Q4 2021 Ageagle Aerial Systems Inc Earnings Call

April 12, 2022

Barrett Mooney: Capabilities to multi spectral camera technology and will better serve our customers' needs long into the future.

Barrett Mooney: We anticipate these sensors will be very popular as we have begun seeing growing demand for these two products already early in 2022.

Barrett Mooney: Then in April of last year to help bolster and develop our software offering we acquired the award winning arial intelligence solutions company Measure Global.

Barrett Mooney: Recognized for its cloud based operating system Ground Control the acquisition greatly complement our existing hardware and data collection platform.

Barrett Mooney: Software is a key component to expanding Ageagle's reach. Connecting disparate hardware data points to insights and intelligence is at the core of what Ageagle software development is always focused on.

Barrett Mooney: As we move forward in becoming a global leader in end to end robotic solutions, we need to be able to offer a comprehensive user ecosystem for our customers to operate out of.

Barrett Mooney: The acquisition of Measure allowed us to leap forward with their existing software capabilities already validated by their world class customer base that includes many fortune 500 companies, <unk>, Marathon Pipeline, the U.S. Air Force and too many to name here.

Barrett Mooney: In November with the software solutions that measure provides we announced that we teamed with Wing to integrate the open sky into ground control.

Barrett Mooney: This partnership materially enhances the capabilities that our platform offers to customers by utilizing open skies technology to make it easy for drone drone flyers to abide by aerospace rules and regulations as well as requests authorization to fly in controlled airspace in near real time.

Barrett Mooney: As our ecosystem continues to expand we will look to partnerships like this to not only push forward our company, but the industry as a whole.

Barrett Mooney: Our final acquisition of last year came in October when we acquired SenseFly.

Barrett Mooney: The developer of EBee branded high performance fixed wing drones.

Barrett Mooney: Headquartered in Luzon, Switzerland, SenseFly brings to our company world renowned expertise in the fixed wing drone space as well as existing revenue to help enhance our growth strategy moving into next year.

Slide brings to our company world renowned expertise in the fixed wing drone space as well as existing revenue to help enhance our growth strategy moving into next year.

Barrett Mooney: Since closing the acquisition, we have worked tirelessly to integrate their existing product line with the opportunities we've identified stateside.

Barrett Mooney: Soon after SenseFly was named to the Blue Suas to point a list of drone suppliers by the U.S. Defense Innovation Unit.

Barrett Mooney: This project aims to bring greater variety of small unmanned aircraft systems to the Department of Defense as well as other U.S. government entities.

Barrett Mooney: After multiple successful demonstrations and months of testing our EBee tac fixed wing drone with U.S. Government officials, we became the first approved drome to be added to the DIU Blue AS cleared list. This represents a huge step forward in the validation of our products with our EBee tac now available for purchase by U.S. government agencies in all branches of the military on the GSA through our partner related resellers.

Of our products with our <unk> now available for purchase by U S government agencies in all branches of the military on the GSA through our partner related resellers.

Barrett Mooney: While we continue to integrate our acquisitions into one cohesive offering we also spend time, establishing and deepening new and existing partnerships. We continue to nurture our network of approximately 200 resellers in 75 countries worldwide, which helped us organically grow revenue year over year.

Barrett Mooney: These relationships are going to be critical as we move into our next phase of growth.

Barrett Mooney: Our achievements throughout the year would not have been made possible without the commitment of our talented team now stationed around the world.

Barrett Mooney: From the end of 2020, we have grown to over 150 full-time employees. Over 70% of our expanded employee base now consists of highly experienced engineers and data scientists that are considered experts in their respective fields. Our company is centered around emerging in innovative technologies that are pushed forward by the expert team that we work with every day Without their expertise we would not be where we are today.

We would not be where we are today.

Barrett Mooney: In addition to our growth through acquisition achievements, we also realized significant milestones on our capital market strategy.

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Barrett Mooney: In May we filed $200 million shelf registration to provide a clear pathway for funding our integration and growth initiatives.

Barrett Mooney: Through this process, we named Stifel and Raymond James as our lead investment bankers, who have been instrumental in guiding and executing our funding strategy.

Barrett Mooney: Then in June we were added to the Russell 3000 index, which is used by institutional investors for index funds and as a benchmark for active investment strategies.

Barrett Mooney: Being included in the Russell 3000 index greatly expanded our investor reach and has helped to increase awareness of Ageagle within the institutional investment community.

Barrett Mooney: Overall, we made significant strides in 2021 to lay a strong foundation and set us up for success. With everything we were able to accomplish, I'm very pleased to have stepped back into an operator role as CEO to unlike in capitalized more value with a clear goal of driving profitable revenue growth.

Barrett Mooney: As I stated in my recent shareholder letter I'm very aware of the negative optics that come with leadership turnover that AGGY will have experienced over the past few years. However, I want to reiterate my commitments to the company and my excitement for the growth opportunities on the horizon.

Barrett Mooney: It's been incredible to see Ageagle transformed from a small drone manufacturer based in the OTC, Kansas into an NYSE listed company that has a global team developing and delivering full stack autonomous robotic solutions in an array of critical industries.

Ray a critical industry.

Barrett Mooney: I fully intend to remain in our hands on leadership position, ensuring the execution of our growth strategy. This vision not only includes drones, but an entire ecosystem that supports autonomous robotics capabilities to help our customers perform their work as efficiently as possible.

<unk> perform their work as efficiently as possible.

Barrett Mooney: While our 2021 year over year revenue growth was fuelled by the successful execution of our growth through acquisition strategy, we anticipate our trajectory will be accelerated by numerous organic growth initiatives in 2022 and beyond.

It was fueled by the successful execution of our growth through acquisition strategy, we anticipate our trajectory will be accelerated by numerous organic growth initiatives in 2022 and beyond.

Barrett Mooney: Before I share more details of our growth plan I'd like to turn it over to our CFO, Nicole Fernandez Mcgovern to provide a recap of our 2021 financial performance. Nicole over to you.

Of our 2021 financial performance Nicole over to you.

Nicole Fernandez McGovern: Thanks, Barrett and thank you all for joining us today. Yesterday, we filed our 10-K with the SEC, which is accessible on the SEC.com and in our Investor Relations section of the Ageagle website. Additionally, we announced some key highlights from our 10-K via a press release, this morning, which I'd like to recap here.

Nicole Fernandez McGovern: Looking at the results for the full year 2021, total revenue increased 659% climbing to $9.8 million compared to $1.3 million in the prior year period.

Nicole Fernandez McGovern: This increase was the result of the three aforementioned acquisitions contributing meaningful revenues throughout the year.

Nicole Fernandez McGovern: Down the full revenue results was our RedEdge and Altum sensor sales that totalled approximately $6.8 million. Our drone and custom manufacturing sales totalled approximately $2.4 million and our software as a service subscription sales that totalled approximately $500,000.

And our software as a service subscription sales that totaled approximately $500000.

Nicole Fernandez McGovern: Consolidated gross profit margin on total revenues was 44% compared to 45% from 2020.

Nicole Fernandez McGovern: The decrease was primarily a result of an increase in cost of components and parts, mainly due to supply chain constraints in the marketplace today, we face.

Nicole Fernandez McGovern: Our net loss available to common stockholders for 2021 was approximately $30.1 million or 43 cents loss per share compared to a net loss available to common stockholders of approximately $14 million or 35 cents loss per share for 2020.

443 loss per share compared to a net loss available to common stockholders of approximately $14 million or <unk> 35 loss per share for 2020.

Nicole Fernandez McGovern: Our cash position as of December 31, 2021 was $14.6 million compared to $23.9 million at the end of 2020. In addition, total stockholders equity increased substantially to $76.5 million as of December 31, 2021, compared to $26.4 million as of the end of 2020.

Nicole Fernandez McGovern: The increase in cash was primarily as a result of our investing activities - increased investing activities related to the three aforementioned acquisitions.

Nicole Fernandez McGovern: Lastly, I want to provide an update on our capital raising efforts. From May 26, 2021 through December 31, 2021, we raised approximately $30.9 million by utilizing our ATM with our colleagues at Stifel and Raymond Jones. These efforts have provided us the resources to pursue our goal of building a full stack solution that we believe will generate significant opportunities for growth across both commercial and government defense verticals, ultimately delivering increased substantial value to our shareholders. Now I'll pass it back to Barrett to go over more detailed review of the state of the industry and our vision moving forward. Barrett.

<unk> will generate significant opportunities for growth across both commercial and government defense verticals Ulf.

Ultimately delivering increased substantial value to our shareholders now I'll pass it back to bear to go over more detailed review of the state of the industry and our vision moving forward Barrett.

Barrett Mooney: Thank you Nicole.

Barrett Mooney: To set the stage for our growth opportunities, progress in artificial intelligence, machine learning and navigation technology is leading to a new generation of autonomous robots and UAVs being increasingly commercialized.

Barrett Mooney: They are being utilized in both indoor and outdoor environments and in applications that span mapping, inspection, agriculture, military defense, public safety, package delivery, transportation, warehouse management among many others - and this is just the tip of the proverbial iceberg.

And this is just the tip of the proverbial iceberg.

Barrett Mooney: Autonomous things that will increasingly takeover repetitive, dangerous and remote labor previously conducted by human workforces. This significantly bolsters operational efficiency for company, reducing costs, while increasing output given robotics ability to operate 24/7 with real time decision making and optimization.

Barrett Mooney: Autonomous robotics requires a thoughtful architectural hardware and software working and coordinated effort to streamline and improve workflows and outcomes based on the valuable actionable data driven insights that they capture and provide. It is our belief that as an autonomous technology continues to evolve it will become more and more integrated and intelligently connected with humans as well as with the environment in which they operate.

<unk> in which they operate.

Barrett Mooney: Ageagle intends to remain at the forefront of this evolutionary process, serving as a respected industry innovator and enabler through our unified line of industrial industry trusted drones sensors and software I believe that when people look back at our company in the years ahead they will realize that the groundwork laid in 2021 through our acquisition strategy, we will have a far reaching impact on how the industry ultimately matured and prospered.

Three ultimately mature and prosper.

Barrett Mooney: With this industry backdrop and solid foundation in place it's been one of my top priorities since rejoining our CEO to ensure our entire organization is aligned on the growth objectives at hand.

Barrett Mooney: Today in 2022, we are focused on capitalizing our specialized expertise in innovating and commercializing advanced drone sensor and software technologies. In fact, 2022 will be defined by organic growth through meaningful sales performance as we aim to provide our existing and future customers with autonomous robotic solutions that meet the highest possible safety and operational standards to fit their specific business needs ,with world class sensors, software and airframe alongside an immense pool of talented engineers and data scientists, we have the utmost confidence in our ability to deliver best in class solution.

In innovating and commercializing advanced drone sensor and software technologies. In fact, 2022 will be defined by organic growth through meaningful sales performance as we aim to provide our existing and future customers with autonomous robotic solutions that meet the highest possible safety and operational standards.

Their specific business needs with World class sensors software and airframe alongside an immense pool of talented engineers data scientists, we have the utmost confidence in our ability to deliver best in class solution.

Barrett Mooney: To deliver upon our organic growth objectives, we've established three centers of excellence that our leadership is challenged to cross pollinate ideas industry insights and inter disciplinary skill sets.

Barrett Mooney: The goal of this is to generate intelligent autonomous solutions that efficiently solve problems for our customers. As I stated in my March letter to shareholders, we're going to be more than just customer and product centric will be obsessed with innovation and knowing the needs of our customers before they do.

Barrett Mooney: Looking at our sales efforts, we will continue to capitalize on growth opportunities stemming from the application of our solution experience and expertise in agriculture, energy utilities and mapping and surveillance. However, it is also our belief that virtually every commercial and government enterprise will benefit from aggregate autonomous robotic innovation.

Energy utilities and.

And mapping and surveillance. However, it is also our belief that virtually every commercial and government enterprise to benefit from aggregate autonomous robotic innovation.

Barrett Mooney: To really capitalize on these potential opportunities we have been intensely focused on building out an appropriate salesforce utilizing a combination of our extensive reseller network across the globe and direct to consumer channels. We're also insuring we're evangelizing our products to the right people through effective marketing tactics.

We're evangelizing our products to the right people through effective marketing tactics.

Barrett Mooney: We intend to adopt a proactive approach to showcase our expertise and capabilities at numerous industry events, conferences and trade shows in the months ahead. We also look forward to participating in multiple investor conferences, so that we can help the institutional investor community come to appreciate the long term sustainable value proposition inherent in our company today and in the years ahead.

Barrett Mooney: I look forward to keeping you all apprised of the progress we make throughout this journey and to ultimately drive shareholder value. I will return for some closing remarks, but I'd like to turn it back to Nicole for our prepared Q&A session. Nicole, over to you.

Nicole Fernandez McGovern: Great. Thanks, Barrett. Let's address the questions we received from investors at this point.

Nicole Fernandez McGovern: With the ongoing conflict with Russia and Ukraine are these applications to utilize the EV Tac for this situation?

Barrett Mooney: First I'd like to say our hearts go out to all the people affected by must constantly and we stand in support of those promoting a speedy and peaceful and to the military aggression.

Barrett Mooney: But directly the EBee Tac offers an aerial reconnaissance platform for a variety of military applications, including an active conflict areas, such as that which is transpiring between Russia, and Ukraine. Our systems provide increase flight time for surveillance over our competitors and can offer significant improvements to the information available to forward operating units when the conditions are changing drastically, thereby improving the safety and effectiveness of military personnel.

<unk>, an active conflict areas, such as that which is transpiring between Russia, and Ukraine or system.

Divide increase flight time for surveillance over our competitors and can offer significant improvements to the information available to forward operating units when the conditions are changing drastically.

By improving the safety and effectiveness of military personnel.

Barrett Mooney: So in short yes.

Nicole Fernandez McGovern: Great next question. Given the company's global footprint these days, what percentage of sensors and airframes are manufactured in the U.S. versus other countries?

Barrett Mooney: This is a great question, because we really pride ourselves on our manufacturing prowess and capabilities.

Barrett Mooney: All of our hardware is manufactured either in the United States or Switzerland. While we've continued to shore up our supply chain a few of our components are still sourced from a variety of locations around the world, but all design. assembly and testing comes out of one of our facilities either in the United States or Switzerland.

Nicole Fernandez McGovern: Perfect.

Nicole Fernandez McGovern: Next question. With the EBee Tac added to the Blue UAS cleared list by the defense innovation unit are there meaningful cross selling opportunities for other for other offerings, such as sensors or software?

Barrett Mooney: Absolutely absolutely we offer a variety of solutions and our expertise in combining software and hardware development makes us an ideal partner for many industries, including the government and defense sector. So cross selling is a big focal point of our growth strategy going forward. We're actively combining and training our sales team to work in a coordinated matrix way so that we can the best solutions for solving customer problems. If we don't have the best solution, we can build it.

The best solutions for solving customer problems. If we don't have the best solution, we can build it.

Nicole Fernandez McGovern: Okay. Next question. Barrett, you mentioned in the shareholder letter that it was your goal to achieve cash flow positive as quickly as possible. What are some of the steps you've taken to accomplish it and what is the catalyst to getting to that point?

Barrett Mooney: I do believe that growing our way to cash flow positive is the best approach as quickly as practicable as for the business.

Barrett Mooney: To that end, we are reorganizing our team to focus on a matrix leadership style that takes advantage of our team's expertise regardless of geography to support the best in class product development and cross selling opportunities as I mentioned before.

<unk> on a matrix leadership style that takes advantage of our team's expertise regardless of geography to support the best in class product development and cross selling opportunities as I mentioned before.

Barrett Mooney: We're also looking at how our software and SaaS offerings continued to accelerate our growth by selling deeper into our customers' organization by offering better and more integrated solutions.

Barrett Mooney: It's a key element that the catalyst is going to be our synergistic approach. Being able to manufacture and build solutions under our own umbrella in the United States and in Switzerland, being able to design, new and innovative sensors and hardware and then wrapping that together at the customer point of interaction with really keen software that expresses a data driven solutions innovative answered some of their challenges that is going to be the big catalysts that are going to get us past that. So my goal here with this cash flow positive as quickly as possible is really to grow our way there through the synergy and innovation.

The customer point of interaction with really keen software that expresses a data driven solutions innovative answered some of their challenges that is going to be the big catalysts that are going to get us past that so my goal here with this cash flow positive as quickly as possible is really to grow our way there through the synergy and innovation.

Nicole Fernandez McGovern: Well, thank you for that as CFO I truly do appreciate that. So moving on to our next question. What product offerings do you expect to see the most sales growth from in the near term, Barrett?

Barrett Mooney: We expect strong sales growth in all of our product categories. I mean, the most exciting and fastest growth revenue areas will be where we have integrated sales, where we have customers that are using multiple Ageagle products, that are driving single synergistic and scalable product ecosystem.

Barrett Mooney: We have a really good outlook on how software is shaping up in its utilization, how that is driving collaboration with sensor unit and our brand new sensors as I mentioned earlier in my remarks, and so we have really high hopes for the performance of those units as well as some innovative stuff on the flight hardware side with EV Tac and units coming from those. So I mean, what product offerings do I expect to see the most sales growth from is really all of that I mean, we have a lot of growing room with where our products are positioned in the marketplace and we're very excited about what that's going to mean for 2022 and beyond.

Outlook on.

On how software is shaping up in its utilization how that is driving collaboration with sensor unit and our brand new sensors as I mentioned earlier in my remarks, and so we have we have really high hopes for the performance of those units as well as some innovative stuff on the flight hardware side with EV Tac and units coming from those so I mean, what product offerings.

I expect to see the most sales growth from is really all of that I mean, we have a lot of growing room.

With where our products are positioned in the marketplace.

And we're very excited about what that's going to mean for 2022 and beyond.

Yeah.

Nicole Fernandez McGovern: Great. Next question is hemp overview as a solution. Any plans to further expand it into new states or with commercial opportunity?

Yeah.

Barrett Mooney: Well, we're always looking to expand the hemp overview in any of our solutions that are on the market. We still offer the hemp overview software platform and are regularly engaging new state government customers. While this part of our business has certainly slowed coming from the news cycle perspective, we do continue to actively look for growth opportunities, including partnerships, new contracts and additional key feature development. Recently, we were even able to add additional crop tracking services to the state of Florida, leveraging our existing software features but selling basically more to our customers who appreciate the flexibility of that product offering.

Coming from the news cycle perspective, we do continue to actively look for growth opportunities, including partnerships new contracts and additional key feature development recently, we were even able to add additional crop tracking services to the state of Florida, leveraging our existing software features but selling basically more to our customers who appreciate the flexibility of that product offering so.

Barrett Mooney: There is always a hope to expand any of our commercial solutions, whether that be through partnerships and new contracts or whether we're expanding feature development on the platform itself.

Nicole Fernandez McGovern: Great.

Nicole Fernandez McGovern: Final question for today is what is Ageagle;s plans for drone delivery? Do you believe there are enough near term growth opportunities to invest in or are you in a standby mode to see how the regulatory landscape pans out?

Okay.

Barrett Mooney: Ageagle has a history of collaborating with companies looking to manufacturer UAVs, ground support equipment and testing equipment directly related to the drone delivery pipeline in an ecosystem.

Barrett Mooney: While we still cannot disclose either a previous or current relationships due to strict NDAs which are in place to protect us and our partners. There are several key opportunities where aggregate was best suited to develop solutions for airborne drone package delivery. With regulations still being a focal point of the changing landscape, the B2B package delivery has a unique set of challenges.

Barrett Mooney: Several of our projects, including our prior work with Mailbox systems Valkyrie are emerging a safe options. So as we look to the future our approach is the same as it's always been and has been for several years. We offer hardware and software solutions that power both the autonomous flight and ground control components of autonomous drones and drone delivery so with these tools.

Barrett Mooney: These tools are absolutely critical to the infrastructure of robotic package delivery and we anticipate that we will continue to be on the forefront pushing what's capable and what's producible.

Pushing what's capable and what's producible.

Barrett Mooney: So this concludes our Q&A session, but before we end the webcast I just wanted to reiterate our vision for the future. We are one company with one vision. While we've made substantial progress over the past few years to be in a strong position we're in today I firmly believe we've only scratched the surface on the true potential of this company. We were fortunate enough to get a head start on this fast evolving industry and our intense focus on delivering some of the most innovative autonomous solutions in the market is poised to keep us at the front of the pack.

Barrett Mooney: We are one company with one vision. While we've made substantial progress over the past few years to be in a strong position we're in today I firmly believe we've only scratched the surface on the true potential of this company. We were fortunate enough to get a head start on this fast evolving industry and our intense focus on delivering some of the most innovative autonomous solutions in the market.

Poised to keep us at the front of the pack.

Barrett Mooney: As I stated in my shareholder letter, good fundamentals reflect good businesses and good businesses command premium valuations in the market.

Barrett Mooney: It is my promise to you that we will remain committed to seeing our organization deliver upon the growth objectives we've laid out to generate consistently strong financial performance. With that 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 sincerely appreciate you for staying with us throughout this journey. Nicole and I look forward sharing our first quarter results for 2022 next month.

For 2022 next month.

Barrett Mooney: Operator, back to you.

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

[music].

Uh huh.

Q4 2021 Ageagle Aerial Systems Inc Earnings Call

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