UAVS - AMEX

Good day, everyone, and thank you for participating in today's conference call. Joining us today from AgEagle is Chief Executive Officer, Michael Drozd; Chief Financial Officer, Nicole Fernandez-McGovern and Chief Operating Officer, Brandon Torres Declet. Following the management team's prepared remarks, they will respond to questions that were previously submitted via e-mail 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 future events or future financial performance or statements of intent or belief are forward-looking statements and are covered by the safe harbor disclaimers contained in the company's 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 AgEagle's CEO, Michael Drozd. Michael?

Yes. Thank you, Karen, and good afternoon, everyone. I'd like to kick things off today by recapping several developments at AgEagle over the past several months. I'll then turn the floor over to Nicole, who will comment on our comparative financial performance for the first quarter, along with other financial matters. Following Nicole's remarks, Brandon Torres Declet, the newest addition to our leadership team, will join the conversation to provide you with some highlights into our future growth plans, product development initiatives and other business building strategies that we believe may best position us to empower and dominate the Drone Age. We will then conclude the call with a Q&A session, during which we will endeavor to address several of the most relevant questions you sent into our IR team at Gateway prior to today's call. Since I became CEO in May of 2020, we have remained focused on leveraging AgEagle's strong foundation to ensure our company maintains its industry-leading reputation of providing American made, scalable drone solutions to our customers. We continue to execute on our primary growth objectives to meet the vision of being a global leader of the Drone Age. We have made huge strides in realizing this vision. By building on our strengths through: one, pursuing highly strategic acquisitions; two, recruiting an incredibly talented, experienced, diverse team from within and outside our industry; three, successfully raising growth capital; and four, working to establish the industry's first true quality standards for U.S.-based contract manufacturing. Since the start of the year, we have made 2 strategic acquisitions that have transformed our business and has propelled AgEagle to new heights. As we discussed on our January call, we acquired MicaSense from Parrot. MicaSense brings us an amazing, talented team of industry professionals as well as the industry's premier high-quality sensor technologies sold in over 70 countries worldwide and integrate into over 150 different drones. Then in April, we announced the acquisition of Measure, an aerial intelligence company that builds software to automate drone operation workflows. With end-to-end program management, user-friendly flight control and in-platform data analysis, Measure's comprehensive software solution, Ground Control, helps businesses save thousands of hazardous man hours and creates millions of dollars in operational benefits. Ground Control is a leading SaaS solution, offering the industry's most advanced features at an unbeatable price point. We acquired Mike -- Measure because their software is essential to enable our comprehensive drone solution platform. Moreover, they bring us an established and growing customer base comprised largely of Fortune 500 companies. In addition, Measure brings AgEagle a world-class team of engineers, developers, oh and by the way, a Tech Titan. Brandon Torres Declet, Measure's Co-Founder and CEO, was again recently named by Washingtonian Magazine as an industry Tech Titan in 2021, after already being recognized as such in 2018 and 2019. In addition to his long list of notable accomplishments and industry acclaims, Brandon also has a seat at the FAA table, having been appointed to the Drone Advisory Committee by the U.S. Secretary of Transportation. This is the guiding group for developing the regulatory framework to integrate drones into the U.S. airspace. With Brandon now serving as AgEagle's Chief Operating Officer and as a member of our Board of Directors, we look forward to benefiting from his leadership experience, industry influence and passion for all things drones. With these strategic acquisitions, coupled with our ongoing recruiting efforts, AgEagle has grown our workforce from a small dedicated team of approximately a dozen professionals at the end of 2020 to an industry force to be reckoned with, that is fast approaching 50 incredibly talented team members. I could not be more proud of the tight-knit, results focused team that we are building as well as the new career opportunities that we are creating for like-minded high achievers. Looking at our Ag Solutions businesses. Earlier this year, we announced that the state of Iowa became the second state Department of Agriculture to adopt our HempOverview platform. This agreement allows Iowa to leverage our platform to manage online registrations, payment processing, data collection and compliance oversight of the hemp fields for 3 years. In addition, we continue to work with the state of Florida to expand its use of HempOverview to manage oversight of hemp and other high-value crops in the state. We are also continuing discussions with other state departments of agriculture and expect that we will have additional new customer wins to announce in the near future. As we look ahead to the rest of 2021, we believe that 3 primary themes will guide us and influence our decision-making processes. First is precision, leveraging advanced technology and drone innovation to deliver the industry's most reliable, safe and effective solutions on the market. Second is quality, establishing the industry's first quality standards for U.S.-based drone contract manufacturing and assembly. And third is vision, remaining focused on executing strategies that allow us to define entirely new standards of excellence and scalability for the enterprise drone industry. As always, I want to thank our shareholders, all 152,000 of you, for your continued support of AgEagle and for the confidence you have placed in our team. We greatly appreciate your enthusiasm for AgEagle and our phenomenal team. Your appreciation for the role that drones will play in almost every industry and for sharing our vision for the future of the Drone Age. Now I'd like to turn over the floor to AgEagle's CFO, Nicole, to provide some key highlights relating to our company's first quarter financial performance. Nicole?

Thank you, Michael, and thanks to all of you for joining us on this afternoon's call. This past Friday, we filed our 10-Q with the SEC, which can be accessed on the sec.gov. And this morning, we announced some key highlights from the report. For the 3 months ended March 31, 2021, revenues climbed to approximately $1.7 million compared to approximately $391,000 reported for the same 3-month period in 2020. The increase is primarily due to revenue generated by the sales of MicaSense sensors to its global customer base. Coupled with licensing fees and revenue share received from the state of Iowa and the state of Florida for HempOverview. It is also worthy to mention that MicaSense outperformed its internal projections for the first quarter of this year. It is our belief that as a result of becoming a part of the AgEagle's portfolio, MicaSense value propositions to its customers and prospective customers continues to strengthen and is serving to accelerate the company's growth trajectory. Our gross margin also significantly improved, rising to 63% for the first 3 months of 2021 compared to 55% in the first quarter of last year. The increase is a result of AgEagle's strategy to expand our product and service offerings to include higher-margin drone sales, drone sensor sales and SaaS software solutions. Looking at our balance sheet, our cash position remained strong with $24.2 million at March 31, 2021. And that was after providing the use of approximately $13 million in cash for our $23 million acquisition of MicaSense. We also invested $206,000 in ongoing product development of our sensor and software solutions in the first quarter. Subsequent to the end of the quarter in April, we completed the acquisition of Measure for total cash and stock consideration of $45 million. The purchase price was comprised of $15 million in cash and approximately 5.3 million shares of common stock valued at $30 million. As a reminder, we filed an initial registration statement with the SEC in February. Providing for up to $200 million to be raised through the issuance of registered shares from time to time in indeterminate amounts and an indeterminate time. The registration statement has been cleared by the SEC. The purpose of the registration statement is to ensure that AgEagle can opportunistically raise capital when necessary to support our future growth strategy. These strategies may include pursuing additional strategic acquisitions, making investments in new product development and redoubling our sales and marketing efforts to enterprise customers. Now I have the pleasure introducing to you all your new COO and member of our Board of Directors, Brandon Torres Declet. Brandon will provide you with details and perspectives on new recent developments involving the integration of MicaSense and Measure into AgEagle as well as his thoughts on our collective future growth strategies. Brandon, over to you.

Good afternoon. Thank you, Michael, Nicole. I'm incredibly excited to be part of the AgEagle team and to participate on today's call. Since [ starting ] Measure in 2014, the commercial drone industry has seen tremendous technology and regulatory breakthroughs, leading many large enterprises to move quickly from demos and proof of concepts to large-scale drone technology deployments. Mainstream adoption of drone technology is here to stay. To service those customers, especially those looking to scale, AgEagle is working towards becoming the preferred one-stop shop for end-to-end drone solutions. We are going to listen to our customers and provide the best solutions for their specific industry applications. Whether they're an energy company with thousands of wind turbines or a construction company seeking to monitor [ sub progress ] around the world. This will include hardware, sensors software and most importantly, the means to create actionable aerial intelligence. It is that data that will drive future growth to the industry and AgEagle, the ability to leverage the data created by drone technology to manage valuable assets and people in the real-world in real time. The entire AgEagle team, including Measure, is heads down, making investments and laying out new development road maps by talking to our customers and incorporating their feedback. Some of the questions we are asking them; how do we make sure we provide you the solutions you want and need; how do we make sure that everything we produce helps to define the standards for excellence, reliability, safety and efficiency; and of course, how do we make sure that we're able to scale with you, our customer. At AgEagle, we are proud to say we have the knowledge and experience, and we will continue to build trust with our customers and our business partners and is one of a handful of public companies traded on a national exchange with access to the capital necessary to fuel our growth and industry leadership. While it's been less than a month since Measure was acquired by AgEagle and just a few months more since the MicaSense deal was completed, we've wasted no time in bringing our teams and our technology stacks together. Measure's flight control -- excuse me, Measure's flight software Ground Control now supports MicaSense sensor payloads, enabling MicaSense users to benefit from Measure's mobile and web-based flight planning tools, including features such as Terrain Following. Measure's data processing supports multispectral imagery captured by MicaSense sensors, providing an end-to-end workflow for planning, capture, data processing and data visualization. In the near future, our technology development roadmap may be expanded to provide for advanced data analytics, deeper sensor integration and artificial intelligence machine learning capabilities. We are enjoying tremendous success integrating the efforts of our sales teams to be more cross-functional, and we already have common customers and cross-selling opportunities which are actively engaged in pursuing. The consolidation enhancement of our collective marketing assets and personnel is well underway to best support the sales of AgEagle's end-to-end solutions as well as to nurture existing customer and reseller relationships at the individual brand levels. On the hardware side, I'm excited to say that MicaSense is currently looking at using our facilities at Wichita in order to manufacture their sensors, which will ultimately drive higher margins. These are just a few of the innovation initiatives that AgEagle is advancing, and I couldn't be more excited with how our teams are working together. The future for AgEagle looks very bright, and I'm pleased to be a part of that. With that, Michael and Nicole, I'll turn the floor back to you for a Q&A.

Thanks, Brandon. Now we're going to move on to our first question. Michael, with companies like Pfizer utilizing drone technology to deliver crucial medicine and vaccines to remote and underserved communities across the globe, have you made any progress on this application for your drones?

Yes, as an active participant in the BEYOND program, we're working in collaboration with a regional pharmacy to develop a turnkey drone delivery solution for delivering medicines, vaccines and other medical supplies to rural communities.

Great. Going on to our next question. As M&A remains part of your growth strategy, do you have a target size or specific criteria that you are looking at when evaluating potential acquisitions? Is Measure a good archetype in terms of size for future acquisitions?

Any acquisitions we make in the future are going to be focused on companies that are accretive to our end-to-end drone solutions, tech stack development. We continue to evaluate a vast array of companies. However, it is important that any acquisition we make is in line with our strategic objectives and long-term vision as a company.

With Measure and MicaSense now under the AgEagle umbrella, are you going to consolidate the branding until one name?

Measure and MicaSense both have tremendous value that we will continue to leverage as we work to further establish ourselves as a leader within the drone industry. We are in the process of analyzing how best to fully integrate our brands and evaluating the best overall branding strategy to accomplish our goals and objectives. In the meantime, AgEagle and its subsidiaries will continue to operate under their existing brands.

Great. With the additions of Measure and MicaSense, AgEagle fundamentally has 4 different businesses under its belt. How does the organization see the synergies between these [ entities ]? And how does it ensure it is a leader in each of these segments?

Yes. As we previously noted, we're building 1 company, which is bringing together the best technologies and capabilities necessary to create end-to-end drone solutions capable of effectively addressing uses in agriculture and other commercial and industrial markets.

Perfect. Recently, you previously spoke about the MicaSense acquisition, saying that their multispectral centers will be key for packaged drones, delivery drones. Can the team elaborate on the competitive advantages to using multispectral sensors on package delivery drones?

Yes. For the purpose of clarification, one of the reasons we acquired MicaSense is due to the fact that they are a leading innovator of drone sensor technologies, and they have highly specialized expertise in this area of focus. While multispectral centrals are vital for drone applications in agriculture and thermal sensors have even broader applications in industrial markets, any package delivery drones that AgEagle develops will include Sense and Avoid sensor technologies necessary to ensure autonomous operation of the drones.

Great. With the recent proposed regulations that would effectively ban the expenditure of federal funds on Chinese-made drones, how does AgEagle see that impacting their business? Is it common for AgEagle's competitors to make delivery drones in China? And how many components of AgEagle's drones are made in the U.S.?

No, the ban on the use of Chinese-made drones has not impacted our business. While it's common for drones to be manufactured in China, AgEagle is focused on building quality, end-to-end drone solutions in America that serves our customers' needs.

Our final question here for today. Are there any updates to the shareholder lawsuits that remain?