Unusual Machines (UMAC) 14 Nov 242024 Q3 Earnings call transcript

Good afternoon, everyone, and thank you for joining Unusual Machines Third Quarter 2024 Earnings Call. With us today are Unusual Machines' CEO, Allan Evans; and CFO, Brian Hoff.

Following today's remarks, we will conduct a Q&A session.

As a reminder, this call is being recorded and a replay will be available on Unusual Machines' website at www.unusualmachines.com.

Now let me hand the call over to CEO, Allan Evans. Allan. ahead, go Please

afternoon, XXXX you Earnings Good Machines' joining Third Quarter Call. everyone. Christine. for Thank Unusual Thanks,

and liquidity. Actual A the Unusual cash be on the and considered is XXXX risks to whether our business improvements Securities should the prospectus it XXXX. Further, impact not performance. Before component Framework indication I that affect revenue effect partnership for approval our of begin, filings gross quarter, burn market by to as various from related on XXXX, uncertainties and to and retail materially the of business-to-business business the tariffs in U.S. made line Machines' business, contained this Blue read risks and that differ our Commission, for be on an our affected of the expected this from improve of our of and retail questions our lawyers our results reporting in may tariffs have if safe during our These results are DIU its drone Red sales, future the bottom statement. the more orders absolutely our will and SEC harbor Holdings and forward-looking and this wars with products U.S. Cat Please subject including discussion and the our margins, to ability future predicted, with consumer uncertainties. the manage margins results expected and difficult Exchange revenue October predict filed note the elections. call, including the quarter, our future statements remarks the will Israel company's future answers asked XX, to with to is be Ukraine imposed me include statements

drone That our parts for approval manner we in USA dependent the Machines any thing. forward-looking and Unusual of disclaims statements the whole our subsequent as and way. the and to a aren't will right. the receiving orders will are those next in update recorded for sometime couple for Blue UAS third result This future follow to timely posted upon able parts main in any drone be is out obligation developments. All getting Additionally, Framework of parties drones. days who a of be

that our We third on prepared have to some clarity remarks to want quarter we results. provide share

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and as little than probably line it's going time we is or anticipated. very faster a this actually happening investors, traders, originally operators to While That's slow feels fast exciting.

and key and big focus priorities: matches a the finished we million. last we This better than flow the is would actually do started with about priority. quarter on and cash flow, of the we our million quarter. me, thing operations most really at $X.X with this to We is end is to For slightly important quarter Cash though, said growth. X what continue still $X.X about

there. we're to So on happy be target

Additionally, another a financing, closed $X.X October, where PIPE net just we proceeds. got in at we million of the end

advantage higher with pretty capitalize comfortable tariffs with new administration. cash feeling slightly some our planning in and other probably and on that adjustments change our business, in going with little real that, a burn burn our be and because components understanding we can cash to of we're and a of growth. the forward, This from could So can aggressively our the rate is position going we're shifting a this on rate. With result toward control the potential we more expect competitive

initiative So both XX as we improving where and lines see come top months materially so. over can next window this we some take by out our opportunity the and a really bottom of or

for operations. The second priority us is

is us, of the ahead for you million second third But still For quarter-over-quarter million a we lot the X% quarter, of is a sales. and is $X.X margin. typically retail quarter and okay, than X% target the quarter, quarter for --" XXXX. numbers a remain more revenue in That's approximately we be for a this because slow actually about "Well generated our $X like, impressive sales. is in might the raw XX% sales This over increase gross

and it. seeing feel so is actually very improvement encouraging really we good this about And

But everyone the quarter us as context to what Brian this table and and until and opportunity chance here see more. I activity in provide hand debt we for discussions into discuss our I financials is happened that to just his some analysis. the it of I'd through goes high-level cap I'm the say to delay off priority why growth a has the Brian, he coming to growth. big and before is want around dive to third unusual going The some

above our $X equity at market we done So spend, outstanding in of and other conversion interest shareholders, this debt, rates. and with payments our to debt in reduce was order negotiated million cash to some

is from which we reduces with place X%, as $X.XX reduce cash interest $X.XX, see this, the So reduction. of also rate we above payments to in to the this, our we about interest doing conversion feature we to price make. In put share when which negotiated part the it have X% a at them added to

So primary we GAAP think cash activity this positive But that the also it does because pretty derivatives priority. funky sensitivity our is other flow really these consider really some especially for all high and business, we create factors. have to volatility like

I so thank CFO, to I'm know Brian working Brian, derivative going our you exercise. has to call So through that that high off much With the Hoff. an been hand the calculations. for level,

thank us afternoon. Allan, Thank you, and joining you everyone to for this

months And Riot want in of revenue at loss about XX Shark million the to margin, $X.X X% our of focus in million that also is Fat operations, XX% Rotor us noncash expense, your item the about which we're stock company gross gross February. After on of comp normal which, the of year-to-date ended for the $X.X every and revenue, about which we includes noted, quarter-over-quarter, ended from very million Allan with This X XX% GAAP puts kind kind $X.X I acquisitions about. quarter. has. this kind growth September excited since again, with As is margins

public from to that do So $XXX,XXX quarter we some the puts operations the of transactional in loss had had reaudit unique and company professional went to fees of we some stuff after that our expenses million. We loss few backing back in related some conversion. increase around of net August normal after those in of that in during out, and puts of related just that about kind That to items. about at operations debt kind us look the $XXX,XXX through kind the our from we $X

So to that we to That's down. kind continue what of bring of in with number kind kind going we plan were expecting be growth. line to kind our of to as of shift

million. Converting ago, loss, Allan see line As moments very comes items in accounting, expense the us about GAAP kind on is the really to right? which which kind that of all conversion derivative noncash, the the and expenses sheet. you'll of loss P&L is $X.X of mentioned of the do, really unique over few all This And additional that nonoperational with to a just balance of has other and leads that's net $XXX,XXX, debt. our this also

little cash, just with it and into proceeds. net the we of at a the manage the and quarter PIPE when QX, looked for line with in a we expectations, we of bit. and but debt million closely, a the kind were end push. We $X.X at fourth -- additional in closed healthy head came of expecting that were about in at end our of our looking noted, we kind are and inventory up As for expectations $X what also very excited down is into we into that of inventory quarter October million little we balances we of third holiday line -- kind looking we had cash our to at XXXX equity. QX. to with in which into continuing ended the our ahead We position that. We're as million gearing But Again, converted head $X.X our of we're

sheet. So which of now from of end another That's of due noncash the have $XXX,XXX XXXX, which of on and stuff, we $X November other so liabilities a -- that at liabilities, couple is started we non-GAAP worth another now. with sorry, balance our see then year derivative $X you'll all related And million, I'm a balance. million is

still IPO, the end figure by since Controller like we're the full into accounting-related other of especially got the this through best being completed addition, of one million GAAP thinking to we And that of made of we've Flight which the larger year. Overall, which end unallocated We've FX quarters. we're our the look those other intangibles QX year. to to going have UAS we $XX.X the kind quarter, the X kind and kind excited out items of progress Brave and quarter what fourth In to should price, the holiday during and heading quarter. of company our goodwill have going the going also is the of Blue of push, a allocations the the we're fulfilled any at is purchase of be about orders acquisitions

feel confident to to it current growth back position to which allow great is place in those kick a focus our cash to we opportunities, So us Allan. over on

thank you to So all.

into conversion I the Thanks, the stuff. created cap Brian. we dive exciting the All really before debt to table. changes few and PIPE to a substantial some items pretty There have our are clarify want

how order to guys explain it. simplify just things, see want to to in So you we as management I

other We have percentage percentage, common to but blocker ownership preferred and stock. It stock for really. and then converts no that just common stock, preferred stock we gimmicks has have a

it about converted stock shares. all preferred tomorrow, plus the be if stock total would common million converted So then our XX.X

say we So that shares million could outstanding adjusted. XX.X you have or

that and stock warrants conversion some reserve and debt $X.XX warrants cash-only all a Almost are of for debt. which are of things, the to But we and conversion mostly spend these that price or represents of company set value strike another price or that receive. $X.XX. we'd cash cash have the would have have We of a that --

the the another X.X is million as So all and the of get warrants additional debt cash. most $X.XX in being exercised you is would $X shares, if expect, which value, all the This, million price. are converted, will about about it company represents

to wanted the nobody there's is there. This to the able you're understanding so they were We calculations our that while these what is and term. broadcast no next to for do what financing surprised to finance So everyone warrants, structure gimmick to long this our conversion, intent operations is intentional.

of part I that with anything we a you have to X. as pass on X vote all have important we just don't December It's finalizing because concentration. meeting can't shareholder get shareholder So votes. of this,

as approval other #X, anything XX.X%. converted. management to warrants we the cetera, a mentioned, to is shares, be than warrant used on shareholder be So not that which why just is share as yes It's issuance financing, to those et want item our a I able and use next suggests and above for

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proxy yet. and if after So haven't statement call you please vote read your this right

just we voting, of major expect we election of some company. impact on Speaking the will had a that future have our

on of We we're new of are potential drone in benefits the tariffs a to Chinese-made from change and see that accelerating production parts. domestic anticipation in inventory parts going orders

to going a everything expect and our for want and Chinese also of really market really that does into they're current on margins push we're And galvanizes comments But the European to competitive I pretty forward. that this the looking we our speculative around improve the I'm XXXX. the just in make introduce election We up make about level. This dive also gross to a are plans. growth pricing way little that, domestically products uncertainty will our sort before higher note I our this

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So scale production us be domestic faster. help there some orders that immediate large could very even

put our is either we give our suddenly this tariff have improve can a use place, to competitive relative domestic sales pricing addition or for channel. our margins part individually to in through enterprise, more sell If retail components competitors. to extra our this components component our really great opportunity gross drones us we that U.S.-made our have retail also XX% of So or ready-to-fly the in as to

U.S. this be spending. have margin this if properly, would and about to defense use definitely manage do to last the the gross I defense year. without U.S. improve this complete Department market our category expectations FPV see government advantage products the both challenging drone still opportunity was The below this more call from So we can share in Cat think capturing our revenue in U.S. fiscal a long-term government We the retail we talking partnership while Red to business. It with spending the or through in FPV here Holdings.

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and next specific way for -- the materialize it definitely for the opportunity there. X season, strongest still quarter us see is this It months the we So just in didn't is our category we for typically expected. The holiday retail sales.

and entire next but without on we're to tariffs sales when plan remarks, holiday, also year conclude to our marketing you really a starting because my would until quarter it's on focusing accelerate impossible unknown. in I very for to just So visibility we But changes administration optimistic you. our staff really shareholders. impacts of and again expect be into to having these from so This our BXB don't thank that or all great really new have say position strong trends. Again, I could office the before enterprise the quickly January. We the want to growth also first takes any everybody,

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the U.S. didn't slower think up just DoD U.S. you do or why jammed one, like think, in first got you materialize bureaucracy. expected? The The DoD I was procurement,

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on with lot I a going And we're time, them. is think priorities other what just out some so I coming saw focused ran and of to this And we again of were delays see they think year.

administration. we're continuing long think going until how of term. the versus government activities I And resolution short-term going the because know some procurement disruptive I to be to January see of to change don't in DOGE are

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So announced like was or be participating in components look components September, then if announced Red you yet. for we short-range until get orders because that supplier the cascade program delays reconnaissance for they order. us originally bid Cat supposed is in slot to a at don't their on been see hasn't Those

So I start likely how of able through delay $X.XX the and to price think our with relationships the some and you with warrants those we'll market start play see price we'll come strike to of are how to us through a primes you're some the out? Yes. manifest. Can to walk above of see

we So in They shareholders. long had a with believe a it's of unusual. we're doing. What is strongly we very did what very lot our conversation

at disclose where they're more more look at $X.XX And to to venture we look -- this do we it they it. So willing like above market. want

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the of a share. company convert of that A to have if the the to lot warrants them at of can some works. least it or ask next prove half the right at $X we Here's warrants round," the

people those expect convert -- to goes after look and what registration we'll and forward, warrants. we'll see I try it to So

price I very we're very cap think continue it's they'll But think clean very table where -- fully to today, with be capitalized we're quickly, to share and dependent. at a if we'll just able convert then operate. I and

imposed? And if it, if as them? We and All they say, place if so out shareholders we willing be in they Do U.S. supporting interested how how conversion. "Hey, We're long your very us building you where you and think contingency are tariffs need to on -- would going," that dependent in in plans -- push really a them. we're as are guys they believe very shareholders are the company can our I then keep is parts. convert. What doing yes, play don't need are U.S.

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need plans think So contingency we I there. don't

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I think we that's time, some change to structure but Brian it. it how would save we might about

demand have whatever. a a a there could and month, we or you able risk when already get that scale if to supply we're always components chain cannot Next at deliver production? There's question. we've in you're necessary. But doing for believe structured recall deliver hardware that, in some to our orders or a that be our $XXX,XXX to risk hiccup Is we -- and have you we some the of

have some scaling. been don't we've challenge, would a do from plan it these we but able It risks we So to do a of before. be to any things and see extraordinary

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feel would ability address And be it awesome. we So actually I about our pretty it. to good mean,

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that and the components, engineering on question. on the really video quality frontier? That define category. the Next depends competition What are the metrics

So which I think price? there's think good, I it's in better, what all is the key missing categories aspect, best. very these is, a

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