Earnings call transcript: Draganfly's Q3 2025 shows revenue growth, stock dips

Draganfly Inc. reported a significant year-over-year revenue increase of 14.4% in the third quarter of 2025, reaching $2.155 million. Despite the positive sales figures, the company experienced a substantial comprehensive loss of $5.4 million, compared to a $364,000 loss in the same period last year. The stock reacted negatively, closing down 3.83% but showed a slight uptick of 1.21% in aftermarket trading.

Key Takeaways

• Draganfly's Q3 revenue grew by 14.4% year-over-year.
• Comprehensive loss widened significantly to $5.4 million.
• Stock fell 3.83% in regular trading but rose 1.21% in the aftermarket.
• Strong focus on military and border security markets.
• Expansion of manufacturing capacity underway.

Company Performance

Draganfly's third-quarter performance highlighted a strong revenue growth driven by product sales, which accounted for $1.6 million of the total revenue. The company is positioning itself as a leader in the NDAA-compliant drone market, focusing heavily on military and border security applications. The expansion of manufacturing capacity, including the establishment of new plants, underscores its commitment to scaling operations.

Financial Highlights

• Revenue: $2.155 million, up 14.4% year-over-year
• Product Sales: $1.6 million
• Services Revenue: $530,000
• Gross Profit: $420,000
• Cash Balance: $69.9 million
• Total Comprehensive Loss: $5.4 million

Market Reaction

Draganfly's stock closed at $8.1, a 3.83% decrease from the previous close. However, in aftermarket trading, the stock showed a modest recovery, increasing by 1.21% to $8.1981. The stock's current price is within its 52-week range, which has seen a high of $14.4 and a low of $1.63.

Outlook & Guidance

Looking forward, Draganfly anticipates that military sales will constitute 90% of its revenue by 2026. The company is exploring strategic acquisitions to enhance its talent pool and culture, aiming to capitalize on high-margin, specialized market segments. Revenue forecasts for the upcoming quarters indicate a steady increase, with expectations set at $2.03 million for Q4 2025 and $4.5 million by Q3 2026.

Executive Commentary

Cameron Shell, CEO of Draganfly, emphasized the company's commitment to customer-centric product development, stating, "Our job is to help ensure that our customer is unbeatable, absolutely incompetable." He also highlighted the role of drones in autonomy, describing them as "the leading edge of autonomy."

Risks and Challenges

• Significant comprehensive loss, which may impact financial stability.
• Dependence on military and border security markets could pose risks if demand fluctuates.
• Expansion efforts might strain resources and operational capacity.
• Potential supply chain disruptions could affect manufacturing.
• Macroeconomic pressures and geopolitical tensions may impact business.

Q&A

During the earnings call, analysts inquired about Draganfly's strategy for potential cash raises and its approach to overseas military manufacturing. The company confirmed strong interest in military and border security markets and emphasized its focus on developing customer-centric products.

Full transcript - Draganfly Inc (DPRO) Q3 2025:

Roli Bustos, Investor Relations Representative, Dragonfly: All right. To respect everybody's time, I think we will get going right away. So again, greetings and welcome to all the shareholders and stakeholders who are joining us today for the Dragonfly twenty twenty five Q3 Earnings Call. My name is Roli Bustos, and I am the internal Investor Relations representative here at Dragonfly. We appreciate you joining us.

As always, we'll start with our CEO and President, Cameron Shell, recapping the third quarter earnings highlights. Next will be a more detailed financial review with our CFO, Paul Sun. We will conclude, as always, by addressing the pre submitted questions we have received. You are welcome to reach out to me anytime at investor. Relationsdragonfly dot com if you have further questions.

I remind everyone that this presentation may include forward looking information and statements. These statements are not guarantees of future performance or financial results and undue reliance should not be placed on them. Any future events or financial results may differ from what might be discussed here. The company's results and statements are accurate as of today, 11/12/2025. We are under no obligation to update or renew these statements outside of material press release disclosure going forward.

The full forward looking disclaimer can be found on the screen right now. So Cam, if you're ready, please go ahead.

Cameron Shell, CEO and President, Dragonfly: Sounds great. Thanks, Roly. Really appreciate that. And thank you, everybody, for taking the time to be with us today. We really deeply appreciate your time and consideration.

So maybe just to hit the highlights out of the gate. So our revenue for Q3 twenty twenty five was $2,155,000 an increase of 14.4% year over year. That includes $1,600,000 of product sales and about $530,000 of services. Our gross profit was $420,000 and our cash balance as of the 09/30/2025 was just underneath $70,000,000 So maybe just to run through a few of the highlights for the quarter. In particular, these are the ones that we felt were certainly material and meaningful to the shareholder and our future revenues.

So first of all, we are unveiling the Outrider Southern Border drone, which is a multi mission drone in a live operations at Cochise County. So basically that whole operation is where we've got the southern border sheriffs basically commissioned a heavy rider or what we call an outlier drone, which is a drone that we designed with the southern border sheriffs to be able to address the very specific mission sets that are required along the Southern Border. This very unique drone, which has a large addressable border opportunity globally, not just along the Southern Border, is actually a drone that really uniquely positions itself to be doing pretty much anything a fixed wing surveillance aircraft can do with the versatility of a heavy lift multirotor drone. And we'll talk a little bit more and I know there's some Q and A that came in around that as well. So that was a very significant win for us.

And in fact, on Monday of next week, we are actually doing the inaugural missions with that drone going live and operational. So we're really excited about the 100 or so different government and international representatives that will be there witnessing and participating in those missions along the border in Arizona. So we also significantly bolstered our military and defense capabilities with the appointment of both Victor Myers and Keith Kimmel. Both are incredibly accomplished war fighters that bring very, very strong both educational and operational backgrounds to the table. They are heading up our military board of advisors.

They're operational within the business and are supporting our sales teams as well as our operational team. So we're super thrilled to have brought them on board and they're very well known certainly within the community. We were approached and very pleased to put a deal together with Palatin AI. And so we are actually collaborating on a specific opportunity that was brought to us from a military customer. But in addition to that, we are putting together and incorporating their AI into our drone fleet.

We have several AIs that are being incorporated into our drone fleet. We treat our AI kind of similar to payloads. And what that means is that because our entire systems are modular, whether it's a particular type of camera, a particular type of payload, a particular type of sensor or even a particular type of AI, all of our system, right from hardware through software, through design is all managed in a way that can all be modular. So if we've got a customer that's coming to us that has a particular workflow requirement that requires a specific AI over another, we can incorporate that into it. Paladin has done some fantastic work in the industry, especially in swarming.

And so we're really, really excited about the opportunity that we've been able to put together, they've been able to put together with us and vice versa. And so we expect big things out of this relationship. And it does start off with a specific customer that we are working with. We also announced that Drone Nerds, who is the largest reseller in The United States, has taken on the Dragonfly line, in particular for public safety, but also for military as well. So we spent probably a year working with them, really helping ensure that we are positioned well within the customer base that they're going to.

They're a very discerning organization and we really fit well within their NDAA compliance strategy. And it should be noted, and I think I'm speaking with all accuracy here, is that in terms of a manufacturer, not just in North America, but a manufacturer anywhere in the world that has a comprehensive lineup of NDAA compliant drones, I think we can point to Dragonfly as the leader, if not really the only NDAA compliant manufacturer out there that has five plus drone systems that are all NDAA compliant. And those range right from small FPV drones that we're selling into the military right through to the Outrider drone, which is a hybrid dual diesel engine, seven hour, 100 pound capacity drone. So Drone Nerds has got this capability now to be able to offer that entire product line, in particular down to their public safety. So we're really thrilled to be have been selected by them and get to work with them.

We also had a fantastic show at AUSA. And this was really meaningful for us. So AUSA is the Army Association show, the big military show in The United States. We were able to display there with our partner, which is the next highlight there, Global Ordnance. So Global Ordnance is one of the largest, what's known as DLA primes out there, one of the largest suppliers of munitions and equipment into Ukraine, as an example, amongst many other things, multibillion dollar organization.

And so they featured our drones along with them and have now brought us into multiple opportunities that we're working side by side on. So this show was really a coming out show for Dragonfly in terms of our capabilities and capacities and we had just an overwhelming response. Now this was also highlighted by the fact that we had a very significant announcement with the U. S. Army, which we'll talk about in just one second.

We also announced that Autonomy Labs, which is a fantastic and strong UK company, basically decided to standardize on our platform being the heavy lift, which is not the hybrid version, but the actual electric version to be able to lay out their mine clearing, what they call carpet. And so this is another great example, at least in my opinion, of payload companies who are looking to capitalize on the drone market, but are looking for the right manufacturer and the right solution provider to actually build their payloads around. So one of the key components of our modularity and our full product line is the fact that a payload is only going to be as successful as a drone platform as it can fly on. So our core strategy of ours is to be able to cater to those channel partners, those payload companies, again, whether they're things like LED signs that we've done before, whether they're mine clearing carpets or whether they're particular camera systems or AI systems, the more of those that we can integrate into our drones, the bigger channel that we have that those payload providers are actually selling into as well. And that is a key component.

So Dragonfly having been in the business for twenty five plus years now, we have that experience to be able to integrate all those other payloads into it. And it takes a long time to get enough integrations build some critical mass around somebody, a end user, a customer going, hey, wait a minute, I need to run this payload, not just on a small ISR drone, but I also need to put it in conjunction with a medium lift logistics drone. And so for them to be able to make an investment once into a particular payload, but use it across multiple use cases because they've got different size of drones that those payloads can fit onto, we're finding that as a significant strategic differentiator or accommodator, if you will, for the customers that we're dealing with in the market and our payload providers. So again, thrilled to have done this project with Autonomy Labs. We displayed with them over at the DESI show in London and they really knocked it out of the park in terms of the amount of orders that they were lining up and the amount of testing that they've got going on with multiple militaries around the world.

We also demonstrated both our Flex FPV and our Commander 3XL platform at the invitation only U. S. Army T Rex experimental showcase. We were there actually, as I mentioned by invite. We were demonstrating the 3XL and the FPV and how they can work in conjunction with each other.

Again, if you think about that Commander 3XL, which is above my left shoulder here, you really do notice that flat bottom on it because that gives a huge surface area for different payloads and multiple sensor capabilities. And so if you would also think about FPVs that are underneath that platform, and so you've got the 3XL, which can carry FPVs to a particular location, maybe a GPS denied location because the 3XL can handle about type of sophistication and radios required to be able to fly in those environments and then be able to deploy FPVs from close range. The next notable one to bring up is that we have now we're well into working with standing up seven new plants in The United States through our contract manufacturing arrangement. We are in the midst of tooling those plants right now. That is going to more than quadruple our capacity.

And for any of those that don't know that we currently in our own plants, we've got about 100,000,000 of capacity that is now just kind of coming online. It took us until about Q3 to get that fully built out. We are now starting to produce on those particular lines, in particular for the U. S. Army order that we announced about four weeks ago now.

And so but these seven new plants coming online based on demand that we've got coming through will give us somewhere in the range of about four times that capacity by the end of next year. The company that we selected to go with, it was an arduous process, but the group that we selected to go with, their real specialty is, I mean, they're great contract manufacturing. They were very accommodating about the tooling and the training that we need to provide. But they're very, very good on global logistics and supply chain management. And that's super key to us, in particular because of the type of army orders that we're now entertaining.

We're also, I believe, very uniquely positioned as an organization to support not just NATO, but in particular the Canadian government. So Canada has now announced that 5% of their GDP is going to be moving towards defense spending. That's literally billions of dollars of new spending in this coming year. And there's upwards of $2,000,000,000 in the next couple of years spent just on drone technology. Now because of the unfortunate tariff war, which is working out fantastic for Dragonfly between Canada and The United States, Canada has a very explicit by Canadian policy right now.

And given the fact that we have manufacturing plants and strong roots from Canada, we're very well positioned there and have several initiatives ongoing in order to address that market and are likely there might be two companies in the whole country of Canada that can address that market for the Canadian D and D. And in fact, the other company right now only has one particular type of drone, It's more of a helicopter that would address that. So we think we're incredibly well positioned up there and thrilled to be able to be of service to that nation, not only to the nation of Canada, but because of our Canadian manufacturing, our opportunities in the Arctic, both with U. S, NORAD, Canada and the Arctic states of Sweden, Denmark, etcetera, really seem to be also burgeoning quite well. So again, I would love to say that was part of our strategy.

It wasn't, it's more luck than anything. But we're super proud to be in that position and we look forward to servicing those organizations and customers over the coming years. And then we did have a Fortune 50 telecom company start to buy our heavy lift drones. Now their heavy lift drone in this particular case is being used for communication support on post natural disaster. And we've been very, very hopeful with this particular Fortune 50 telecommunication company to actually expand the relationship.

So this is part of two big initiatives that are happening. First of all, they're moving away from the Chinese manufacturing and they were very explicit about needing a really solid long term partner that had NDAA compliant drones and had the capability to serve them at scale. So this was an initial order, but it was really important order for us. And in the event that we see more orders from this particular company, we see it as a signal from them that they're standardizing on our fleet. And of course, those order size get well into the hundreds.

And when I say hundreds, again, I'm not talking about a small ISR drone. I'm talking about a very sizable nine foot drone that has incredible capabilities, is standing up cell towers, has tethered components to it and such. Then of course, very notable subsequent event from Q3, which was incredible for us as a company and as shareholders was that we announced an order for our FPVs from the U. S. Army.

Now this particular order, though we have to remain shy on some of the details of it, I can tell you that the reason that we won this order, think is I'd like to say it's because we have a terrific FPV platform that does have some incredibly unique features designed from our experience being boots on the ground in The Ukraine since 2022. But I think the other reason that we frankly won this is that this particular order isn't just about providing drones, it's actually providing supply chain and logistical support. We're actually training this particular section of the Army to actually be assembling and manufacturing our drones so that they can do modifications on the fly. And then we're actually supporting that and providing the logistics for the resupply of all those drones into those locations. So it's actually Dragonfly manufacturing on U.

S. Army location and presumably, hopefully, locations. So really, really significant. It took about one years point maybe plus in order to actually put this order together. And it is one of the reasons that about two years ago, a little less than two years ago, I guess about eighteen months ago, excuse me, is why we still we started building out our capacity.

So over the last two years, we basically had to cap our sales. We had to rebuild a bunch of our capacity in order to meet the demand of this and the other particular similar orders that we anticipate coming down from this. So just a quick review. This is our drone platform. This view here does not include the Outrider drone, which actually goes live next Monday on the Arizona border.

And that drone itself would look very similar to the drone that's on the far right side, the heavy lift drone, other than the fact that it has combustion engines on it as well. It can come with a variant of either one or two engines. It has the capability to fly up to seven hours and carry 100 pounds of payload. That particular drone will be doing everything from communications, mesh networking, surveillance, reconnaissance, actual interdiction, logistical resupply, medical emergency support and many, many other things. I mean, is truly a drone that fits just an incredible array of use cases.

So the event next Monday has over 100 people coming from multiple countries, all pretty border focused and the word that we're getting now is that we've called this drone the Outrider, but most people are calling it the border drone now because it's a purpose built border drone. The TAM on border and border surveillance for drones is literally globally in the hundreds of millions of dollars per year for this particular product line. So we have some pretty high hopes and certainly early indications are that this is going to be a leading driver of sales for us even next year, even though we hadn't planned on it being a big driver of sales until 2027. You can see the other drone lineup there, which I think I've explained pretty well in past calls. Key thing here is that they're all interoperable, all the payloads fit across it.

If we've done an integration on one drone, whether it's with an AI and yes, our Flex, even the FPV drone there has AI incorporated into it. Whether we do it with that drone or all the way up to the heavy lift drone or the Commander, excuse me, the Outrider drone, you're working with the same common operating environment, the same connections, the same buttons in the same places, flight characteristics and so on and so forth. So it's also of note that the old DGI payloads that were supported by DGI also fit into this modularity. So if somebody has got an investment into a payload, they got FLIR cameras or they got whatever it is, and they're having to get rid of their DGI fleet, but they do not want to lose their investment into their FLIR cameras or their other payloads. Those payloads actually integrate right into what we're doing as well.

So again, just some experience there that's helped us think through how do we progress our customers into a new full product line. I won't spend much time here, but basically, the military impact for what's happening in the small UAV market is incredible. We saw in the last couple of weeks the U. S. Government talking about getting well over 1,000,000 drones.

And I know one of the questions that came in is, do we think we're going to get our piece of that? And certainly, that's what we've been planning on for years and working toward. And we are one of the few companies in North America that have that capability or capacity to be able to meet that demand. So we're pretty excited about what's happening there. We do have some validation around the Army orders that we previously sold in Special Forces and now into the Army as well as the many other initiatives that we've got going on across the whole Department of War.

At this point, what I'd like to do is I'd like to turn

Paul Sun, CFO, Dragonfly: it over to Paul Sun, our CFO, to run through our financial highlights. Paul? Yes. Thanks, Cam. Thanks, everyone, for joining.

Appreciate it. So yes, just taking you through these tables here. Revenue for the third quarter was $2,160,000 up 14.4 percent from $1,890,000 in the 2024. Third quarter revenue did comprise of the $1,620,000 from product sales with the balance coming from drone services that Ken mentioned at the outset. Gross profit $421,000 this quarter compared to 441,000 in Q3 of last year.

This quarter did have a one time non cash write down of inventory of $3,000 and otherwise gross profit would have been $464,000 Gross profit for 2024 would have been $6.17 if we took away the one time inventory write down of 176,000 from the same period last year. So taking these non cash items into account, gross margin would have been 21.5 this quarter versus 32.7% year over year. Total comprehensive loss for the quarter was $5,400,000 compared to a loss of $364,000 in the same quarter last year. This quarter did include non cash changes comprised of a fair value of derivative liability loss of $1,800,000 that $43,000 inventory write down that I mentioned and a gain on a notes receivable of $35,000 So otherwise would have been a comprehensive loss of 3,600,000.0 The same period last time had a onetime noncash change in derivative liability of $3,600,000 the 176 inventory write down that I mentioned and then a gain on an impairment note of 8,000. So the comprehensive loss from last year would have been 3.8.

So that decrease in loss is due to primarily foreign exchange gain and lower professional fees, offset by higher half office and miscellaneous costs, wage costs, and share based payments. If we move to the next slide, please. Yeah. We just went through the year over year changes. So here, I'll do a quarter over quarter between Q3 of this year and Q2 of this year.

Revenue for Q3 twenty five increased 41,000 to 2,160,000.00, up from the 2,120,000.00 in '25, an increase of 2% due to higher product sales. Gross margin for Q3 twenty twenty five again was 19.5% compared to 23.9% for Q2 twenty twenty five. Again, if we back out that one time inventory write down mentioned before for Q3, and the $10,000 write down from Q2 'twenty five, gross margin again would have been 21.5% for Q3 and 24.3% for Q2, with the difference being product mix during the quarters. Total comprehensive loss for Q3 again was 5,400,000.0 compared to $4,700,000 for Q2 of 25,000,000 And again, please recall we had that loss in fair value of derivative liability of the 1.8, the write down of inventory of 43,000 and the gain on the note of 35,000. So the comprehensive loss would have been 3.6.

If we adjust for the non cash items in Q2, which included a non cash gain in the of a derivative liability of $180,000 a write down of $10,000 of inventory and a gain on a note of $8,000 that loss would have been $4,600,000 So the quarter over quarter decrease in loss is primarily due to the foreign foreign exchange gain and lower professional fees offset by wage costs and share based payments. Going to the next slide, please. Yeah. So just kinda looking at some high level balance sheet items here. You can see total assets increased from the 10,200,000.0 at the '24 to 77,000,000, which is largely due to the increase in cash over the year.

Working capital as at the September was $69,000,000 versus $3,800,000 at the December. However, if we exed out the fair value of derivative liability of $3,000,000 working capital would have been a surplus of $73,000,000 this quarter and $6,000,000 at the December. Doing the same analysis for the shareholders' equity at this quarter end would be $73,000,000 versus the $70,000,000 shown and $6,800,000 at the December versus the $4,600,000 shown here. And as you can see, we continue to have minimal debt and our company's cash balance, as Ken mentioned at the outset, was $69,900,000 at the September compared to $6,300,000 at the December. And with that, I'll pass it back to you, Ken.

Roli Bustos, Investor Relations Representative, Dragonfly: All right.

Paul Sun, CFO, Dragonfly: Thanks, Paul. So

Cameron Shell, CEO and President, Dragonfly: what I'll do now, if it's all right with everybody, is I'll jump into some of the questions. There's nine questions I'll certainly do my best to be timely and answer them as surely as is reasonably and regulatory possible. So the first one that we've got here is it says, you seem to have more cash on hand now than ever. What are the scenarios or use cases for any potential future raise?

So we'll be opportunistic about potential future raises. I think we've raised less cash certainly than our comparables out there. And we're cognizant of cash being a strategic advantage. That said, we're highly, highly sensitive to dilution and shareholder value. So basically, we've got $70,000,000 cash on hand.

We're burning about 1,000,000 point dollars a month. Things are scaling in a great way. Pipelines are literally, I can't even say the numbers because they're really truly unbelievable. So there's not an acute need to raise cash. And we certainly as a company that's been around for twenty seven years, able to we think we have very good visibility to EBITDA positive and cash flow positive over some time here.

That said, there are some key acquisitions that we're interested in. They are to be clear, not necessarily acquisitions around technology or a particular product. Our acquisitions, which I think is a bit different than our comps out there, are very focused on the people. So we're in a fortunate position to be able to build what we sell and integrate what we sell. We're highly engineering focused and customer integration organization.

So what's most important to us is having the right team and people to be able to do that. So there are some pretty cool acquisitions out there that do have some great products and tech that fit with what we're doing. But they're probably not of the size or scale that maybe we see some of the comps out there doing, because really what we're interested in is culture and how those people fit in, how we better serve our customers, how that can scale, how that can add to the scalability of what our customers are asking for us right now, because the scalability that's being asked of us is truly astronomical. So us is not about layering in more acquisitions, which can sometimes be more problems. We're really about layering in the right personalities, people and leadership and technical capability in order to meet the demand that's at hand right now.

And of course, those customers who are making those demands and that's kind of really where the market's at right now, we want them to be incredibly confident with the people that we're bringing on. So that tends to be a bit of our acquisition focus, which I think is probably another one of the questions in here. So in terms of raises, we needed to do a raise for an acquisition, we would consider that. If it was opportunistic in the market, everybody says when the cash is there and you're in growth phase, you kind of really want to make sure that you don't not take it. But we're going to be we're definitely going to be prudent about that to the best of our ability.

So the second question that came in is, you expand on the press release about manufacturing and overseas military facilities? How large is the potential here in terms of revenue? Are the financial metrics of this much different than manufacturing is done in North America then shipped as a final product? So I'll speak to the extent that I can about this. So the manufacturing in overseas facilities is very specifically in military facilities where they're manufacturing a Dragonfly product.

And it's a little bit more of assembly than manufacturing. The prime driver here is that those facilities need to be able to modify and have capabilities that they don't need to go back through a procurement cycle in order to order some new capability on a drone. They need to be able to do those modifications and such themselves. So they need to be trained in how to manufacture, how to modify, how to repair, how to change the product within the concept of operations that might be changing in their tactical situation at that time. And so that's really the driving premise.

And then the other part of that is, well, is an army base ever going to be able to do that on scale? If you think about what's happening in places like the Ukraine right now, you have individual brigades that are using hundreds of thousands of drones per month. And so you are not going to get that kind of scale on an army base. So you need a partner that can actually still provide that scale into your theater of operations, while you still have the capability to actually make the modifications or drive your technology or tactics forward. And so that's more of the type of relationship that's here, which is why it is so strategic and such a big deal.

In terms of scale, all I can say is that there is a lot of brigades in The U. S. Department Of War and all the NATO and the Five Eye countries. And when I was at AUSA, one of the big announcements from the Army was that every soldier is going to be trained on a drone, every single soldier. And the reason is that if you think about those FPVs right now, which are not they're just the tip of the iceberg of what's coming, And they tend to be the focus right now.

But basically, every soldier has a grenade that can go 10 kilometers. Now that's I mean, that's what they choose to use it for. So the scale is absolutely enormous. But then when you also look at what's happening on the logistics side, on the resupply side and all the rest of it, and they need that embedded manufacturing capability, which is what we're calling it a hybrid embedded manufacturing. I really am not at liberty to say what the sizes are, but you can figure out pretty quick that it's numbers that are just completely astronomical.

So The U. S. Has stated that they intend to order millions of drones. Do you think we'll be able to get a meaningful piece of that? I do.

And it doesn't have to be a big percentage of it for it to be meaningful. And the ethos at Dragonfly is we want to make sure that every one of our customers, whether they're military, industrial, commercial, whatever the case is, our job is to help ensure that our customer is unbeatable, absolutely incompatible. And so again, whether that's a military or an industrial customer, what we like to do is add value. So will we eventually be the biggest drone manufacturer in the world or something? I don't know and that's actually not our goal.

We want to be the best partner to our customers that make them uncomputable. So we really want to continue to be that high value, highly sought after organization that brings a lot of experience and a lot of consciousness to the table in terms of the products and the services that we're able to enable our customers with. So the short answer is, yes, think we can get a piece of it and we'll just keep working to do so. Canada has said that they want to purchase Canadian made drones. Can we expect meaningful orders from Canada and the Department of Defense at some point?

I believe so. I can't give you predictability or any deeper insight, but I think we are as well positioned by far as anybody in the world to be able to provide that very big budget. We don't often think of Canada as a military force. But that said, it's about the seventh largest economy in the world and now you get 5% of that economy going into rearming and reimagining what they're doing. And a very meaningful part of that is going into drone technologies as is all military budgets now, because we've moved from into an entire new phase where everything is actually becoming about not just about automation, but about autonomy.

And the leading edge of autonomy is quite frankly drones, whether it's controlling autonomy, being autonomous, being in airspace, managing airspace, all of it. Drones are the leading edge of that. And so even small military budgets now are meaningful because so much of that budget is being focused into this particular area. So is border security still the main focus for the company? Yes, I mean, if Cochise County and the Southern Sheriffs is any indication of where we've been fortunate enough, very blessed to be able to be positioning ourselves as a border management specialist, not just with our drones, but with our tactical solutions team to be able to understand the ConOps and integrate the understanding of the ConOps into functional equipment.

Yes, management, border security is a huge, huge piece of what we're doing. And I do find that we're pretty uniquely positioned there because it is a particular specialty that isn't just about ISR. When you've got folks coming over that border, you've got search and rescue situations, you've got human trafficking, you've got weapons, you've got armed militias, you've got drugs coming in. So the variance of what's happening is so incredible that you need to have a specialized team that really understands how to work with our professional with the law enforcement professionals and the super brave people along the border that are holding our economy and our people safe in order to be able to provide that service. So again, those tactical solutions that we provide, the integrated services that we have at a tactical level are really our strategic differentiator for building great product.

Do we see consolidation with the drone industry? For sure. Yes, there's I think we're going to continue to see a great expansion, a lot of small companies. They're talking about 1,000,000 drones. They're talking about easing procurement.

But what's going like, this is not an easy business. You're talking about putting aircraft in the air. And so any way you slice it, a lot of people order parts off Amazon and think they can build a drone. But when you're talking about building drones at these levels with these mission critical requirements and or flying them over people or vehicles or that type of stuff, I mean, you're just dealing in an environment that most people do not understand. Then on top of that trying to scale production, that's a whole other set of problems out there.

So we think there's going to be a big rush of folks. There is a big rush of folks into the industry. We've seen it seven or eight times before over the last twenty five plus years. There's going to be fallout from it and there's going to be great talent available out there and we're hopeful to pick up some of that talent because there are super talented people in lots of organizations that are working on these problems, including our comps out there. Think our comps, you are probably obvious names, they're going to do great.

There's kind of like the four or five companies out there that have kind of made it through some very lean times, have some capacity capability now, have some experience. And they've got enough scars, like we all have enough scars where we're going to muddle our way through and be able to solve these solutions or solve these problems at scale. And so I think the industry in general is starting to shape up quite nicely. There's also a couple of privates that would do well. But yes, there's going to be consolidation for sure as there always is.

So can you give us an update on what your production capacity is and if you had planned to increase in 2026? Yes, so our number one focus is organic capacity, which is can do up to about $100,000,000 and that's what we really want to make sure that we're streaming that in 2026. And then, but we are bringing on more capacity in 2026 and so it will expand far beyond that, but our focus is on our organic capability. Part of the reason that we've got outsourcing capability that we're bringing on stream is for some of our supply chain management and being able to provide from different parts of the countries and different parts of the borders to ensure that we've got efficiency around tariffs, efficiency around manufacturing, delivery, supply chain, etcetera. So again, pretty unique positioning in terms of North American manufacturing and being able to suffice all parts of North American and European, in particular, manufacturing.

So again, wasn't part of the master plan, but it sure worked out well for us. And it was maybe a little part of the master plan, but not all that much. So can you tell us what percentage of revenues will be military versus commercial? Do you expect military to be a major part of your revenue going forward? Yes.

Right now, I'm going to say, we've had our revenue cap here for the last couple of years, and that's certainly now about to change very quickly or is changing very quickly. And I would say that military is, let's call it, 30 ish percent of that. But that will be next year, it will be 90%. Just one single order dwarfs the numbers that we've done for the last three years, and there's multiple types of those orders that are falling into place. So it could be 99%.

We could see our commercial or our public safety market go up 200% this year and military sales will still be 90% just because the individual order sizes and then the resupply and everything else is just so absolutely mind boggling. So what do you feel differentiates Dragonfly? Our integrated practices, our integrated tactical services. That is a big differentiator for us. So when we worked on the Cochise product, we spent months on the border, on horseback, on ATV, we understand the communication points where the holes were, we got to learn where the cartels were, how they think, what they operate, what are their techniques, like all of that stuff.

And then we sat with the sheriffs of the Southern Border and we spent the time designing what it is the capabilities that they need to meet. So whether that was that instance, whether it's some of our industrial clients, whether it was the opportunity that we created over the last was provided to us, excuse me, the last two years with this latest army contract, It was that same process. It didn't start with the product. It started with understanding the concept of operations, the use cases and really kind of figuring out, okay, what can make your situation such that we can help make you uncompetable. And I think that's our differentiator.

Now further to that, we've got twenty five years of experience that allows us to have a full product line. So we can actually leverage that and be able to provide those types of products out there and services. So at the end of the day, it's our people. And I hate saying that because it sounds like such a typical answer, but that is how we utilize the incredible talent that we've got in the company in order for us to be differentiated. I do think the fact that we've got manufacturing, not just like across two borders is a big differentiator as well, because that Canadian market has turned into a monster opportunity.

And so that's pretty unique as well. I think ultimately, what will carve out a durable market share for us over the next three years. From a strategic standpoint, we're all about creating blue ocean opportunities. So there are a number of companies and there's a whole bunch more coming that are going after that kind of Mavic three replacement, small ISR drone, which is a lucrative market right now. But ultimately that market in our opinion, what we've seen over the years is that's a market that's continued, that's going to continue to get chipped away.

There's multiple players going after it. Right now, they're $30,000 a year from now, they'll be $20,000 eighteen months from now, they're going to be $4,000 drones again. Maybe the comps out there are going to agree with me on that. And then the risk is actually, there are other everybody thinks that DGI came in and dominated the market. Well, we have to remember that the North American market was being dominated by multiple foreign manufacturers, primarily out of Asia.

And if it wasn't DGI, it was going to be one of them that basically took the rest of us out in North America. It's just that DGI was so good, they were able to dominate those players as well. Well, a lot of those players were from countries that can produce NDAA compliant products. So if I were to make a prediction in a number of years from now, we're going to see the Eastern Europeans, we're going to see the Southeast Asians, we're going to see them in that kind of small competitive ISR prosumer space, again with NDAA product. Now we got kind of like a three to five year kind of window here where that isn't going to be the case.

But it's also not been a reason where we've really kind of focused on that particular product line. If you look at the rest of the other five products that we've got, they kind of skip over that piece. Now we've got some strategic alliances and such in that area so that we can address it with our customers, but that's just not a piece of the market that we've seen North American manufacturers be overly successful with. Now the market is very different and I could be completely wrong on it. But notwithstanding, when we take on a market like the border, we're building a border solution and we think that we've created a very unique scenario where we've got an addressable TAM where it's going be very tough for other folks to compete in there because of the job that we do making our customers so incompatible.

And so whether it's that particular product or the embedded hybrid manufacturing product or any number of the others that we either have and or we'll be announcing, we'd like to create blue ocean opportunities. So we've got these pockets or hives of burgeoning high margin business that are very attuned and custom and ideal for the products that we make. And that's a multibillion dollar sales funnel certainly over the coming years. And so we don't necessarily have to be, hey, let's go build the typical drone and have to be the number one or the number two player. We're even though we're a small company right now, we are the number one or number two player in the markets that we are addressing.

And they are large total addressable markets. So on that note, I am going to wrap up the call. Roli, thank you so much for all the work that you do. I know that I get so much feedback from shareholders about how candid you are, how hard you work, you're 20 fourseven. And I encourage anybody that if you've got questions or anything that you need help with, reach out to Rollie.

He also has the rest of the organization standing behind him in order to be a greatest service that we can be to our shareholders, all of which none of this would be possible. And then finally, just to our team members and to our employees, You're the most important thing that we have going out there. And that ethos of helping make our customers completely uncompetable is the ethos that keeps certainly keeps my passion going. And I see you guys executing that every single day with customers in ways of just going deeper for them than I've seen across many, many organizations I've been lucky enough to be a part of over the last thirty five, forty years of entrepreneurship. So I couldn't be more proud.

Thank you so much everybody for being here and reach out if you have any questions.

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