Welcome to the Alpha Wolf Impact Club. I'm Tim Winrout and this is where we shine a light on small companies with big ideas. Our mission here is crystal clear. We want to identify, support, and champion game changers. Those companies that are tackling massive challenges, revolutionizing industries, saving lives, or making us more efficient. For example, today we have Allan Evans of Unusual Machines. Unusual Machines designs and manufactures drone components, motors, FPV, video goggles, flight controllers, and more. Owns brands like Fat Shark and Rotor Riot, a ecommerce for drone pilots. They sell both consumer drones and critical parts for defense, commercial, and public safety use. Recently expanded US manufacturing, especially for NDAA compliant motors.
Why? They're an impact company. They support American supply chain, reduce reliance on Chinese-made drone tech, and build in the US for security and compliance. They drive job creation. They have recently added more than 30 people to their facility in Florida, and they enable life-saving tech. Drones assembled and powered by their parts are used in rescue, defense, and emergency response.
This is an impact company and I'm going to let Allan tell you more about that in just a moment. This is not to be taken as investment advice. I am not a certified financial planner. This is for education and entertainment purposes only. I encourage everyone to do their own due diligence.
Allan Evans from Unusual Machines. UMAC is in the house. How's it going, Allan?
Damn, it's pretty good. Did earnings last night? Did all the analyst calls, get to talk to you? It's a Friday. You know, I was thinking about traveling for the holidays, but with the government shutdown, it looks like a bad idea. So, you know, I'm revisiting those plans and hoping that the government will open. You know, the market's corrected a little bit I think is what people are calling this, but it's great, the world's wonderful.
I'm good. I'm good. All right.
You know, yeah, I mean, government shutdown, the housing, you know, the big short guy. What's his name? Michael...
Burry or whatever his name is. Yeah.
Basically betting against everybody. Yeah, I mean, this is perfect. Perfect. Heading into the holidays. I mean, people on food stamps may not get a meal. I mean, that's pretty cool.
Yeah. No, I'm confused that we're arguing over healthcare and then choosing not to feed people to make the fight worse. But again, these things are beyond me.
Yeah. Sometimes I wonder, you know, can we all just get along? I mean, if we did, I probably wouldn't have a company.
Valid point. Valid point.
But we could get along better, right? Like, I like sports. I like the competitive nature of things. I do think competition, generally healthy competition, it pushes us all forward faster. Like, if we all just got along, I think we'd still be living in caves.
So I think competition is the reason why we can talk over the internet right now. So not all competition is bad. And I think if it was a full Kumbaya journey, like I said, we would have never even built the pyramids, you know, we'd still be sitting by the Nile and eating berries or something. So let's not go for all of us getting along. Let's just get along better.
Okay, that's a good idea. I like that idea. Let's get along better. So, I just read something about China and DJI and the government coming up with the final... I don't know. Can you tell me where is DJI right now in terms of having their drones here in 2026 or not here in 2026?
So what it looks like based on the last NDAA is if they don't get a waiver, they'll be FCC banned, which means that DJI won't get approval on new products. So any product introduced through this year that they got an FCC approval for, they'll be able to sell and people will be able to use. It's just like the Mavic 5 won't be able to launch in the US.
Okay. And so it's the way that the US government banned Huawei is it sort of creates a natural obsolescence cycle where they just can't launch new products in the US. So it's not like it's a hard shutdown. It's not a hard kick out or any of those things which I think would be bewildering for a lot of people, but it's more of a they won't be able to launch new products. Okay.
Which I mean if you know that they can't launch the new products then it just kind of forces you to look for other alternatives, right? Yeah. What I think it does is starts a clock on the requirement for replacement which is probably three to four years out, where companies like ours or other American drone companies, we will have to keep growing up and grow up fast to sort of be a substitute good in that three or four years when the current set of products start to reach their obsolescence cycle.
So that leads us into a question about your numbers from yesterday. I mean, numbers were fairly good. I guess if you were going to nitpick, you could nitpick retail numbers, right?
Yeah. So enterprise was up, right? We almost doubled enterprise sales. We saw a margin improvement because of that. We have 16 million in bookings going forward for the enterprise side over the next few quarters. We were profitable. So there's some good things in there. But if you want to go after it, I think we fell short of analysts' expectations on revenue and that our retail store didn't perform as well as it historically has. And you know, small team, 19 people at the start of the quarter. The government had finally passed the bill and we basically... I drained the staff and said, 'No, no, no. You have to go focus on enterprise sales because the government fiscal cycle ends at the end of September.' So like, go babysit these clients that have to spend money in two months and a few things fell through the cracks and so we had some stuff out of stock so we didn't ship so we can't recognize revenue. Since then we've hired a lot more people. We backfilled it. I don't expect us to sort of operationally miss like that. But at the same time, if you look at best enterprise sales of all time, highest margin and 16 million in enterprise backlog, I think with the people that we had in house, we made the right choice on how to execute for the long term for the company. So I would do it all again.
And I wouldn't blame it, right? So I mean, look, you obviously you see it, you knew you made a conscious decision, right? But it was the right decision with what...
Well, we'll know in another couple quarters if it was the right decision. That's the best part about my job is I can say any decision is the right decision. You can't measure it for at least six months. So it's like, pretty much you can measure decisions I made six months ago basically and be like, was it right or wrong, but you know, we'll know in another quarter or two if it was the right decision. I think it is. I think it pushes us down the road. But that's, I tell everybody this, like a CEO's job is to make six right decisions a year, right? You don't know if they're right for months.
Yeah, that's true. But I think when we first met the question was, are you too early?
Right. Yeah, it was the question and I didn't think we were. And you know, we went after it like we were a little bit too late. We operate with a lot of urgency and now I think we're here just in time.
Right. Right. Yeah. So the government shutdown, I mean if this goes on indefinitely...
I don't know what the hell is going to make people step up to the plate. I would have thought a bunch of people starving would do it, but apparently they're okay with people starving. I don't know. I would want to believe that this is not going to last much longer, but then again, I don't know. There's some real stupid people out there and I am concerned that we're going to go into a holiday season where a lot of people are hurting in a big way and that is concerning to me. So, if this stays this way, how does that impact you?
I mean, look, we... I said this on the call. We have 16 million in already set aside purchase orders. We got a consumer market. It'll probably hurt the consumer market as you said because people will be hurt. But we're scaling as fast as we can because the reality is that the Department of War and then also for the replacement for Chinese parts. People want drone parts. And you know, all these markets are S-curves. They start and people look and they're like, it's exponential. Well, that's the bottom of the S. And I think predicting the top of the S right now is a little tricky, but we're at the bottom of the S. So, we're just going forward trying to scale as fast as we can. So, I think the next three or four quarters for us are light your hair on fire and run around till it gets put out kind of crazy as you try to scale and bring in people and everything else. You know, we just added 30 new people on Monday, for instance. So, going after that.
Do you have any concerns that maybe you're overstaffing?
No, because let's say we overstaff. Do I think the market, the top of the S-curve is right here? No. So, it just means we have more people trained for the next month or the next quarter when the demand is up. So, would you rather train people too late or too early? Let's say we're pre-scaling, which pre-scaling risk is what we're talking about here. Let's say I have this completely wrong. Okay, so it cost us a couple million dollars to be ready rather than miss the market. Well, we have more than 130 million in the bank. We had a profitable quarter. Even if you take away our gains, we only spent 900,000 in cash for the quarter. So, I'm willing to put a couple million dollars at risk, right? Just to be ready in case the government comes back and wants the million drones that they said they wanted today. In fact, if they want 100,000 drones, right? We got to go full speed. We got to build the supply chains. We have to do everything else. So, no, the risk-reward and the opportunity to do the right thing, I think all align here to say, 'Yeah, go ahead. Go do it. No problem.'
Right. Right. I mean, the demand isn't going to change. And you weren't early, you were on time, and we may go through a little rough patch here, but what does that mean when we get to the other side of this rough patch? There's going to be a bunch of pent-up demand that needs to happen like now, right?
Oh, yeah. So what I think is really interesting, the government buy cycle is like real noisy, right? But you have an idea of what it's going to be and the stock market's real noisy, right? And so what we try to do as a company, if you look at our staircase financing strategy or at our sales scaling strategy, we try to basically be the steady line through the noise as the company, right? So, we know that there'll be demand, so we'll scale. Do we care if it turns on now or in quarter one? No. Like, we need to scale and sell stuff. It's fine. We can reduce the noise.
The same with like if you look at the retracement in share price. Well, we always talked about our financing strategy as being a staircase and we don't burn any money. So, we raised 48 million at 9.70 a share. We raised 72 million at 15 a share. Okay, we're back to like 9.70 right now. All right, we don't need to go do anything in the market, right? We're fine. And if it can oscillate above, it can do whatever and we're well capitalized to execute. So I think for people, if you zoom out, somebody had told me this once a long time ago, when in doubt, zoom out. If you do that and you look at our company, you'd be like, 'Oh, it's just kind of steady.' Like, smoothing function is really what we try. And in doing that I think not panicking, not being reactive or being like, 'Ah, everything's on fire,' or being like, 'We're amazing, I'm the best CEO on the planet,' right? Like, I think just the steady truth that we're trying to do a thing and it takes time and consistency and we're in a position to provide that consistency. I think that puts us in a really, really strong competitive position.
Does it help you at all? I mean because of the fact that maybe things are slowing down. I mean, you've got an idea what's coming. You got a 16 million backlog, right? So, does it actually kind of help you in a little bit in a way because you get to get some employees up to speed on things?
Yeah, it doesn't change our operations at all. So, we're still going as fast as we can. It does two or three positive things for us. First, it takes away the exact delivery date pressure. So, we're not compromising things to get stuff out the door so that our customers can integrate it to deliver. So, we don't actually have to introduce inefficiencies to meet customer demands, right? We don't have somebody calling being like, 'I need this in three days.' Great. So, we don't have those injection inefficiency cycles in a ramp, which actually lets us ramp more effectively.
It also pretty much nukes any undercapitalized competition, right? Like, if you're not capitalized and you don't have any orders, you can't go finance setting up your supply chain. You're just kind of sitting on your hands with your sweet prototypes bleeding out your cash and you'll be nine months away from turning on where it'll turn on and we'll be like, 'Hi, we have stock.' So then any non-customer of ours is now interested in being a customer of ours because we're willing to set up the supply chain in advance so they can still compete when the government market opens. So it's driven more people to us because of our big pile of money.
Which is nice. And when you look at those, those are pretty positives. And then it's also wiped out market signaling for any actual major investment for real competitors. Like, this level of uncertainty makes it hard to go to VCs and be like, 'Yeah, let's build motor factories. How do you show me the PowerPoint that says this is a good idea?' Right? You just can't do that right now. So because we're like, 'No, this is a good idea. We know what the customers need and we can just smooth out the uncertainty from the customer side.'
And we could also ride out any uncertainty in the market. Like I was joking, we could go down to 2 a share. We could buy back shares if we wanted to. Whatever. Because we don't burn cash. So there's not this like, 'Oh crap, we run out of money' cliff.
And I think our discipline in doing that, what's really cool about quarter three is we had money in quarter three. We had raised another 50 million before that. We were profitable. And if you wipe that out, we still only burn 900k from operations. Like, having money in the bank didn't change how we treat money, right? Unfortunately, I don't take the private jet to a fancy hotel when I have a business meeting. I'm still a JetBlue Rewards member and I love Courtyard.
You... you know what I was gonna say, man? Even after you... you stay at a very humble hotel. You're not...
No, I stay in one with a little kitchenette because if I don't, I got nowhere to put my water. I can't go to the grocery store and get some basic things because otherwise then it's hamburgers or all the beers at the bar or whatever. And like, I'd look like a waterlogged version of me. It's hard enough as it is. So, you know, I'll take that complimentary breakfast. Those acts are exciting.
And I like that about you, man. I mean, you're not out there. You stay humble and I think that's a really good thing.
Hold on. Let's not kid anyone. I'm not humble. I stay practical. It's cheap. Those are fine, but humble. You can't do this job without some kind of ego, right? No, I mean, that's because everybody always tells you no. They're always trying to be like, 'Oh, your stock's down. You screwed up earnings.' No, no. Our plan is going fine. 'Oh, you're going to get nuked here and here and here.' Yeah, maybe, but probably not. Or early days of raising money, like 100 nos for every yes. You got to have a little conviction, right, in what you're doing when the world is telling you you're an idiot.
And so you can't... it's hard to do this job if you're humble. But I have a theory that I call primary vice, where no matter what the situation is, when it's really hard, when everything's frustrated, you kind of become your primary vice. And most leaders, they're either ego or greed. And I just have a very simple rule. Don't let your ego get in the way of your greed. Just like if I'm greedy, I'm a big shareholder, I'm aligned with everyone, like I could be having the worst day on the planet, but you know what? That Courtyard bed, I can still fall asleep on it because why am I going to burn the house down when I can just keep making it work?
Yeah. So, remind everybody not to let their ego get in the way of their greed. Like I have ideas and I go into executive meetings and like my COO, my CFO, they'll be like, 'Allan, we don't think it's a good idea.' You know what? We don't do it. Not unless I can convince them because again, just because it's my idea and all my ideas are great, Tim, we just talked about this. But I'm not going to let my ego get in the way.
And you know, now if it's super high conviction and it's necessary, obviously I'll sit down and we'll have a conversation and they'll very often come around and understand what we're trying to do. But if they don't, then we don't do it. So it's actually one of the things I look for in senior leadership, right? You need people who are proud, who are willing to do the work, who are willing to be convicted on a thing. And it takes a little bit of ego to do that, but you want them to be in it for the win even more because then everybody will work together and they'll all positively interact toward that collective win.
Yeah. And I like that whole approach, right? I mean, we've talked about it. I like your whole approach to how you hire and it's not just a one person thing, it's a group kind of a group thing. The people that are going to be working with them, which makes sense, right? Why would you not want the people that are going to be working with them interviewing the person they're going to be working with, right?
Yeah. And I want all the senior ones to be just a little bit greedy. Not too much like, you know, but when it really gets tough you want them to generally be good people but I again I think in certain situations at some points we all become our vices, not for a long time or whatever, but you know, it's once in a while and so that's really how I... it's a strange dark way to look at the world but you know.
I like it. So tell me about the hiring process. Do you feel as though... because I read on LinkedIn, I read one of your guys that I think that must have been doing the training for, I guess soldering or something like that.
Yeah. So what we... oh, go ahead. I'm sorry.
No, I think we did a really good job of building out our senior leadership layer. So I'd say in the last four or five months, we brought in Tom to do headsets. We brought in Jason to do supply chain. Brad doing the manufacturing, you know, HR with Trish. So, what we really look is to bring in sort of that layer of leadership and then let them go do their job. And being sure leadership's aligned, then everybody can go sort of function independently to reach the end goal and then you don't have death by committee, right? So, I feel really good about where our leadership team's at. And now that's what enables us to go hire 30 people and just hit the ground running rather than have it be, you know, bonkers clown car chaos, is people know what they're doing and they're in a position to go do it.
You got some good candidates, right? It seemed like at least from what I had read there, you kind of surprised at the amount of good candidates that you had to choose from.
Oh man, it's really cool. So again, I was a Silicon Valley startup kid and like the really good candidates used to be able to sniff around at about that A-round when a company was about to hit the corner. And so in that time period, you get these really great candidate pools. Well, that's what we had for candidate pools for hiring. And so when that's happening, you're like, 'All right, so I thought this was kind of magical. I feel like we got legs and this thing's going to take a real run, but it's going to be validated by the people that are willing to leave these other positions and come work here in the early stage to help this thing rip.' And that's just one of those indicators that you don't always see or you don't realize but when you go look at that quality of candidate pool, you know, like Al left the drone company he founded, Hoverfly, to come join us as a VP of engineering.
Right? He's amazing as an engineering lead, and you don't do those things very often unless they're like the seeds of magic in a place and talented people don't make that decision. You know, they can go anywhere, right? And so to have a bunch of candidates in that category apply, we're like, okay, there is something here. Something's probably going to happen. And we have a lot of those indicators. So, I'd say those are some of the breadcrumbs traders or whatever don't necessarily see because they haven't been through the operational trenches or through the mess of the early stage zones. And we're definitely seeing that and that to me is one of the most exciting things is now we have sort of that next leadership roster pretty much fully flushed out with just extremely talented people and that puts us in a position for them to each build out below them. So now instead of it being serial, we can parallel path as we scale.
Right. If by chance, I don't know, there was world peace like tomorrow. There's still going to be a huge need for drones, is there not?
Yeah. Oh, yeah. If you look just beyond flying around doing burrito delivery, scanning pipelines. One of my favorite applications is these cattle ranchers in northern Canada. They free-range their cattle and they go wandering off and they hide in the woods and stuff and they're over these huge chunks of land. They'll take a drone to go find them and then use horses to round them up. Drone with a thermal camera, like, a whole chunk of the herd is way off somewhere strange and they're like, 'Found them. Let's go bring them back.' You know, you've got companies doing window washing, saving time and money on that. Like every cell phone tower pretty much in the US is inspected by drone. You look, there's all of these applications. Not to mention the fact that let's say there is world peace, everybody will just start preparing for the next war. And so it's not going to stop the government from being like, 'We still need to do this.' It'll be like, 'Yeah, we probably still should do that.'
So I think not just for conflict, because we sit on both sides, but I think there's going to be an overwhelming demand for a domestic ecosystem for components that'll extend for many years.
So Redcat just had their... F... was it? It's the FPV drone that got on the blue... is it?
Yeah. Fang. Fang got on the blue list.
There you go. I'm sorry. Yeah. Who made that?
Yeah. Well, Redcat obviously made it, but it does use a lot of our parts. They use a lot of our parts.
So, it's a really good FPV drone, you know.
And that was a good thing, right? I thought that was a good thing.
Well, it means Jeff and I still get along. So, let's take that for the first clue that we aren't... you know, it's not fake. No, it's a great thing. Like, they're a great customer. Jeff's great. And, you know, our parts getting on there and it being blue mean, you know, other people can probably buy our parts and get a drone on pretty quick because our parts are all approved.
It's cool when I see like Sam from Light Path after you guys have a little thing on LinkedIn. It's cool to see Sam chime in, you know, and say something positive about you, MAC, and you do the same thing. And I mean, there's just... I love what I'm seeing within the industry, the camaraderie that is happening. I mean, it's beyond just single companies, you know? I mean, it's the whole industry and it's really cool to see.
