Inside Volatus Aerospace: CEO Glen Lynch Talks Expansion, Innovation, and $TAKOF(Impact) Growth

Hey Tim, good to see you.

So, Volatus is an aerial intelligence and logistics innovator. So we do a little bit of drone cargo delivery, aerial intelligence. Reason I say aerial intelligence and not drone intelligence is because we actually operate about 21 piloted aircraft and helicopters on top of about 100 drones. And we're somewhat of an ecosystem. So we design drones, we build them, we sell them, we operate them, and we train people on them. So it's a full ecosystem. We're across Canada, the United States, the United Kingdom, Norway, and we have an office down in Lima, Peru. So we like to advertise ourselves as an ecosystem.

So, training, I mean, in a professional aviation company, training is both legislated and just a requirement, right? There's technology and regulations and they're coming together with tactical applications. So, a lot of training required. There are licensing requirements. There's a lot of organizations that can do basic licensing in Canada, the US, Europe, and UK. We certainly do some of that, but the real focus for us is on tactical training and on training for things like sensors. How do you collect the data? What do you do when you do collect the data? How do you process it? You know, we've got data scientists on staff, geomatics professionals, thermographers, those sorts of things. So all of that, that's the aerial intelligence piece. And really the objective is using data and analyzing it to create actionable intelligence products for the end-use customer. That could be data over a farm field for a farmer or over a battlefield for the defense community.

That's correct.

Yeah, it's funny enough the head of our global training strategy is actually based out of Portland. So she's down in Maine. Danielle heads up our global training initiatives which have operations in Canada, in the United States, in the UK. We're very very big in thermography. Diane Heath and her team in the UK actually run one of the oldest and most advanced and I believe one of the largest thermographic training and certification organizations in England.

So, some of them are hours, some of them are weeks. It depends on what the training is. Some of it's online, some of it's in person, and some of it's self-paced.

Actually, you know what, Tim? That would be a lot of fun. Definitely help with that.

Dull, dirty, and dangerous. That's where they replace human beings. So, it's really installing automation and to some degree autonomy in jobs that can be hazardous or boring for human beings.

And there's a lot of truth there.

So there's a series of things that have happened. Obviously we're going through a kind of a global reset in how trade happens and how countries are approaching their defense responsibilities and so on. Canada is a country that has underspent its defense budget since at least as far back as 2015. And we have a new government and that government has recognized that shortfall and committed to both achieving our NATO commitment 2% by March of next year which is an increase of more than 9 billion Canadian dollars in spending. That's an increase between here and the end of the year. And then also meeting their NATO commitments of three and a half to 5% spend by 2035. So on top of that, this week they tabled a budget that basically creates the roadmap to get us there and addresses some of the, combines the requirement for the defense spending with the economic and trade reset that's happening globally. So, a lot more focus now on repatriating much of the defense dollars that Canada does spend. About 75 cents of every defense dollar that the Canadian government spends leaves Canada. So, that was a trigger for us because it basically meant they're attempting to spend more in Canada with Canadian domestic capacity. So built in Canada, designed in Canada, built in Canada for Canada, but also for our NATO and allied partners. So that created an opportunity. So we saw this coming late last year and into early this year. The election of our new government and some government announcements that happened starting in June of this year actually stimulated our movement to refocus on stepping up to the challenge of helping make change in the Canadian defense community but also helping build that domestic capacity. So we signed a partnership with a battery company. People asked us why that company. It was Volt Explorer in Canada largely because they have the ability to test their battery technologies down to minus 45 degrees centigrade and remember one of our borders is the Canadian Arctic. So that's a big deal. Secondly, we announced a few weeks back an investment in a manufacturing facility in Montreal, which is one of the top three aerospace cities in the world to build drone technologies to meet both Canada's requirements and NATO partner requirements. And then lastly, and this past week, we announced the acquisition of some technologies from the UK. This was a family of medium altitude long endurance drones. So drones that are capable of flying for anywhere from 15 hours up to 4 to 7 days and carrying fairly substantial multi-mission payloads.

So the reason for acquiring that technology is now we can actually move that technology to Canada, build it in the facility that we announced a couple of weeks ago and introduce it to meet some of the unique requirements of Canada which is a very very large territory with very large borders and a large Arctic. And of course the last part of that is how do you ensure that you can fund that? Well, obviously we try to capitalize on all of the opportunities that are available through grants and other incentives, but at the end of the day, you have to be able to support your own initiatives. And while Volatus has done, our CFO has done a good job in capitalizing us for our existing business plan, expanding into manufacturing can potentially create some new demands. So, this past week, we announced a $20 million bought deal from Stifel. They led the deal for us and a syndicate of partners, and that was to make sure that we had the dry powder to execute on the plans that we've laid out.

20 million. That's correct.

Yeah, it was. I was very happy with that. Just slightly less than a 12% discount when we announced it and no warrants. So, it was, I think it was a sign that the market is starting to recognize our progress and our execution and I was really encouraged with that.

Well, and it's also why, again, I sing the praises of our CFO. He led the charge here, but he was able to execute on a series of raises. And people said, why did you do all those small raises? Well, our stock price was trading, our market cap in Canadian dollars was down around 60 to 70 million. And of course, raising any significant amount of capital at those levels is highly dilutive. So what he did was in fact he progressed from that lower valuation and again forgive me because I'm quoting in Canadian dollars at the moment, but our first raise was down around 12 cents and this most recent raise was at 60 cents. So, we've continued to improve the price points and also the terms of the financing have got more and more appealing. So, that's allowed us to position ourselves well. Right now, we're going into Q4. We're living in Q4 with a much stronger balance sheet and a solid road map to continue executing on the path that's laid out in front of us.

Yep. So, we've been operating drones routinely that are 2600 miles away from the operator. So, on the other side of the continent.

Yep. When you start trying to deal with the long endurance. Now, obviously small motors because you're talking about drones that are measured in hundreds of pounds, not thousands, right? But to be able to get the endurance in the cold weather and the considerable endurance right now, that's the most suitable power plant for that type of operation.

So our trajectory while we have piloted aircraft, there's no question we see the future in autonomous flight and automated flight. So we have a helicopter that's capable of basically carrying 400 lb and flying up to 125 miles. We have the drones that I was talking about earlier. You know, you're talking about one of them is capable of carrying as much as well over 130 pounds in terms of a payload. And the other thing I should mention, Tim, which I think is really key is everything we focus on or at least certainly our primary focuses are dual-use technologies. So while they're applicable to the defense applications, they're also capable of the civil security and commercial applications like pipeline surveillance and power line railway and large-scale fire mapping for example and in wildfires which is a big topic here in Canada.

Yeah, I think that's true. I think largely because we're an industry rocketing out of an infant phase and 50% of our growth came through rollups. So, the diversity is by design. When you're in a small industry, you've got to to some degree tap into making sure that you're in all of the areas necessary to be able to generate critical mass in terms of revenues. So, completed this most recent acquisition was our 20th since 2019. About 50% of our revenue growth comes through acquisitions and the other 50% is through a very large and very active sales team that are scattered across the regions that we're serving.

Well, aviation at large, 43 years now. And 43 years as a pilot and 37 of them as an executive leader.

I am. I hold both American and Canadian airline transport licenses. So, most of my life has been spent in commercial aviation. It was 2018 when I started focusing on drones.

What is what?

Yeah. Natalus. Plug in for Natalus. Yeah. San Diego based, they're building a family of aircraft, but specifically cargo drones. So, we're talking about, the one that we're involved in is called the Kona. It's 19,000 lbs. They're quite far along in their evolution. I think we'll expect to see them somewhere in the 2030 time frame, but they're actually powered by, the Kona is powered by two Pratt & Whitney PT6 turbines. It's a big blended wing body that is designed to carry palletized air freight and reduce the cost of cargo by more than half. So it's pretty interesting application for middle mile cargo basically going airport to airport. That's an American technology. We do not own that technology by the way. We just happen to be the ones that bought into it the earliest we bought the first production.

Yep.

Big believers in what they're doing. I think they've got a strong team. They've got a lot of experience building.

Oh, yeah.

Right. Not a bomber. It's actually a commercial airplane. It's pretty exciting. I think they're going to be entering the market at the right place at the right time.