Q3 2022 Ageagle Aerial Systems Inc Earnings Call

This increase is primarily attributable to increased general and administrative sales costs and increased new product development costs related to our sense by acquisition in 2021 the.

The increase was also attributable to a decrease in gross profit margins due to supply change Chris streets.

During the three months ended September 30th I, Giggled satisfied info and payment for its 2021 acquisitions of micro sense sense by SA and ink and a 50% discount of the original hold back 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 32022, IV goes total comprehensive net income attributable to common shareholders was $1 3 million or.

<unk> per share compared to a loss of $3 8 million or <unk> <unk> loss per share.

Now looking up a little.

The results for the first nine months of 2022 total revenues climbed $14 6 million up 158% to five 7 million when compared to the prior year period.

As part of the Central acquisition, which occurred in the fourth quarter of 2021. The company recorded incremental revenue for ebay drove a $7 9 million, which were not included in the prior year financials again due to strong global demand for the ultimate PT and read Hp's 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 480000 compared to 360000 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.

<unk> thousand from 127000 offsetting the increase was a decline in south subscription sales of hemp overview, which totaled 91000 down 26% from 122000.

During the higher general and administrative R&D and sales and marketing expenses associated with our acquisition of satisfied in 2021 loss from operations increased to $18 million from $11 6 million or 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 adjustment 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 or 14 cents loss per share.

Our cash position as of September 32022 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 32022 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 and 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 their to go over the operational highlights and a review of our strategy moving forward go ahead there.

Thanks, Nicole and Hello, everyone. We had an exciting quarter here at a giggle highlighted by the strong demand we received from both our EDI drones that are often PG and read Hp's sensors.

Combination 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 <unk> 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 EBIT 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.

Very proud of what our team has been able to accomplish over the quarter. We are beginning to see all of their hard work, culminating together the tangible results.

Ties into our specific segment updates starting with our fixed wing drones R. E. D line is a strong contributor for us this quarter in part fueled by the demand we've received who's being added to the department of Defense is Blue UAS cleared list.

As we got it because we were added to the list in May earlier. This year, we have sold over 50 <unk> to the U S government with strong continuous demand in our pipeline.

We are also very recently began a partnership with government contractor darlie to further reach into the U S. First responder and tactical defense markets Darlie as a leading supplier of training and material support to the U S Department of defense and we believe this partnership will significantly bolster our penetration into government applications by leveraging <unk> expertise in the space.

Our new FAA approval, that's critical to tactical search and rescue firefighting missions Darlie looks to supply our <unk> tax to safety and defense professionals 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 X series drones became the first and only unmanned autonomous system to be approved by the FAA for advanced drones operations over people and moving vehicles. These approvals allow EV drones to operate without an FAA waiver over people and moving vehicles, which is often a difficult and costly process for our customers.

Brings additional commercial use cases for our drones and demonstrates our ability to bring industry changing technology to practical operation.

We built a competitive moat for ourselves with our regulatory wins in Europe , Canada, and Brazil as well.

Latest win with the FAA has put even more distance between us and our competitors. We expect these waivers will be strong catalysts towards additional commercial orders from safety minded industry.

Our fixed wing segment.

He is on a solid growth trajectory and our results this quarter give a glimpse of the potential we believe our drones hat with the strong demand we have in our pipeline and the recent FAA approval. We are focused on delivering best in class drone capitalizing on the momentum we've gained.

Moving onto our sensor segment, our sensors spearheaded by the Olson PT in the Red HP 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 back.

And we expect to Felicia was our orders by the end of the year, our sensors have repeatedly proven their capabilities in a multitude of use cases that have been generated by industry professionals are sensors unlock details that when paired with the correct data analytics tools offer tremendous insight within forestry conservation agriculture, and utility sectors will continue to improve in <unk>.

Kris our line of unique and charismatic products for our customers, who require high quality data and insight.

Moving to our software division measure ground control and hemp overview, our software division has contribute much to AG eagle than what our sales figure 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 technologies, we continue to maximize.

The assets, we have and evolve our user experience and our other core products. We laid the ground control has potential to play an integral part in the overall drone space, particularly with commercial drone operators and we will 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 welcomed the launch of our new website, which brought together our various product channel.

As mentioned in previous call. Our newly designed website is a better reflection of our core offerings and shows our path towards being a stack 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 highly recommend visiting the site to learn more about our market offerings and how we are supporting customers across our broad portfolio.

As part of a brand unification, we have identified several opportunities to optimize communication and cost efficiencies throughout our global team to.

To further foster a stronger corporate culture and create valuable bonds within the team we have chosen to consolidate our U S operations and transitioned to a centralized location near Raleigh North Carolina.

Based on production capabilities in stock inventory levels, we are targeting a year end move and our offering our team members' relocation and work from home options as applicable to their current roles, we will not be reducing our slowing down our U S manufacturing capabilities in any way.

This move will only help us reduce our costs. It will also create a stronger foundation throughout at Eagle and make us a more connected company.

With the speed at which add Eagle 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.

Downer office spaces, we should see some reductions in our operating cost flow and our operating costs flow through the beginning of next year.

Our move to North Carolina, as an important step towards reestablishing, our core identity and company culture, and bringing our teams closer together.

Our bottomline will begin improving as a direct result, 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 AG Eagle Ford success, we're seeing consistent strong demand for our hardware products, while our software assets are evolving to create commercial opportunities in fast growing industry with new FAA approvals in place. We are excited to capitalize on a regulatory one.

Over the long term I would like to reiterate our focus on profitability, we have 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 and 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.

Eagle Ford, our shareholders and position ourselves for long term profitable success, we firmly believe we remain on track to accomplish that mission.

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

Great.

Let's address the questions we received from our investors today.

With the success of the E V Tach and now new FAA approvals, where do you see the EBIT line going next.

Very great question, I mean, our <unk> line and fixed wing. The R&D 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 and such amount of it continues to get high quality data backed with operators with efficiency and sustainability and that <unk>.

He is a valuable tool to industry professional 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 <unk>.

R&D time wisely this year, so stay tuned.

Great. So next question.

As you have success with your reseller and distribution network do you still see your overall sales model shifting towards <unk> 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 is handle on <unk>.

<unk> and knows how to operate many of our borrowers offer training and additional services and products at work with hours to enhance the customer value output.

So no I wouldn't call it a shift we value our vars and their offerings to customers, we do see several areas, where a partnership or direct fleet.

Fleet sales approach may be better suited.

It's being direct between us and our large enterprise and we can do 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.

Okay next question.

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 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.

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 will start to look at what the merger and acquisition landscape looks like.

Great are there any partnerships in the pipeline with any other drone 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.

In aggregate, 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 a meaningful revenue gains through that that portion of our expansion. So there is 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.

So the last question for this afternoon is with organization seeing success across a multiple of industry do you expect to eventually move away from the AD 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.

Like many companies we are growing fine that the skills products 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 a question discusses some some corporate rebranding.

We're going to continue to provide value to our customers and corporate rebranding as a big undertaking one day that might be part of the discussion for a call like this but but not yet.

This does conclude our last question for our Q&A section I would like to thank you all for joining our webcast today and I'd like to thank all our shareholders for their continued support and we appreciate you staying with us throughout this journey 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.

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