Draganfly Inc.

I think to respect everybody's time, it's now 5.30 Eastern, or 4.30 Eastern, or 5.30 Eastern. Let's get started. So let me jump in. Greetings and welcome to the Dragonfly Q2 2022 earnings call. So the markets continue to be challenged. Our Q2 results show that we continue to strengthen and grow. Once again, my name is Roley Bustos, and I am internal investor relations here at Dragonfly. I personally welcome each and every shareholder, stakeholder, and analyst here today. Today's call will follow the same format as previous ones, which means it will start with our CEO and president, Cameron Chell. will jump in and discuss the financials as reported earlier this afternoon. We will then conclude with our lead director, Scott Larson, facilitating the Q&A portion. Remember, you're always welcome to reach out to me at investor.relations at dragonfly.com. Lastly, I want to remind everyone that this presentation may include forward-looking information and statements. These statements are not guarantees that future performance and undue reliance should not be placed on them. Any future events or financial results may differ from what might be discussed here. The full forward-looking disclaimer can be found on page two of the presentation, and I would be happy to send that to anybody upon request. So without further hesitation, Cam, please go ahead.

Thanks, Wolde. And thanks, everyone, for joining us today. Thanks in particular to the incredible team that we have at Dragonfly and for the work that you have done in this last quarter. Especially thank you to our shareholders and stakeholders who have had trust with us, believe in us, and are on this journey to create the number one or the number two drone solutions company in North America. Paul Mullen, Paul Sun I think this is probably about number five in a row. And we continue to see growth in the manner that we really like to see growth. So we are, and we did complete and we're reporting $2.37 million of revenue in Q2. This represents a 19.6, almost 20% increase year over year. And most importantly, that is 100% organic growth. That's customers that are coming to Dragonfly for the products and services that we are designing and scaling out for them. And that is really at the core of our strategy is that the IP and the solutions that we design are the core solutions that our customers are wanting and that we're growing that base. That's what we believe will create long term sustainability in the business. I'll let Paul run through the details of that. And after the presentation, we also look forward to answering the questions that you've sent in ahead of time. I'm just going to pull up a share screen here. So we've got the customary disclaimer. And of course, Roli gave us all notice of the potential forward-looking statements. So just to be clear, and it's really important as we put our financials in context, where we strategically believe the industry is and why we are conducting our strategy in the way that we're conducting our strategy, which is somewhat different than maybe some other drone competitors out there, the routes that they're pursuing. So first of all, you know, the industry today is about a $20 billion industry. And that industry is primarily and it's really important to understand this is primarily military is probably about 95% military, a couple of percent, you know, three, 4% of consumer, and really only one or 2% is commercial. And listen, I've seen these these industry projections for years where they say, hey, it's going to grow to 40 billion dollars like this projection does. And I've never believed them. And the reason I've never believed these before is because, you know, we're one of the companies that that were around, you know, working in the commercial space in particular. And we weren't seeing that kind of growth. We were having to fight for every single sale, every single deployment, every single service ticket, whatever it took. Now, what we've seen since the FAA has started to give a particular guidance around BB loss, but other regulations as well, is that we have seen the industry open up. And our issue right now is managing how we grow and the type of growth that we want to have, not fighting for those sales. So we do see, and I for the first time believe, these industry projections of going to $40 billion or having the potential to go to $40 billion by 2028. The constraining item there is not demand, which is really exciting. The constraining item there is infrastructure, capacity, regulation, the supply chain, the things to keep up to the demand. But it's important to note that because when you take that longer term view, you end up designing and building services and products that are proprietary to you and solutions that are proprietary to you so that you can not just make the sales now, but really create a moat around your strategic differentiators and the services that you'll be providing in the future. So the industry today still is highly fragmented. The commercial market in particular is at an inflection point where it is where the majority of the growth is going to be happening. Things like AI, autonomy, and the sensors are more important than ever. And the things like we have very large segments coming into this now, like delivery, like services that are big, big needle moving opportunities. They're not a matter of selling, you know, one or two 30 or $50,000 drone units. They're multi-million, multi-year opportunities. And those are the majority of the types of contracts that we're now working on. So our business model, just for review, and again, just to put our financials in context, really has four broad sections. We do contract engineering, and it's one of the reasons that we've been around so long is that we have done a lot of contract engineering, in particular to the military contractors, the aero environments of the world, as an example, or the Raytheon-type companies. That contract engineering over the last 24 years has allowed us to build a really strong bench of engineers. While pretty much every other North American drone manufacturer has gone out of business in the last 20 years, not in the last two or three or four years since we've seen a number of upstarts start, but I'm talking about the last 20, almost 25 years where they've all gone out of business and they all had hundreds of millions of dollars behind them. It's because they, you know, they basically tried to build a commercial product, sell it into a consumer base, had no margin and had to compete with Chinese or offshore type manufacturers. The market is very different today. And one of the reasons that we're able to really garner the market and be in a position to take advantage of the explosive growth that's about to unfold is the fact that we have such a strong engineering bench that has been building military applications for over 20 years now. So we also have a full product and development sales pipeline and lineup of products. So it's not like we're, hey, we're coming out with a new product and we're going to get into a new industry and it's going to develop and we're going to get a signature customer. We've been developing new products for years. And just this last quarter and some of the operational highlights that we'll talk about is we just released three really exciting new products, which are absolutely going to be driving our growth through Q2. through Q3, Q4 and beyond into next year. More on that in a minute. But the point is, we have a product line that's built out. It's not like something like, hey, we're trying to get that first customer or that first, you know, this thing, it's scaling. And the scaling that we're doing right now, constraints are all around our ability to continue to increase our capacity, which we're doing as fast as we can. We also have full flight services and a lot of companies have divided themselves either into a manufacturer or into a service company. And the reason that we do both is because companies aren't coming to us looking for a drone that goes, you know, Greenberg, and many more. Now, the other area that's really important to us is our software data and AI. At the end of the day, the customers, again, aren't looking for a particular airframe. They're looking for a platform. But what they want at the end of that platform is a result. And the result is, say, a package delivered or the data that comes from the mapping in the survey or the mining survey or the mine detection survey. They want the data, even as it relates to delivery. The data is so important that when it was delivered, how it was delivered, what was the package weight, what was in the package being delivered, how long before they picked up. This is all incredibly important competitive intel. So we're highly focused on our own kind of AWS services, if you will, where we actually fly flight services, design specialized sensors, have some of our own proprietary sensors and AIs. Greenberg, Paul Sun going to be probably the largest data repository of forestry information in North America, maybe the largest repository of certain types of mining deposits in North America. And that's the data that becomes really valuable to our customers and so sticky. But that data is the most important asset of the company. And so they're not looking to get, you know, John and Jerry's flight service company to, you know, fly a mission, right? . . . I feel that we can say this with such confidence is that we've seen the market develop over 24 years. We've seen all the big competitors come in with the big private equity names and the big capital and the amazing management teams, and they are. And a lot of them, they just haven't seen all these cycles that they think are new are just the same thing repeating themselves. At the end of the day, the drone industry really is about the data industry. So our full product and services here, you get a sense of it. We've got our Dragonfly Commander, which has been an award winning drone for years. We've launched our new medical response drone back in Q1. We actually started delivering those into Ukraine. Greenberg, Paul Sun We have search and rescue drones that are highly specialized. We've got fixed wing drones that are highly specialized. We work with the Dragonfly Quantix, which is actually an aero environment product that we've done a bunch of work with that we've modified and worked with for agriculture and for situational awareness or reconnaissance. We're not afraid to use other platforms that are best suited for our customers. We have our long-range LIDAR, which we'll talk about a little bit more, and our Commander 3XL, which we'll talk about shortly. We have full-flight services, and in each one of these areas that you see listed here, we have something that is a strategic differentiator, something that is completely proprietary to what we do that differentiates us from somebody else that might be able to fly a mine detection mission. or a mining mission or power line missions. The reason that we developed our own LIDAR system is for that exact reason. There are certain types of measurements and data that we can collect and apply AI to that other companies can't do that allow us to have a differentiator with our customers and provide them better data, which speaks to the final piece of the equation here, which is our AI and data solutions. We're the only folks out there that actually have a camera system that can record things like vital signs, your heart rate, your respiratory rate, your blood pressure. Now, if you think about how important that was during COVID, now apply that into search and rescue, right? Apply that into combat situations. Apply that into surveillance situations in combat areas. We're even doing work with Fish and Wildlife Reserves and organizations around the world now. Cameron Chell, Deborah Greenberg, Paul Sun I'm going to turn this slide over to our lead director, Scott Larson, to talk about what our growth strategy is, because it's a really important component of what we're doing. And it's a very, very disciplined approach. Scott?

Yeah, thanks, Cam. When we look at our strategy, we kind of break it up into two different categories. One would be organic. And so revenue, as Cam mentioned earlier, and Paul, our CFO, is going to get into here in just a few minutes, we continue to grow at 15%, 20%, 25% year over year. In fact, as Cam mentioned, it's been more than a few quarters where we've had that type of growth right now. And so it is just organic growth that comes through new product development, Engineering work, entering into new verticals with some of the new tech that were coming out. and then deciding joint ventures with other participants in each one of those verticals. The second way is designed to move the needle a little bit more, a little bit further and a little bit faster. And that'd be through larger partnerships, looking at different entities in different verticals. Maybe we'll come back and talk about that in a couple of minutes. Looking at larger technical solutions and software and going into things like Ukraine that Greenberg, Paul Sun Greenberg, and Paul Sun. and the path that we're on.