Drone Delivery Canada; the Leader of the Pack

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This is big news!  I’ve been waiting over a year for some sort of indication of what the revenue model of Drone Delivery Canada Corp. [DDC(TSX-V: FLT) / (OTC: TAKOF) might look like.  To management’s credit, they wouldn’t tell me until they said they had a better idea of how various revenue scenarios might pan out.  And, this won’t be the only manner of doing business.  But for now, we have a snapshot, an exciting example; C$2.5 M in revenue for 1 year of service with the Moose Cree First Nation communities.

It would be easy to jump to wild conclusions here based on the number of remote northern communities that have been estimated at 1,000.  I’m not going to do that….  Perhaps more exciting than today’s news is the fact DDC got the deal done!  They’ve crossed the finish line.  After nearly 5 years of incredibly hard work, they’ve landed a commercial contract.  That doesn’t mean 10 more contracts will be announced next week, but this first deal is huge for the Company.  Congratulations to the entire team, Board & Advisory Board.

According to the press release, 

The Company is currently permitted to commercially operate its drone delivery platform within the Moosonee and Moose Factory communities with its Compliant Special Flight Operations Certificate (SFOC) which permits DDC to conduct drone operations in all Canadian provinces and territories. DDC, with its Compliant SFOC in hand, will deploy its drone delivery platform to service the communities of Moose Factory and Moosonee, two northern towns located in Ontario approximately 19 km south of James Bay.

The Company’s Special Flight Operations Certificate (“SFOC”) permits DDC to operate in all Canadian provinces and territories. 

My understanding is that the Company is taking it slow and steady.  That prudent approach makes sense.  The last thing DDC needs would be mishap of some sort.  But make no mistake, they have the  SFOC, so they are permitted to  approach hundreds of remote communities over time.  However, each community will have to jump through hurdles, get permits, approvals, do local testing, gain community trust and acceptance, etc.  

Yes, I think DDC will take it slow, other communities will need time, but will be all the more likely to sign deals once they’ve seen DDC in operation in other locations month after month, year after year.  Also from the press release, quote,

“Financial terms of the agreement are C$2.5 Million of revenue for year one with the potential to expand services in following years. As previously anticipated, it is expected that revenues will begin to be received late in Q2, 2019 once Federal funding is received by the Moose Cree First Nations.

This is very important as well, remote communities are getting funded through government initiatives for infrastructure development.  The federal gov’t stands to save large sums of money using drones instead of building (for example) roads or bridges.  DDC is a viable infrastructure solution in these remote locations.  

“In Canada, there are approximately one thousand remote communities, and, almost all face similar infrastructure and logistics challenges that contribute to a high cost of living. DDC looks to provide a cost effective and highly efficient logistic solution to these communities to improve lives and to create jobs in Canada’s north, all while reducing costs.”

At first, DDC will use its compliant Sparrow aircraft, capable of a 5 kg payload, for goods to be commercially transported between the communities, including include, letters, general parcels, medical supplies, and other general necessities.  However, it’s merely a matter of time before the payloads and ranges of the drones advance.  Drone capabilities are improving at a rapid pace, meaning that drone pricing/performance enhancements will fall directly to DDC’s bottom line.  Remember, DDC is not a hardware company, they will be utilizing (buying or leasing, not building their own) the best drones available. 

Hundreds, if not thousands of drone hardware companies are fighting for the top spot.  As ranges, speeds, drone prices & payloads improve, that will make DDC more profitable.  The Company will be able to make more deliveries and charge more for heavier payloads and longer hauls.  

An important factor not touched upon in the press release is the long-term benefits drones will provide in reducing carbon emissions, and in less usage of existing infrastructure.  Existing roads & bridges will potentially last longer and require less maintenance.  In addition, less fuel efficient modes of transportation (boats, planes, helicopters, snowmobiles) will be not be needed as frequently– emitting less carbon emissions and saving money.  A true win-win solution. 

“We are on track with the roll out of our commercial operations in Q2 of 2019”, commented Tony Di Benedetto, CEO of Drone Delivery Canada. “This agreement is representative of the large ‘Remote Communities’ market that we see penetrating over the next 3 to 5 years. The Remote Communities market is only one segment of the overall total addressable market in Canada. In addition to Canada, DDC is working with other customers around the globe to licence our FLYTE software and drone delivery technology.” 

So, Canada first, but other opportunities around the world in the early 2020s.  Very exciting and consistent with what management has been saying all year.

“We have worked closely with DDC for nearly two years and see the many benefits of DDC’s Drone Delivery Technology to our community as well as many others like us.  Where infrastructure is weak, or at times non-existent or accessible, DDC’s drone delivery platfrom is a valuable solution to connect remote communities and provide fast and efficient deliveries that were once not possible,” commented Stan Kapashesit, Director of Economic Development Moose Cree First Nation.

Drone Delivery Canada (TSX-V: FLT) / (TAKOF) is in the right place, at the right time and it just proved that it’s a commercially viable enterprise.  Drone delivery is not just a luxury or a really cool idea, next decade it will become a must-have component of service companies the world over.

Disclosures: The content of this article is for information only. Readers fully understand and agree that nothing contained herein, written by Peter Epstein of Epstein Research [ER](together, [ER]) about Drone Delivery Canadaincluding but not limited to, commentary, opinions, views, assumptions, reported facts, calculations, etc. is to be considered implicit or explicit investment advice. Nothing contained herein is a recommendation or solicitation to buy or sell any security. [ER] is not responsible under any circumstances for investment actions taken by the reader. [ER] has never been, and is not currently, a registered or licensed financial advisor or broker/dealer, investment advisor, stockbroker, trader, money manager, compliance or legal officer, and does not perform market making activities. [ER] is not directly employed by any company, group, organization, party or person. The shares of Drone Delivery Canada are highly speculative, not suitable for all investors. Readers understand and agree that investments in small cap stocks can result in a 100% loss of invested funds. It is assumed and agreed upon by readers that they will consult with their own licensed or registered financial advisors before making any investment decisions.

At the time this interview was posted, Peter Epstein owned shares in Drone Delivery Canada and the Company was an advertiser on [ER]. Readers understand and agree that they must conduct their own due diligence above and beyond reading this article. While the author believes he’s diligent in screening out companies that, for any reasons whatsoever, are unattractive investment opportunities, he cannot guarantee that his efforts will (or have been) successful. [ER] is not responsible for any perceived, or actual, errors including, but not limited to, commentary, opinions, views, assumptions, reported facts & financial calculations, or for the completeness of this article or future content. [ER] is not expected or required to subsequently follow or cover events & news, or write about any particular company or topic. [ER] is not an expert in any company, industry sector or investment topic.