Half-Year 2023 AgEagle Aerial Systems Inc Earnings Call
Good afternoon, everyone and welcome to egg Eagle aerial systems 2023 second quarter results webcast presenting on today's webcast, our AG Eagle's Chairman and C E O favorite Mooney and Nicole Fernandez Mcgovern the company's chief.
Actual officer and executive Vice President of operations. He taught before I turn the floor over to them I remind you that during today's call statements that are not historical facts, including any projections statements regarding future events or future financial performance or statements of intent or belief our forward look.
Statements and are covered by the 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. At this time I would now like to introduce the company's chairman and CEO Baer.
Mike Mooney Barrett.
Yeah.
Thank you Morgan and good afternoon, everyone. It's a great pleasure to be hosting todays webcast and we thank you for joining us and for your support of AG Eagle today I'll be focusing my comments on two primary things. The first is our progress on the integration of our business and operating units and the impact that's having on cost reduction and our relentless march towards positive cash flow.
Second our focus on product innovation and industry leadership and the role we expect these to play and our future financial performance, let's start by having the call will take us through the Q2 results in detail and then I'll continue with my remarks after that Nicole why don't you get us started.
Thank you Garrett and good afternoon to all who have joined US for this live webcast yesterday afternoon. After the market closed we filed our 2023 second quarter report on Form 10-Q with the SEC.
You have all had a chance to review it you may access it on the SEC dotcom on Yeah, I think on Investor Relations section website on our website under SEC filings.
I encourage everyone to read our 10-Q and other filings with the SEC to ensure you have a whole lot of understanding of our business financial results and other important information disclosed.
Again by first reviewing the highlights of it.
Reflected in our income statement revenues for the first three months ended June 32023 totaled 328 million, which compared to 5.29 million reported for the same three months in 2022.
38% decrease in total revenues was largely attributable to lower sales of our E. V lineup Jones during the quarter, which contributed one point to $7 million in revenues to total revenues compared to $3 four.
<unk> 4 million for the second quarter of 2022.
Overall the decrease in <unk> sales were expected ahead of the launch of our new <unk> vision. Many customers have indicated that they are delaying their drum procurements as our next generation EV vision unmanned aerial system released in September .
The evening vision, which is winning rave reviews by earlier doctors across the globe is currently in the final stages of commercial production and expect it to be rolled out next month.
Gold sales were also impacted in Q2 of this year due to a strategic price reduction we implemented for our legacy E V drug products to move effect to more effectively compete with imported drone products.
We believe that this price reduction will attract additional customers to the brand and help fuel the value proposition offered by our value added resellers Walmart.
Which we believe will start to gain traction over the next two quarters as it aligns with our marketing efforts.
About multi spectral centers, mainly yeltsin P. T that HP, our newly released <unk> P. Dual cameras were also slightly down decreasing 10% to 1.88 million from the $2 9 million for the three months ended June 32023, and 2022, respectively.
This small reduction was fuelled by constraints on our fulfillment of orders due to supply chain constraints that affected our sales pipeline.
Descriptions of our software solutions ground control measure of ground control and have over you were also soft declining to approximately 126000 from 158000 on a comparable quarter over quarter basis.
For the six months ended June 32023, total revenues decreased 20% to 7.34 million, which compared to 9.13 million for the first half of 2023.
The reason that I have already mentioned sales of our E. D drums declined to three $2 million to $3 million for the six months ended June 30th 2023, which compared to $5 seven 8 million for the same six months reporting period from 2022 and software sales also declined to approximately 246000 compared to roughly 328.
<unk> thousand for the first half of 2022.
Offsetting the decrease in drone and software sales during the six months ended June 32023 was growth in our sensor business, which saw revenues climbed 27% to $3 8 million compared to $3.02 million for the six months ended June 32022.
Moving down the income statement due to ongoing integration and consolidation of our sales team and manufacturing operations. We succeeded in reducing our operating expenses, 26% to $5 9 million from $7 9 million port $4 million on a comparable quarter over quarter basis.
A huge achievement brag Eagle Likewise operating expenses for the six months reporting period ended June 32023, also drinking on 28% to $12 4 million as compared to $16 7 million reported for the six months ended June 32022.
More specifically our integration efforts have resulted in notable disgraces and spend for general and administrative costs, introducing lower legal and consulting fees a decline in expenses associated with the consolidation of our offices and workforce reductions in payroll related costs due to integration of both less ERP consulting integration costs.
<unk> and R&D consulting fees and lower stock compensation costs.
Our income statement also reflects other expense not related to accounting for our promissory notes original issue discount of 4% and interest at 8% pronounce them issues for an investor into December 2022, along with net foreign currency transaction losses transaction losses incurred by our drone hardware.
Collectively this amounted to 419000 857000 for the three and month three and six months ended June 30th 2023, respectively, which compared to other expense net of approximately 213003 hundred 28000 for the first half of 'twenty 'twenty.
Two.
Respectively.
As a result of everything I've covered we incurred a net loss of 5.29 million or five cents loss per share for the three months.
June 30th them this year compared to a net loss of $5 6 million or seven times per loss per share for the comparable three month period in the prior year. This represented a 6% improvement on a comparable quarter over quarter basis.
We are also very proud of the fact that we achieved a significant improvement in our net loss for the six months of 2020 thing for.
For the six months ended June 30th 2023, our net loss totaled $9, eight 9 million or 11 cents loss per share, which was reduced 25% from a net loss of $13, two 1 million or 17 cents loss per share reported for the first half of 2022.
Yeah.
Now turning your attention to our balance sheet as of June 30th 2023, our cash position was $4 2 million, which compared to 4.35 million as of December 31, 2022 cash used in our in our operations. During the first months six months of 2023 totaled $6 seven 8 million a day.
A $4 8 million or 42% as compared to cash used of 11, six 3 million for the six months ended June 32023.
Other genes or do we.
We had working capital of 754 million and total stockholders' equity of 41 18 million this compared to working capital of $9 8 million and total stockholders' equity of $43 22 million.
December 31 2022.
This now concludes my overview of the financial highlights and I will turn the call back over to Bill there.
Okay.
Thank you Nicole.
While our second quarter results reflected agri continues to work to overcome supply chain issues globally, deflationary and competitive pressures in other business challenges our efforts to effectively optimize our operations through integration consolidation of our offices at workforce are indeed, yielding tangible results as Nicole just outlined we're finding our balance on the topline but focused very.
Heavily on reducing our spend we've lowered the net loss, we are burning less cash and now set up our pricing marketing and innovation strategies to grow revenue and.
In addition to the reduction in overall operating spanning shaken up our organization aligning and consolidating our sales teams centralizing, our branding and marketing efforts and integrating our manufacturing operation benefits that should become more transparent in the form of stronger revenue performance in the coming quarters.
Effective execution starts with leadership, ensuring we have the right people in place to drive our organization forward. We've made some significant sales leadership changes over the past several months.
<unk> organized our global sales team to provide direct oversight of drone sensor and software sales by industry and global regions of responsibility. We have also strategically expanded our team to provide for in house government sales executive to manage our direct sales opportunities with U S government and military agencies.
As I mentioned, we've also been refining our pricing strategies to ensure that our drone sensor and software solutions are priced competitively and what helps protect the global market share that AGGY glue, it's hard to win.
When coupled with the innovative new products and product enhancements that we are bringing to market. I believe we remain on a path that will lead us to enhancing shareholder customer and employee value as we move into our next exciting chapter.
However, the next chapter of egg Eagle is about continually innovating and introducing leading edge products and technologies focused on enabling our customers there.
This is a core of AG Eagle's research and development efforts, we use the input collected from our commercial and government clients to uncover opportunities to meet underserved demand and then leverage our engineering expertise to create and commercialize products that can deliver outcomes.
For instance, as I mentioned in our last webcast. We're pleased to unveil field checks for a measured ground control mobile apps early in the second quarter a solution designed specifically to change the way our customers work materially egg Eagle software apart from other offerings in the market.
Presenting a key competitive differentiator for egg Eagle.
<unk> unique feature set enables users to review and validate the quality of their drone captured imagery on site.
<unk> target imagery right first time in one trip to a project site allows users to eliminate time law and costs associated with project reworked by ensuring data capture is complete and ready for processing into high resolution outputs before ever leaving the site. This is a true game changer in our industry and one that we expect will have material impact on greater adoption of ground control.
On a moving forward basis, as we build awareness of its unique capabilities.
We also expanded our line of industry, leading multispectral sensors in may of this year with the commercial release of our Red HP Blue and dual.
High resolution drone centers, featuring 10 multi spectral bands the Red HP dual was purpose built for metering Landsat eight Sentinel to satellite bands and just one drone flight and at a higher resolution Europe , where they niches per pixel 200 feet, enabling direct comparison between drone and satellite imagery.
The Red HP duel set up doubles, our analytical capabilities with the benefit of a single camera workflow, it's coastal blue band. The first of its kind in the market is an ideal solution for vegetation analysis of water bodies, environmental monitoring water management habitat monitoring protection and restoration and vegetation species, and we'd identification, including differentiating accounts.
[noise] plants trees and invasive species in weeks.
We're very excited about the early reaction, we're getting from the market on the Red HP dual which is expected to provide meaningful sales growth for our industry leading line of sensors.
When developing our latest fixed wing innovation EV vision, our next generation EV designed for intelligence surveillance and reconnaissance mission, we spend months meeting with drone operators spanning several market sectors to fully understand their respective goals and objectives. This fact, finding mission resulted in our team inventing a number of groundbreaking advancements and engineering methodologies that have been integrated.
With the E V vision.
Some of those include a smart battery gauge, which we branded as got us out as combines an ultra precise front end sensor with a model fully simulate the behavior of our drone battery all in a low power microcontrollers each of the battery cells is modeled to flow in real time to the battery state of charge. It state of health is voltage in its reaction to constraints allow.
Owing our customers to make the most of our energy source wallet flight.
<unk> sensor enabled motor controllers, optimizes torque ripple in flight, ensuring better efficiency and acquire more responsive more emission must for Sculpsure valent operation a smart dual band <unk> antenna, we branded Alexia.
For use in transmitting EDI visions high resolution video streams in real time further its compact design and lightweight allow it to be integrated into the fuselage or the drop ensuring optimization of aerodynamic performance.
And also we designed it into your Jarvis smart decision, making tools that I, Google developed which enabled us to expedite the design and development of the E. D vision through the application of Jarvis multi fidelity analysis tool, we were able to properly discern optimal design metrics as well as analysts flight duration bets like E rate of climb and maneuverability, all in real time and helping us to.
Advanced through a prototyping process and a highly efficient cost effective manner.
In support of our sales and preorder efforts aggregate team has been engaged in numerous live demonstrations and intensive training sessions with officials and government and military agencies across the world seeking to leverage the power of the easy vision and their respective drone operations.
In July alone we competed with.
We completed a comprehensive training sessions with our first European military customers, who were confirmed at EV vision operators can qualify trainers of new users. These new customers confirm with aggregate technical teams that all operational capability of the division continued to meet and exceed performance benchmarks and scouting surveillance usability fast deployment in flight.
Among other use case criteria specified by international military community.
Our training sessions have led to very positive indications for procurement and several large unit several.
Units being free order.
Interest in and demand for the EDI vision is indeed accelerating as we take advantage of showcasing this new innovation to our reselling partners in new and existing customers worldwide, we expect that like.
Like our other new product introductions, the eating vision will be a significant growth driver for AG eagle in coming quarters.
Before we move to the Q&A session on todays webcast I'll add that in the face of a challenging equity market environment. You can still expect the ideal to continue investing in innovation to further differentiate our customer centric drones sensors and software we remain optimistic about the long term growth prospects for our business and we're confident in our ability to deliver consistent and predictable financial performance in the.
Future.
With that said Nicole let's address some of the questions that our shareholders kindly sent us in advance of today's webcast.
Great. Okay Merit first question relates to our cash position I'm sure has asked if we plan on raising additional capital to increase our cash available to fund operations through the end of this year.
Okay.
Good question, what we have been as we've historically been successful in raising capital to meet our working capital needs the ability to raise equity capital in prevailing capital markets environments not guaranteed.
Nonetheless through our commitment to grow revenues and work towards achieving positive cash flow. We are currently evaluating.
Currently evaluating a number of strategies to obtain additional capital to fund our future operations until we begin cash flow and we were very pleased to raise critical growth capital at fair and reasonable terms. This past June through a registered direct offering and concurrent private placement, how and when we raise additional capital will really depend on a number of dynamic variables and considerations.
And that will need to be factored into our growth and innovation strategies in the coming quarter.
Okay next question from our shareholders.
There are big purchase money.
[laughter] as we've made it a you know as we've made it very clear I giggle as completing the time energy and resources on developing a sales strategy that provides for direct sales to customers and sales to customers through our global network of over 200 resellers.
I can share that we are working in close collaboration with several of our reselling partners on winning potential large government NGO tenders with organizations around the world on the direct sales front in April we want a federal contract from the Dod's defense innovation unit to produce and deliver the E revisions drones and customized command and control software that is compatible and it's in full.
Compliance with the Dod's robotic.
And autonomous system are interoperability profile isn't yield significant new revenue to our company, which adds to our positioning of AG Eagle as a trusted partner to the U S. Government. We expect that this in turn will lead to additional and larger opportunities within the defense sector.
Moreover, now that we've been awarded multiple award schedule contract by the GSA, we are working on enhancing our offerings to federal state and local government market and an initiative that we fully expect will produce new sales and potentially significant new sales for our company over time.
It is important to note that aggregate we approach large tenders in partnership with our local resellers and we will continue this approach as a long term growth strategy. However, our bread and butter will likely continue to be sales of our drone sensors and software to the growing number of commercial enterprises, which are coming to recognize the value of building and expanding their drone programs to better up their businesses and inform their business decisions.
Through the data and insight that drones capture and deliver we stand ready to serve these customers and benefit from their program their drug program expansion effort.
Our final question comes from a shareholder would like to know an example of how our drones are being utilized to solve problems.
Well.
That's a good question.
We have thousands of use cases.
From around the world in various industries and we've continued to demonstrate the value of the aggregate drone solutions provide to our customers I would say that many of these case studies are available so for those shareholders that are interested.
They are available for viewing on our website. So please I will direct you there to download a few of those case studies.
But here's one example that that does come to mind and it relates to the recent flooding that ravage the state of Vermont, just last month the drilling team at the University of Vermont spatial analysis laboratory was tasked with documenting the initial catastrophic flooding that occurred following relentless downpours that began in early July and persisted for weeks.
And then documenting the aftermath that remained for farmers in the region and an E mail sent to us from a university of Vermont official.
Said that the long and short of it was at the EV played a key role in the flood response. It was the only system, including satellites crude aircraft and you ask that was able to collect the geospatial imagery of peak flooding conditions that FEMA needed to assess the damage to support the disaster declaration and that was huge for their recovery efforts.
So with those kind of efforts that are ongoing we know that there are use cases out there where our drugs are playing a role and our job is to make sure that as we educate our customers as we educate the market we continue to deliver a really strong position.
For you know for.
The business and for our sales initiatives as a whole.
So with that I think that concludes as nickel you said our final questions. So that concludes our Q&A session.
Where we end the webcast I just wanted to reiterate our vision for the future.
First we are growth minded with a strong foundation as a known drone solutions company and more than a decade of proven experience and Eagle is uniquely positioned to offer best in class solutions to legacy and emerging industries through product innovation, R&D and strategic partnerships our reputation as an American drone technology company sets us apart and positions us to become a dominant <unk>.
First in the market.
We believe our deep bench of drone expertise on the team puts us in the pole position to benefit from regulatory changes that will allow our customers to fly drones autonomous Lee in more places than ever those autonomous drones will collect high quality data and applications as varied as pipeline inspections as design construction survey leaf level crop health tactical mapping and surveillance.
For war fighters.
Finally, we believe our employees are passionate experienced group of professionals, who are building the solutions that will pave the way to an autonomous future of robotics, We trust that together, we will build a diverse collaborative resilient and innovating culture intense on winning in this marketplace.
With that I'd like to thank all of you for joining our webcast today I'd now like to thank all our shareholders for their continued support we look forward to continuing share our progress.
Morgan back to you.
Thank you Barbara This concludes AG Eagle aerial systems 123 second quarter results webcast. Thank you for attending and have a wonderful rest of your day.
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