Q4 2020 Ageagle Aerial Systems Inc Earnings Call

Company officers will respond to questions that were previously submitted via email by analysts and investors before I introduce Michael I remind you that during today's call, including the question and answer session statements that are not historical facts, including any projections statements regarding.

Teacher events for our future financial performance or statements of intent or belief are forward looking statements and are covered by safe Harbor disclaimers contained in the Companys public filings with the SEC.

Actual outcomes 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 AG Eagle's CEO, Michael Droste Sir.

Yes, thank you for Linda.

Good afternoon, everyone. It's a pleasure to be speaking to all of you again as we have plenty of updates to discuss.

Going to kick off by providing a high level review of our record results.

Sales for 2020 from there I'll go through various operational and business development initiatives, including our recent acquisition on Microsoft and.

And lastly, Nicole and I will close the call with a Q&A session to respond to questions submitted via E mail over the past couple of weeks.

With that let's start off with a quick overview of our financial results for 2020.

I'm very pleased to.

A report that we had a record year with revenues of $1 3 million.

Which is up more than four times from 297000 in 2019.

The majority of our annual revenue in 2020 was attributable to our major E Commerce client, which engage AG eagle in late 2019 to manufacture and assemble Uavs designed to meet the critical.

<unk> specifications for drones to deliver goods to urban and suburban areas.

As a reminder, we are not at Liberty to disclose the name of the client or any sort of details regarding our work with them as a result of our mutual NDA.

Revenue growth was also positively impacted by the continued focus on expansion of our platform providing aerial imaging.

And analytic solutions, which serve new and emerging markets, including registration oversight compliance on Perm field by state departments of agriculture.

Our gross profit margin also continued to increase rising to 45% on revenues in 2020 compared to 32% in the prior year.

The primary factor.

<unk> seen for the increase in our gross profit margin was the continued shift to a higher margin mix of products and services.

Yeah.

For many on this call today 2020 was a pivotal year in many respects, including from a capital markets perspective.

We raised a significant amount of capital, which further bolstered our ability to execute on our strategic initiatives and accelerate.

Celebrate our growth, while achieving favorable market support.

In fact, according to various market sources AG was the best performing stock on the New York Stock exchange in 2020.

As a result cash on hand is as of December 31, 2020 totaled $23 9 million.

Subsequent.

Went to the end of the fourth quarter, we raised an additional $8 million through the exercise of warrants, which further strengthens our capital position moving forward.

Additionally, as many of you are aware, we have filed a shelf registration with the SEC, which for us.

Which will provide us with the ability to raise up to an additional $200 million on the future.

This gives us flexibility for if and.

When our capital requirements dictate a need for even more cash to support our ongoing M&A and organic growth initiatives.

Now turning to operational updates.

During Q4 and early 2021, we accomplished several key objectives and announced a number of important developments on materially strengthens enhance our company on a number.

Number of mission critical fronts.

From a human capital perspective, we continue to attract and hire some of the industry's best talent.

Most recently, we announced the addition of a new Vice President business development, and a new director of business development for drone solutions, Paul Allen and Mary Beth Force.

Both palmeri breath bring agata.

Invaluable experience market influence and deep relations with the drone industry that we expect to fully leverage to support and further accelerate our penetration in the drone market.

We have also increased the team in Wichita by recruiting several new positions that are needed in order to support our various growth and expansion initiatives.

I also want to make you aware.

That we have changed our transfer agent of record to quantity leveraging their EQ platform to provide a more seamless and simplified process for shareholder services.

To get in contact with our new transfer agent you can find the information in the investors section of our corporate website.

Additionally, we changed our independent audit firm to with them.

Which is a nationally recognized and ranked public accounting firm of.

Of the top companies across the country.

Both of these initiatives further strengthen our controls at the public trough company and are in other market progress on just how far AGGY growth com this past year.

Lastly, we also engaged on new public relations firm clarity.

To lead our brand building and PR activities.

Clarity is a high powered award winning firm with a breadth of experience in a variety of industries across the globe and are consistently won various industry awards and recognitions. We're very excited to be working with clarity team and we've already made great progress on starting our engagement a few weeks ago.

We look forward to unveiling.

Some interesting new PR campaigns in the upcoming months.

Now turning to our progress with our business development initiatives.

In February of this year, we announced that we teamed up with our partner Valkyrie to produce an on demand drone delivery system to deliver food and beverages to golfers, while theyre playing golf on the golf course, we.

We conducted our phase one.

Demo the system for officials at Sun City Country Club in Arizona, and this demo was very successful.

We are now advancing to phase II of demonstration and we look forward to sharing more detail details about this exciting drone delivery solution on the future.

Once we prove success our solution has a fairly sizable market opportunity with over 9600 golf courses on the U S alone.

We also believe this pilot will demonstrate just one of the many ways AG Eagle and Valkyrie drone delivery can be used to optimize fast and secure deliveries range.

Ranging from hospitality to commercial packaging deliveries and beyond.

As we mentioned on our last call in November AG Gigawatts selected industry partner on the next phase of FAA.

UAS integration pilot program also known as the beyond program.

We remain confident that participating this program will empower our company to lead select pilot projects in key areas of interest.

In fact, we proposed a framework for two pilot projects for the B on our program one focused on drone package delivery and one on inspection.

Although it is still on the early days for these two pilot projects, we look forward to providing more details as they come and take shape.

Okay.

Subsequent to year end, we started 2021 off strong in our AG solutions business with the state of Iowa, signing a three year contract for AG Eagle's hemp overview solution.

Throughout the 2020 planning season.

And I was department of Agriculture, and land stewardship manually manage the registration oversight and reporting of hemp planting.

This proved to be incredibly tedious and inefficient.

After going through our demo and realizing the immense value of hemp overview was providing the state of Florida. The regulators in Iowa, New was time to utilize the technology solution designed to meet unique.

Complexities of the hemp industry and as a result, they signed a three year contract with AG Eagle through the 2023 planting season.

Now both the state of Florida, and Iowa are benefiting from our purpose built aerial imaging and data analytics solutions for hemp crops and we are working to introduce hemp overview to other states on tribal nations as a solution that can work for them as well.

Stay tuned for more news on this front in the upcoming months as we continue to expand our footprint in other states and tribal nations.

Now, let's discuss another important milestone that AG, you'll achieve that started this year.

In late January we were pleased to announce the acquisition of Seattle based micro sense from pair at a French drone company in a cash and stock transaction valued.

That $23 million.

With this acquisition, we've officially launched AG growth new sensor solutions business.

Recognize world worldwide as one of the most trusted brands in drone based multi spectral imaging because its founding in 2014 Michelson sensors are sold in over 70 countries through its well established reseller network.

In addition, Microsoft sensors are integrated in over 150 different fixed wing and multi copter drones in the market.

Microphone hold a significant share of the drone multispectral sensor market, which we intend to increase in 2021 and beyond.

This acquisition not only brought aggregate best in class proprietary sensors, but.

It also added a world class team of talented system engineers developers and support staff, who are among the best in the drone sensor industry.

The integration on micro sense into the AG Eagle organization hasn't been incredibly smooth.

<unk> been working together to define and progress our collective operational strategies for building on Microsemi for success in the AG industry.

While at the same time expanding into the broader drone solutions industry for a wide range of commercial and industrial applications.

Ultimately, we believe this acquisition will empower AG Eagle to drive true innovation advancements on commercial drone systems and solutions for a number of high growth industry segments.

The strategic Union of our skill sets.

Complementary technology expertise and shared industry experience should position us well to capitalize on the growing demand for drone enabled solutions solutions that can materially improve how businesses operate.

As we move forward through 2021, we are very excited about advancing the many initiatives. We have launched in the last several months to secure the long.

Growth and success of our Eagle.

Given the sheer enormity and diversity of these opportunities in the emerging commercial drone industry. It is vital to our long term success to remain highly focused.

With that we intend to focus our energy talent and resources on three primary growth objectives.

First.

Long term <unk> solutions.

We plan to leverage our reputation as one of the leading technology solution providers for the agriculture industry as we look to increase market share through delivery of best in class drones and data analytics for him and other commercial crops.

Next day sensor solutions, our aim is to establish AG eagle as the world's preferred.

<unk> advanced proprietary multispectral drawn sensors, serving the aerial mapping and analytic needs of the agricultural and broader drone markets.

And third is drone solutions empowering the drone age by providing American made tailored drone solutions for the world, including design manufacturing Assembly.

So we're testing and R&D for countless commercial and industrial applications.

Through these three focus areas along with everything we accomplished in 2020, we truly believe that AG Eagle is at an inflection point in the global commercial drone market and we continue to position the company as one of the global leaders in the drone industry.

Before wrapping up the call Nicole and I would like to address some other questions. We received from investors by email over the last few weeks.

As always we are very appreciative of all the questions that came in but please understand that we cannot address every single one in a specific amount of time. Therefore, we selected what we believe the most important and relevant questions to answer Nicole I'll turn it over to you.

Great. Thanks, Michael kicking it off with our first question AGGY go ahead, several shareholder last day outstanding as a result of the short seller report that came out in February can you speak to these losses and the company's ability to defend itself.

Sure Nicole as we stated in our response PR shortly after the initial attack on AG.

AG Eagle the short seller report released by <unk> research contained faults inaccurate and misleading information. It was a clear attempt to manipulate and profit from AG Eagle's, resulting stock price decline.

We were able to easily refute the false claims from our report and therefore, we believe the lawsuits are equally baseless and meritless.

While.

While we cannot comment on ongoing litigation, we remain confident in our legal abilities defense and hope to have the situation resolved as quickly as possible.

Great.

Next question.

Rates to our acquisition of Microsemi and the investment in battery is your focus going to be further integrating and capitalizing on these partnerships where do you.

Sales plan to continue pursuing M&A opportunity. If it's the latter is there more specific area of your business Youre looking to bolster such as software additional hardware component manufacturing et cetera.

Yes, great question, M&A and organic growth will both play key roles in AGGY goes growth strategies moving forward because.

As I mentioned, our growth will center on delivering American made tailored AG sensor and drilling solutions for the world. So we will continue to actively seek out strategic opportunities for our sustained long term growth.

Great. Next question also has to do with microphones with might've been having an established revenue.

New stream and customer base is it fair to assume this business will make up the majority of your revenue in 2021.

Yes, although micro sense will represent a material portion of <unk> revenue for the foreseeable future. We do believe the continued execution of our organic growth strategy will result in significant new revenue for AG Eagle in 2021.

Perfect.

Continuing also regarding the Microsemi acquisition and talking about our continued build out of our management and manufacturing teams in Wichita at this time, how many employees does <unk> go ahead.

Yes, great question, especially given the emphasis I placed on building a world class highly dynamic and.

Diverse team of professionals at this time, we have a total of 32 full time employees and we are rapidly growing our team.

Yeah.

Next question has to do with our hemp overview platform.

With the continuing.

With us continuing to gain traction in the industry on the regulatory side of that thing.

Have you had any conversations with businesses large hemp farmers that can benefit from the platform's ability to monitor hemp crop health.

Yes, we routinely speak with farmers in our ground for us about opportunities to leverage AG goes ax solutions to help them to address and optimize crop health and yield as.

As we've noted on the notice.

We noted in the past it is our belief that <unk> represents the first agricultural technology company to bring to the market and advanced AG Tech solution that.

That is designed to meet the unique complexities and vigorous oversight compliance and enforcement demands of the emerging American hemp industry, we firmly believe that hemp overview addresses the unique needs and demands.

Of key industry stakeholders, which includes a vast array of farmers.

Great.

Most recently has the global computer chip shortage affected I giggle further do you see foresee any other supply chain issues that could affect us and income.

Nir.

Yes.

And in 2020, we did experience from supply chain delays due to primarily to logistic issues related to COVID-19 shutdowns.

We do anticipate some of these delays to continue in 2021 at this time, we are very proactively sourcing components for our manufacturing of sensors and your own solutions to minimize any disruption to our business.

Perfect and our last question for today will there be an opportunity in the near future to see AG goes drone capabilities and actions similar to the video you posted for the golf course demo.

Oh, most definitely in addition to conducting more demos for other golf courses around the country, we plan to expand to other commercial and industrial markets.

We believe this end to end drone solution can prove to be a more safe reliable and cost efficient alternative and ultimately solve important business challenges across multiple industries.

Great and thank you.

Yeah, well Nikola for this concludes our Q&A session, but before turning the call back over to the operator I want to thank.

All of our employees partners and shareholders for their continued for a result support that result in a record year for AG Eagle.

Through the addition of micro sense bolstered management team and strong operational and financial positions. We remain highly confident in our ability to execute our growth initiatives, while continue to prove our value.

<unk> in this emerging market.

As I stated in the past we are only getting started and have just begun to leverage the power of the platform and technology that we have.

We will continue to keep you abreast of our progress providing all pertinent and material updates on the business as we continue on this journey together.

We hope you all stay safe.

And healthy out there and thanks again for joining our call today, 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.

[music].