through the art their collective efforts add yield vision of becoming a leading provider of advanced technologies services and solutions is quickly becoming a reality.

Before wrapping up the call Nicole and I like the rest of the questions of received from investors via email over the last weeks as always we're very accretion of all the questions. The came in the please understand that we can or cannot address every single one of the and especially all the time.

Therefore, we select of what we believe the goes the most important and relevant questions to answer Nicole I'll turn it over to you.

Thanks, Michael kicking it off with our first question are you able to further to provide further details on your relationship with the major E Commerce customer further how long do you expect this relationship to continue.

Yeah on the call as we said on previous calls the simple truth as we can't give you that answer we're contractually obligated to maintain the confidentiality of this relationship.

Nonetheless, you should the will assess the value of this relationship through our future financial performance and we expect this relationship to continue in 2021.

Great.

How do you see how do you foresee the scope of the operating partnership expanding do you anticipate collaborating with athlete on other initiatives in the future of beside the manufacturing of the drug delivery station.

Our relation with Docker is very strong as based on the solid foundation. So yes, we fully expect to be in a position to pursue potential growth opportunities that we believe will benefit both our companies. We view the team of bound Korea's business partners and market allies and they view as the same so we fully expect to combine our strengths in respect of fear of the.

Industry influence and contacts.

Great.

Continuing on the topic about the at what point should investors start to see the revenue being generated from the relationship.

Yeah.

We believe the 2021 will potentially be an inflection year from boundary and by extension AG Eagle on the contract manufacturing side as we work closely the scale production of the delivery stations and presuming the industry embraces and ultimately adopt the boundaries delivery station of the preferred ground support solution for the delivery of packaged goods our revenue should climb accordingly.

Perfect.

Then you are exploring potential M&A opportunities do you anticipate pursuing more relationship similar to the one with Dockery line.

Like taking a minor equity stake in the company, while providing services to propel their growth.

I'll take this one might go up that's okay.

As we look to establish the strong M&A strategy, we have to find it as an extension of our growth initiatives and as a way to expand our client relationship and competencies that would otherwise take much longer to develop on our own. We believe our M&A strategy will demonstrate the I still pairing that had also the potential to create a game changing competitive.

Question for as you go through the acquisition of technology and other athletes.

Lastly, I think the badly we believe that by taking equity Stakes in early growth stage partners. They can further our position as an industry disruptor with the potential to and how enhance our evaluation.

Going on to the next question and our last one for today given the drone market is very fragmented how do you believe that I giggled strong position as an industry leader can that's the leverage to the meaningful growth opportunities Michael.

Yeah. When you combine the fact that we do indeed have a reputation as a pioneer and leader in the commercial drone industry with the facts. The we have a very strong balance sheet and robust cash position and we are on the New York Stock Exchange company with access to additional growth capital. We believe many acquisition candidates will view us as a very attract.

Of acquire this is particularly true if we go head to head with other competitor companies competing against US furnace that for an acquisition. The may not have the same strength and advantage that we offer.

[noise] Moreover from expire.

Experience Barry.

The new contract manufacturing customers.

And new R&D projects with government and enterprise partners, all of which may equate to future revenue growth and deeper market penetration as we move into the future.

Being in support of the on program is one example of this and winning Docker is a valued customer of business partners just another.

Great well Nicole this this concludes our Q and a session before turning the call back over to the operator I want to thank all of our employees partners and shareholders for the support as we continue to plant our flag as a leader in the drone age.

With the strong cash balance and no long term debt, we have the utmost confidence in our financial and operational position and we truly believe we have just scratched the surface of our growth potential.

We look forward to keeping you all the breadth of our progress as we continue to execute on our strategy.

We wish you all nothing but the best during these unprecedented times and thank you for joining our call today.

Operator back to you.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at the line. Thank you for your paper for both of them.

[music].